A couple of major culprits to transaction declines are invalid card numbers and expiration dates, says Robin Reodica, senior vice president, global product management with Merchant Services at Bank of America. This could mean that a customer has entered in their personal and card data inconsistently, but more often the issue is that a card has been replaced or has expired since last used with that merchant.
“When a consumer card is replaced, customers may not always remember to update their information with every single retailer or subscription service where they have an account,” Reodica says.
Traditional “updater” services can be used to periodically update the customer cards on file as they expire or change for other reasons, but depending on how often you request an update, any number of cards are likely to be inaccurate at any given time. Luckily, according to Reodica, newer services (such as ‘real-time account updater’ as part of the authorization optimization service) can automatically check for any account updates as the sale is being transacted with the cardholder, which can more than double approval rates.
A transaction that’s been flagged as potential fraud might be declined because the purchase doesn’t match the pattern of the consumer’s previous purchases with that merchant. One common reason for this is that many businesses, especially those with multiple types of operations, could have confusing or contradictory merchant category codes (MCCs). While most businesses stick to the MCCs for their primary business activities, that may not be enough if they have multiple lines of business and brands, says Gregg Kambour, senior vice president in technical solutions consulting with Merchant Services at Bank of America. “Think about a hotel, for example, that has several businesses just in the lobby — a restaurant, a coffee shop, a retail store, car rentals — and there might be many more.”
To combat this type of card decline, payment officers should take care to fill out all the soft descriptors about the various lines of business, as well as alternate business and brand names. For companies that offer subscription services and charge customers a fee on a regular basis, it’s also important to use the available indicators to alert credit- and debit-card networks that these are recurring subscription fees, says Walsh, adding, “If critical indicators within your transactions change, such as merchant ID, price point, or velocity, let your major issuers know so they can prepare their strategies and avoid false / positive declines.”
Fortunately for customers and merchants, declines aren’t one and done: authorization optimization software will allow you to retry the sale later. But the timing of those retries can be critical. “The second largest reason for declines, behind invalid account number as discussed above, is due to customer exceeded their credit limit or available balance,” says Kambour. “For those declines, a cutting-edge retry strategy can identify the times when the account is most likely to be able to afford the transaction, and retry the transaction at that time.”
To even further increase the odds that the billing will go through on the second try, consider using authorization optimization software that employs data science and artificial intelligence, says Kambour. Software like this can analyze a customer’s previous transactions to see if the transaction fits their spending pattern, then look for and correct information that may have been omitted or supplied incorrectly.
Tokenization, which turns sensitive data into electronic “tokens,” is generally considered one of the highest forms of data encryption. Since the account tokens are generated by the card issuers, card tokenization increases the likelihood that the card will be recognized and that the transaction will therefore be approved. At the same time, the token has the added advantage of remaining consistent even if a card expires or if a cardholder replaces the physical card.
Card declines can do serious damage to a business. And no single solution can address all of the reasons for declines. But by bringing together real-time account updates, informed retry strategies, proper transaction indicators and tokenization you can improve both your authorization rates and your customers’ experience.