Every failed payment is a lost sale.
Did you know that subscription-based businesses lose 9% globally only because of payment failures? Failed payments also negatively affect customer experience on your checkout channels, impacting customer retention and conversion as well. When a payment doesn’t go through, your customers churn to a competitor brand, causing you significant losses in sales revenues.
However, your business can easily reduce the number of unsuccessful payments using multiple simple methods, like smart routing, retry logic, tokenization, and API-driven optimization.
This blog will guide you through the common causes of payment failures, and the simple methods you can deploy to enhance payment success rates.
Why payments fail: Common causes
Payment failures can occur because of multiple reasons that involve your customers, technologies, or third parties involved in the whole process:
- Bank and gateway downtimes: Payments fail sometimes because of unavailability of banking services or payment gateways caused by network outages or manual interventions, like scheduled maintenance.
- Authentication failures: Payments fail when a payment system is unable to authenticate a user because of issues with 3D Secure, incorrect OTPs, failed CVV checks, or use of expired cards. Authentication problems may also occur because of flagged high-risk transactions.
- Issuer declines: If the customer has insufficient funds in their bank accounts, the card issuer may decline the transaction, leading to payment failure. If the transaction is of high value and the customer is unable to authorize it through the issuer’s channels, the payment will fail.
- Technical errors: Issues like API timeouts, invalid requests, integration mismatches, etc., cause technical problems in the payment ecosystem, leading to payment failures.
- Cross-border payment barriers: Sometimes geo-restrictions prevent payments from going through. Additionally, currency conversion failures can also prevent smooth transactions during checkout.
Achieving higher payment success rates with Smart Routing
Did you know that declined or false payments cost merchants a whopping $20.3 billion annually? Smart routing is the technology that aids businesses dynamically route transaction traffic to the better-performing payment gateways.
The smart routers take various factors into consideration, such as geography, success rates, transaction type, etc., to intelligently divert payment traffic to the right gateways and servers.
This prevents a single stream of traffic from overloading a single gateway, which may cause delays or timeouts. Smart routing can help you save that lost revenue by ensuring that payments succeed. Developers can implement intelligent pay routing in two ways:
1. Routing through different PSPs
This method is also known as “payment orchestration” and helps businesses route a payment through different Payment Service Providers (PSPs). Smart routing automatically detects which PSP is most likely to perform optimally given the current conditions and sends the transaction down that route.
This process considers multiple transaction factors, such as the customer’s region, currency of the payment, amount of the transaction, card type, and key merchant details. Then, this information assesses a payment provider’s capacity and capability to process a payment.
2. Routing through different networks
Smart routing through different networks is a similar process to routing through different PSPs. In this method, smart routing considers various networks like VISA, Mastercard, etc., and assesses their performance in the current situation before routing a transaction. It increases the chances of payment success drastically as businesses have a choice over which card network to use for routing.
How does it help?
By evaluating real-time data like network latency, downtime, issuer response times, etc., smart routing engines assess the best path for various types of payments to go through.
For example, a travel booking website can reduce its payment failures using smart routing for transactions depending on the issuer’s geolocation. This would ensure better success rates.
Similarly, an eCommerce store can smart-route its card-based payments through dedicated gateways, keeping other gateways open for other types of transactions like UPI and netbanking.
3. Retry logic and adaptive transaction flows
Retry logic is a repayment system in which a failed payment is followed by a set number of retries automatically, using slight variations in the method or timing employed. It helps enhance the success rate while ensuring the customer gets a second chance to check out.
Similarly, adaptive flows work in much the same way, but on the customer’s end. After a failed transaction, adaptive flows automatically recommend switching payment methods to the customer to help them check out even if one payment method hasn’t succeeded.
How does it help?
These methods are deployed when a customer’s payment fails on the first attempt due to reasons such as network issues, OTP delays, congestion of payment gateways, etc.
Retry logic can help reduce checkout failures by automatically resending failed transactions through different gateways after a waiting period, increasing the chances of successful payments.
For example, a subscription-based business may employ retry logic to ensure that automatic renewals succeed without issue. Or, an eCommerce store may deploy adaptive flows when a UPI transaction fails for a customer, and recommend paying using netbanking or wallet instead.
4. Reducing Declined Payments Using Tokenization
Tokenization is the process of masking sensitive information behind tokens – a heavily randomized combination of characters – which helps prevent authentication problems that may cause payments to fail.
How does it help?
Tokens replace the sensitive card information of your customers, reducing the risk of payment declines because of user authentication issues, expired cards, blocked cards, or other such problems.
Tokens reinforce payment data security, reduce breach risks, and thus enhance customer experience with your payments.
5. Optimizing payments using APIs
Application Programming Interfaces (APIs) are the bridges that help developers integrate payment infrastructure or solutions into the business ecosystem. APIs are highly customizable, enabling you to plug in custom payments solutions and technologies that improve payment success rates pertaining to the specific needs of your business.
APIs for analytics
Your business can connect analytical and business intelligence tools to your payment ecosystem using APIs to capture valuable data. The insights from this data can highlight key metrics such as approval rates, reasons for failure, points of failure, transaction response times, etc.
Real-time payment monitoring with webhooks
Webhooks enable two applications to communicate with each other in real time. Using webhooks, you can monitor the payments going through your network as they happen.
For example, during a busy sale season, an e-retail outlet can detect network latencies on a payment gateway and recommend that its customers opt for a different payment method for faster checkout.
Wrapping Up
Payment failures cause harm to your brand’s reputation and can also pose challenges with customer acquisition and retention.
If you wish to enhance the quality, speed, and reliability of your payment process, you can partner with Pine Labs Online for a robust digital payment infrastructure that performs under all conditions.
Pine Labs Online provides reliable payment gateways and tokenizers to ensure your business has all the tools and resources it needs to provide excellent checkout experiences to its customers. Power your business to optimize payment success rates with Pine Labs Online.