23 Mar

Recover Failed Payments Effectively with Intelligent Payment Retry

In this day and age, accepting online payments is no longer an option but a necessity for many businesses across various industries. From e-commerce giants to emerging startups, companies around the world are embracing digital transactions to keep up with the ever-growing demand for convenient and seamless payments. With the e-commerce industry anticipated to see substantial growth, increasing from a projected volume of $4.11 trillion in 2023 to a remarkable $6.35 trillion by 2027, it's clear that this growth isn't slowing down anytime soon.

As the preference for online payments continues to grow, the need for effective and error-free payment processing becomes increasingly important. However, the rising volume of digital transactions also introduces the challenge of addressing payment failures. In fact, payment failures are so common that a study by Forrester reveals the majority of e-commerce companies experience them, with some instances reporting payment failure rates as high as 20%. 

In this article, we will explore the causes of payment failures, discuss best practices to minimize payment failures and showcase the highly effective approach of conditional payment retries as a key solution for recovering declined payments.

Understanding payment failures

Payment failure is a situation in which a customer's payment attempt is declined or cannot be processed for various reasons. Payment failures not only lead to a negative customer experience but also can result in significant revenue loss for digital platforms.

Payment failures are typically classified into two primary categories: soft declines and hard declines. Hard declines are irreversible and should not be subjected to retry attempts. These occur when the issuing bank denies payments for reasons such as incorrect card details, reported stolen or closed cards, and other related issues. 

In contrast, soft declines are temporary and can be retried once the underlying issue has been resolved. A significant portion of declines, approximately 80% to 90%, fall into the soft decline category. Common causes for soft declines include insufficient account balance, card limits, network issues, and processor-related declines.

To tackle payment failures effectively, it's important to understand the reasons behind both soft and hard declines. By focusing on reducing soft declines, businesses can act proactively to prevent a significant portion of these issues from happening. In the next section, we'll explore some best practices that can help companies minimize payment failures.

Best practices to minimize payment failures

To reduce payment failures, there are several best practices merchants can follow:

  • Provide an intuitive payment experience with clear instructions and visual aids to guide customers through the checkout process.
  • Offer alternative payment methods to cater to a broader range of customers and increase the chances of successful payments.
  • Use accurate anti-fraud solutions to detect and prevent fraudulent transactions while minimizing false positives.
  • Utilize payment routing to direct payments through the most efficient and reliable payment channels, reducing transaction fees and payment errors and increasing the chances of successful payments.
  • Implement a payment retry system to automatically retry declined transactions in the background, enhancing customer experience and overall payment success rates.

Among these best practices, implementing an intelligent payment retry system is an effective strategy that we'd like to explore further to provide a clearer understanding of the essential components and strategies required to build a successful payment retry system. This is important because a well-designed payment retry system not only enhances payment success rates but also handles declined payments without causing inconvenience to customers.

What is payment retry?

Payment retry is a product feature that allows merchants to automatically retry declined transactions using various rules, such as retrying immediately after the initial payment failure or for selective failure reasons, retrying after a set amount of time, or even retrying with alternative payment acquirers.

Payment retry operates in the background, automatically attempting to process the transaction again without requiring any additional action from the customer. This eliminates the need for customers to re-enter their payment information or go through the checkout process multiple times, providing a seamless and hassle-free experience.

While setting up a payment retry system involves some initial effort, the long-term benefits will always make it a worthwhile investment. In fact, we've seen that when a payment retry feature is put in place effectively, it can boost payment success rates by up to 5%.

How can digital platforms implement payment retry? 

To effectively implement a well-designed payment retry feature, digital businesses should consider the following aspects:

  1. Token vault: Token vault is a product feature that securely stores customers’ sensitive payment information for future transactions, eliminating the need for customers to re-enter payment details and ensuring a smooth and swift checkout process. Token vault also enables digital platforms to reduce dependency on a single payment service provider by providing the flexibility to switch between multiple payment service providers and gain full control over their payment processing.
  1. Work with multiple acquirers: To increase the likelihood of successful payment transactions, it's highly recommended that merchants work with multiple acquirers. While payment retry attempts can be processed using either the same or different acquirers, having multiple acquirers can significantly reduce the likelihood of payment failure. In the event that the primary acquirer experiences connectivity issues, the system can automatically attempt to process a failed payment with another acquirer. This approach ensures that merchants can maintain the continuity of payment processing and minimize the impact of any issues that may arise with their primary acquirer.
  1. Rule engine with configurations: To effectively manage payment retries and prevent infinite loops of retries, merchants need to have the ability to set up rules and configurations. This includes specifying the maximum number of retries, configuring retry intervals, deciding which failure reasons to retry, and so on. For instance, if a payment is declined due to insufficient funds, it's better to wait for a specific period of time before initiating a retry attempt rather than immediately processing it again. By setting up these configurations, merchants can prevent errors caused by retries and minimize the risk of failed payments. It is also very important not to retry excessively as such measures are usually punished by credit card schemes (e.g., MasterCard, Visa) and can lead to overall lower payment authorization rates. 

How Payrails can help

There are several factors to consider when building an effective payment retry system, such as a token vault, multi-acquirer partnerships, and a rule engine with customizable configurations. Payrails' payment operating system delivers all the necessary components, and our team of payment experts collaborates closely with merchants to develop highly efficient payment retry scenarios. This approach eliminates the need for extensive in-house development or the challenges of combining fragmented solutions from different providers. In addition, this helps merchants to avoid getting additional compliance burdens by falling under a larger PCI scope. 

If you're keen on recovering failed transactions using an intelligent payment retry system, we are here to help. Schedule a demo today to get a firsthand look at our intelligent payment retry solution and see for yourself how a reliable payment retry system can effectively minimize failed transactions.

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