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A huge shift to online commerce is underway, with ecommerce growing 30% a year globally.1 This massive shift in consumer behavior makes it an exciting time to be doing business online, but it also brings some challenges. One of those is failed payments, also known as “network declines.”

What exactly are we talking about when we say “network declines”? In short, it’s an unsuccessful transaction—one that fails. And those blocked transactions can create immense headaches for both you and your customer. But before we dive into the details of network declines and what you can do about them, it’s helpful to review a successful online payments flow.

There are typically five key players involved in an online transaction: 

  1. Cardholder: The customer who owns a credit card.
  2. Merchant: The business that accepts online payments.
  3. Acquirer: A bank that processes credit card payments on behalf of the merchant and routes them through the card networks (such as Visa or Mastercard) to the issuing bank. Sometimes acquirers may also partner with a third party to help process payments.
  4. Card networks: Card networks, such as Visa and Mastercard, are the connection among all of these players. They communicate transaction information, move funds, and determine the underlying costs of card transactions.
  5. Issuing bank: The bank that extends credit and issues cards to consumers on behalf of the card networks.

Transactions go through three steps: checkout completion, fraud protection, and network acceptance. Conversion happens when all three steps are successful.

Network declines, also referred to as issuer declined charges, mean that the customer’s bank has declined the transaction request. Network declines happen for a lot of reasons, such as a simple typo in the payment form or suspicion of fraud.

While declines can help you filter out fraudulent transactions, they can also mean losing legitimate customers and long-term revenue. Customers who experience a decline often abandon their cart and may not return. Consider some of these industry-wide statistics:

  • 58% of declined ecommerce transactions are actually legitimate orders.2 That’s all lost revenue.
  • More than 80% of cardholders who experienced a false decline said it wasn’t just inconvenient—it was embarrassing and aggravating.3
  • In a recent survey by Javelin, 32% of shoppers who experienced a decline said they’d no longer shop with that merchant.4

To help you navigate network declines, we’re sharing insights from our partner Stripe, a global leader in payments infrastructure, on how businesses can optimize their entire payments flow to boost revenue and increase customer loyalty.

Understanding network declines

Before we get into the specifics, let’s dig into exactly what happens when a network decline occurs—and why they occur. It starts when a customer hits the “buy” button. From there, the payment provider takes the charge details and sends a payment authorization request to the card networks, like Visa or Mastercard. Then, the card network forwards that request to the customer’s bank that issued the card.

The payment details the business sends to Stripe might look really simple. It’s things like:

  • What is the card being used?
  • What’s the amount of the payment?
  • What currency are they paying in?

But what Stripe sends to the issuing bank is actually a much more detailed encoded message, called an ISO 8583, containing over 100 fields. Each issuing bank has its own way of interpreting those fields to decide whether that transaction should be approved or declined.

Now, let’s look at why banks evaluating that information might decide to decline a transaction. A bank has to balance preventing fraud with providing a good customer experience. There are three main reasons why transactions are declined:

  • First, the card might have insufficient funds, or the cardholder may have hit their credit limit
  • Second, the card information might be entered incorrectly or be outdated
  • Finally, the bank may suspect fraud

Network declines serve a purpose: to prevent fraud. But they’re also problematic for businesses. When legitimate payments are flagged, it can hurt revenue and, more importantly, it really hurts the customer’s experience and customer loyalty.

Three ways to reduce network declines

Stripe has identified three steps businesses can take to boost authorization rates and reduce network declines.

Step 1: Collect the right card details

One of the biggest opportunities businesses have to stop network declines before they occur is gathering the right details from the customer at checkout. By collecting the right information from the cardholder during the checkout flow, you can help the bank feel more confident in the transaction and customer. These details include the card’s CVC, expiration date, and billing zip code.

Step 2: Use a specific call to action

Getting a customer to fix an issue—such as a typo—or try a new payment method is an effective way to recover a network decline. If you think a customer is legitimate, you can recover declines by prompting the customer to try again with a specific call to action, such as, “Your card has insufficient funds. Please try another payment method.” This approach tends to have a higher success rate than a generic decline message like, “Your card has been declined.”

