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A potentially valuable customer visits your site, chooses their products, proceeds through the checkout, and submits their payment details. The worst happens, their card is declined. What can we, as etailers, do to provide these customers with the best experience, and not lose a sale?

I remember, some time ago, reading one of postcards on the PostSecret website. It said:

If a customer’s credit card is declined this time of year. I act like everything’s fine. I pretend nothing’s amiss, let them leave with a free tree, and wish them a Happy Christmas.

Free Christmas Trees - Postsecret

Now, of course, this isn’t something that most etailers would be eager to do, but it does raise an interesting question: How do you help customers whose payment has been declined this Christmas?

After all, we spend a great deal of time & money getting visitors to our websites, we have complicated merchandising engines to present products they would like to buy, and we invest in usability to ensure they get through our checkouts. Why should we then give up the sale so easily?

Do you, as an etailer track how many declined transactions per day you receive?

Obviously, without monitoring, you can’t improve. So the first step is to configure your analytics system to track whenever a declined transaction occurs. We can do this simply by firing a TrackEvent in Google Analytics, but I’m sure it’s easily done in most analytical programs.

You can then start to measure your conversion rate for visitors who experience a decline event during the checkout process. You can then make the judgement as to whether card declines are an issue for your site, and whether to invest in ways of improving their conversion rate.

Decline types

Firstly, we should take a look at the different types of declines a payment transaction can return with. These can be grouped into two types; “Soft” and “Hard” declines. We’ll go through each type, the declines that occur, and how you as an e-tailer can improve the experience for the customer.

Soft declines

Soft declines aren’t really declines at all, but simply a message that something has gone wrong in the authorisation process.

Timeout

First off, it’s possible that your payment gateway goes down (as we had last year), but even if this is not the case, payment gateways can suffer from instability and bottleneck issues, like any other system.

Furthermore, authorization involves multiple journeys, from your site to the payment gateway, then from the gateway to the authorizing bank.  If the second journey fails, then your payment gateway will return a Decline(Timeout).

So what do you do? You don’t have authorisation to process the transaction, so do you present the customer with a “card declined” message, or is there another way?

How do you transact?

It’s very easy when transacting online to take the standpoint of immediately debiting a card once an order is placed. However, this is rarely best practice, nor does it follow a logical process. For example, the goods ordered could be suddenly out of stock, you may have a quality hold issue, or one of many reasons that means the goods will not be shipped promptly. If you immediately debit on order, you would have to communicate this issue to the customer, and possibly organize a credit, losing you the sale.

Furthermore, informing the customer that their cards are not charged until goods are shipped will certainly help battle checkout reluctance.

Preauthorisation & settle

Taking payment for an order can be split into two separate, logical processes. Preauthorising a payment card for the amount due, then “Settling” the transaction upon picking and packing the goods. This way, the customer is only charged when you’re certain they’ll receive the goods.

Be wary though, preauthorisation holds on debit cards generally only last a few days (as opposed to 30 days for credit cards), after which it’s still possible to get a decline message on settle, meaning you would need to pull the order prior to dispatch.

Wow, that’s complicated, why are you telling me this?

Well, if you aren’t settling the transaction until some time after the order has been placed, but before the goods are dispatched, it doesn’t matter if you have authorisation until that time.

This way, in the case of a Timeout issue, authorisation requests to your payment gateway can be buffered, and resubmitted later, up until a cut off point where an unauthorised transaction will be declined, and the customer informed and offered alternative options.

Referrals

Though I see these less and less, I imagine they happen quite frequently with etailers selling consumer electronics, gambling sites, or anywhere why the risk of fraud is high.

If a Referred message is received, this is often due to a security check on the customer’s account, requiring the transaction to have verbal authorisation from the card holder. In this case, a simple message to the customer asking them to contact their bank is required.

Remember that the customer may not do this immediately, so you should provide a mechanism for them to save their basket contents, and place the order later.

Of course, if they haven’t placed their order within a couple of days, remind them with your Abandoned Baskets Program.

Hard declines

Hard declines are messages from your gateway that the issuing bank will not authorize the transaction. The reason for this can be one of the following

  1. Incorrect Card Account Details.
  2. Address Verification Declines.
  3. Card Verification Methods Declines.
  4. 3D Secure Declines.
  5. Funding Declines.

