Understanding Authorisation Declines: Soft vs Hard, and How to Reduce Them

Authorisation Decline Disruption - A Merchant Guide

Managing payment declines is a critical challenge for businesses. Authorisation declines can disrupt revenue flow and frustrate customers, but understanding their causes, especially ambiguous codes like "Do Not Honor," can help businesses implement effective solutions and improve customer satisfaction. Understanding why transactions fail, the meaning behind decline codes, and how to address them can help businesses optimise their payment processes and recover lost revenue.

What Are Payment Authorisation Rates?

Authorisation rates represent the percentage of submitted transactions approved by the issuing bank. They are calculated after the customer clicks ‘Pay’ and determine the success of payments.

Though separate from conversion rates—which track customer actions before payment—authorisation rates complement them in providing a full picture of the customer payment journey. Monitoring both metrics is crucial for optimising the end-to-end payment experience.

What Is a Decline Code?

A decline code is a two-digit alphanumeric code issued when a transaction is declined. These codes are typically provided by issuing banks, payment processors, or credit networks, and they give insight into why the transaction failed. Some payment processors, like Stripe, may display customised codes to help businesses resolve issues and complete transactions.

Types of Declines Soft Vs Hard

Soft Declines

Soft declines are temporary and often recoverable. Examples include:

• Do Not Honor (05): The bank declines the transaction without giving a specific reason.
• Insufficient Funds (51): The customer’s account balance isn’t sufficient to cover the transaction.
• Processor Unavailable (91): A technical issue prevents the transaction from processing.

These declines can often be addressed with retries or by asking the customer to take further action.

Hard Declines

Hard declines are permanent and cannot be resolved by retrying. Examples include:

• Invalid Account Number (14): The provided account details are incorrect.
• Lost Card (41): The card has been reported lost.
• Stolen Card (43): The card has been flagged as stolen.

Retrying hard declines is strongly discouraged, as it can harm your authorisation rates. Customers must provide a new payment method in such cases.The Challenge of "Do Not Honor" Declines

The "Do Not Honor" code is one of the most confusing for merchants. This generic code means the issuer rejected the payment without providing a clear reason, leaving merchants to guess the cause and determine the next steps. Customers, meanwhile, are often left puzzled and frustrated by the failure.

What Triggers a Decline Code?

Declines can be triggered by various factors, not all of which are linked to fraud or insufficient funds. Common reasons include:

1. Expired Card: Transactions fail if customers use cards past their expiration date.
2. Insufficient Funds: The account balance doesn’t cover the transaction.
3. Invalid Card Number: Card details cannot be verified by the issuing bank.
4. Verification Issues: A faulty microchip or magnetic stripe can disrupt processing.
5. Credit Limit Exceeded: The transaction exceeds the cardholder’s credit limit.
6. Incorrect CVV: Entering the wrong security code can lead to declines.
7. Transaction Restrictions: Cardholders may block certain transaction types.
8. Invalid Transaction: Errors in entering card details can result in processing failures.

By understanding these triggers, merchants can anticipate potential issues and improve their response strategies.

Common Credit Card Decline Code Glossary

Here’s a list of common credit card decline codes and the recommended actions:

This list offers businesses insights into why payments fail and how to address them effectively.

Decline Code Flow

The flow of decline codes involves multiple layers, each contributing to how they’re interpreted:

1. Issuer: Banks generate codes based on the cardholder’s account status (e.g., insufficient funds, fraud suspicion).
2. Card Networks: Networks standardise codes across the industry, though variations may exist.
3. Acquirers/Payment Systems: These entities refine codes to give merchants actionable insights.
4. Merchants: Businesses use the codes to implement strategies like retries or alternative payment methods.

Key Factors Affecting Authorisation Rates

Improving authorisation rates starts with understanding the factors that influence them:

• Market: Different regions may have varying decline rates due to local regulations and preferences.
• Issuing Bank: Some banks have stricter fraud prevention rules that impact approval rates.
• Card Type: Tailor payment methods to customer preferences, as certain card types may have lower success rates.
• Transaction Amount: Decline rates may vary for high- or low-value transactions. Adjust rules to optimise performance.

Uncovering Payment Authorisation Issues

To improve authorisation rates, identify and address the root causes:

1. Analyse Data: Use payment insights tools to evaluate metrics across providers, currencies, and issuing banks.
2. Monitor Trends: Look for patterns that indicate issues, such as frequent declines from a specific card type or bank.
3. Develop Strategies: Implement targeted solutions to address identified problems.

How to Reduce Declines and Increase Authorisation Rates

1. Analyse Decline Codes

Review codes to identify common issues and adjust retry or routing strategies accordingly. For example, network issues may call for retries, while insufficient funds require customer communication.

2. Implement Intelligent Retries

Retries can recover transactions declined for temporary reasons:

• Use adaptive systems to retry transactions at optimal times.
• Route failed payments through alternative payment processors.

3. Optimise Fraud Tools

Fine-tune fraud detection settings to avoid blocking valid transactions:

• Customise fraud rules to account for legitimate customer activity.
• Leverage machine learning to distinguish genuine payments from threats.

4. Adopt Adaptive 3D Secure (3DS)

This enhances fraud prevention while minimising unnecessary customer friction:

• Use risk-based authentication to verify only high-risk transactions.
• Monitor 3DS performance and refine settings for maximum efficiency.

5. Educate Customers

Help customers understand why their transactions might fail and how to resolve issues, such as updating expired cards or ensuring sufficient funds.

Wrapping It Up

Addressing authorisation declines is vital for reducing lost revenue and enhancing customer satisfaction. By analysing decline codes, leveraging advanced payment tools, and optimising processes, businesses can significantly improve authorisation rates.

Armed with these insights, your business can minimise declines, recover more revenue, and create a seamless payment experience for your customers.