Step 3: Support autofill or one-click payment methods

If you want to go a step further in collecting the critical information issuers want to see in a transaction and increase the chances of success, ensure your checkout flow supports autofill capabilities or one-click payment methods like Apple Pay and Google Pay. These methods can make the transaction really fast and seamless for the customer, and give the issuer a lot of confidence in that transaction.

How Stripe can help 

Above all, Stripe has found that the best way to minimize declines is to understand or even reverse engineer issuer decision rules. For most businesses, that’s extremely tough. But Stripe excels at this, and businesses working with MYFUNDBOX Subscription Billing, in partnership with Stripe, reap the benefits: Stripe processes hundreds of billions of dollars each year from millions of businesses. About 90% of American and 65% of UK adults have made a purchase on Stripe over the past year.

Those past encounters give Stripe an enormous quantity of data that can help lead to smarter fraud detection and reduced network declines. So even if you’re a new business that’s never processed a single dollar, you can leverage all of that data to help your own processing.

In addition to a massive amount of data, Stripe also has strong, collaborative relationships with all major issuers and card networks—which yield even more insights that help Stripe continue to improve. In fact, Stripe has started working directly with issuers to help them better understand its customers, which has led to significant increases in authorization rates.

Stripe also happens to be an issuer, which gives it unique insight into how transactions are handled across partners. Stripe can build these insights into fraud prevention and acceptance tools, which can significantly reduce declines on legitimate customers with no detectable increase in fraud rates. Stripe can also leverage its fraud machine learning capabilities to turn these insights into a risk score shared directly with the issuer, which can significantly reduce declines on legitimate customers with no detectable increase in fraud rates.

Stripe has unique products that help recapture transactions when they do fail. For example, Adaptive Acceptance can recapture transactions in real time, before a customer even knows they’ve been declined.

With Adaptive Acceptance, once a decline happens, Stripe uses data to reverse engineer what went wrong or what might seem off to an issuer and then try to fix it in real time. This turns a potentially bad customer experience into a good one, and it’s seamless for the customer. Businesses see a lot of declines recaptured this way, and many of them see a 1% or more improvement in auth rates.

Consider Twilio, for example, a leading customer engagement platform that partnered with Stripe to tackle its goal of expanding into new international markets while also increasing authorization rates. After several weeks of A/B testing with multiple major global payments processors, Twilio saw a 10% increase in authorization rates with Stripe compared to its previous provider. That increase included:

  • 1% uplift from Adaptive Acceptance, which helped reduce network declines by leveraging machine learning in real time
  • 2% uplift from Card Account Updater, which intelligently updates the credentials of saved cards that have expired or been replaced
  • 1.5% uplift from ongoing support from Stripe payments optimization specialists, who analyzed Twilio’s transaction types and frequency to identify auth rate optimizations

Reach your business goals

The rise in ecommerce opens new possibilities for ambitious online businesses. But making the most of this transition also requires deploying smart strategies. To overcome difficult challenges such as network declines, businesses need the right partners in place.

With MYFUNDBOX Subscription Billing and Stripe as partners, you can take advantage of sophisticated tools that help you maximize revenue and minimize losses. To find out more about how MYFUNDBOX Subscription Billing and Stripe can help you accomplish your business goals, chat with live support which is available in website today.

Sources

  1.  https://www.digitalcommerce360.com/article/us-ecommerce-sales/
  2. http://images.solutions.lexisnexis.com/Web/LexisNexis/%7Bea78e9df-056e-46ed-b04c-e8bfbc526ffd%7D_2016_True_Cost_of_Fraud_Study_052516.pdf
  3. https://info.rippleshot.com/hubfs/Mktg_Offers/2016IndustryReportFalsePositivesandCardReissuancePDF.pdf
  4. https://www.javelinstrategy.com/coverage-area/overcoming-false-positives-saving-sale-and-customer-relationship