Lets tackle the first three. I recently asked on the forum if it was considered best practice to derive which stage of verification failed, and inform the customer.
Remember the ability to do this will depend on your gateway provider.

We took the decision not to inform the customer at which stage verification failed. Without a good case of precedence, it felt to us like too much of a security risk. However, if declined transactions are taking large chunk out of your conversion rate, you may take a different decision.

If you are unlucky enough to have to support Verified by Visa or MasterCard Securecode, as most of us are, then you have a further level where a decline can occur.  Remember that these services often operate a “three strikes and your out” policy, where a card can be blocked if incorrect information is repeatedly submitted.

Conversion after a decline 

A rather wordy error message about a card being declined
Card decline messages are one of the few places where wordiness is acceptable!

As I started this article, the first step to improving your decline conversion rate is to monitor it. You can then derive what your decline current conversion rate is, and work out what the annual return would be were this to improve by, say 25%. At this point you can then make the decision whether you want to put the infrastructure in place to assist customers with declined transactions.

Alternative methods of payment

The first step to helping customers who have experienced a funding decline is to offer an alternative method of payment.

Cash on Delivery
Wiltshire Farm Foods offers Cash On Delivery

For Wiltshire Farm Foods, our original business model was Cash on Delivery, so it was easy to integrate this into our website. However for many e-tailers this might not be possible, although there are several examples of this being implemented successfully.

Kiddicare customers can pay using Cash-Tickets, essentially a form of voucher than can be purchased from many grocery stores & newsagents.  Not only does this offer an alternative for declined customers, but also helps those who may be unfamiliar with or wary of buying online.


 
Italian fashion site Yoox offer Cash on Delivery via courier. Of course, this incurs additional fees. UPS offers a similar Collect on Delivery service that will accept cheques.

Reserve online / Collect & Pay Instore

Halfords offer a Reserve and Collect service

Halfords reported great success with their Reserve & Collect service, allowing customers to check stock and reserve items, for later collection and payment in the physical store, which should be a must for any multichannel retailer. 

With the economic downturn, and “Silvers Surfers”, those most unlikely to complete payment card details incorrectly becoming the largest online demographic, e-tailers will have to seriously look at how many good customers they are unnecessarily turning away.

Matthew Curry

Published 4 December, 2009 by Matthew Curry

Matt Curry is Head of E-commerce for online sex toy retailer LoveHoney. He spends a lot of time working on user experience and customer satisfaction is his highest priority. He frequently has to be penetration tested. You can follow him on Twitter, although he does often talk about dildos. He also has a LinkedIn profile, where he has to act professional.

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Comments (5)

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Sarah

My card was declined, purchasing an item for a game. Is it still legal to take the money even though the message was sent about a week ago?

over 6 years ago

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Rob Mangiafico, CTO at LexiConn Internet Services, Inc.

Great look at the various options available to merchants for declined cards. If a merchant is using ecommerce software that does not support advanced declined handling procedures, a simple thing to do is review your declined/unsettled transactions in your gateway each day, and contact those that were declined via email or phone to follow up.

It can really make a difference when you follow up personally when someone is unable to complete an order.

Rob - LexiConn

over 6 years ago

Matthew Curry

Matthew Curry, Head of Ecommerce at Lovehoney

Indeed Rob. In fact, whats really useful is, if you start tracking front-end declines in Analytics, do they match the declines in the gateway backend? If you find there's more, then you're giving a decline message whenever the gateway returns something non-standard.

over 6 years ago

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Alena

Specializing in small and medium-sized businesses in both traditional and Internet environments, www.damerchantservices.com has one of the highest merchant acceptance rates in the industry, with most applications approved within two business days. In addition, our technological advances have effectively harnessed and exceeded the growing demands in the processing industry—allowing us to support nearly every vertical market with increasing and profitable business solutions.

over 6 years ago

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http://www.mastercreditcard.net

Hi, this is Smithi learn your whole statement and i am agree thisi

need to say somthing about this i  took the decision not to inform the customer at which stage verification failed. Without a good case of precedence, it felt to us like too much of a security risk. However,

----------------------------

Smith

over 6 years ago

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