23 Mar
2023

3 Ideas for reducing payment failures with automatic payment retry

We have reached a point where accepting online payments is no longer just an option but a necessity for any business that wants to grow and thrive. But soon even accepting online payments won’t be enough. 

Businesses that want to unlock new levels of revenue generation and to outperform the competition will have to offer convenient, customized and seamless payment experiences to keep their customers engaged. This means addressing all potential obstacles in the online checkout process.

One major hurdle that eCommerce companies are currently facing in the payment space is payment failures. Payment failures are so common that a study by Forrester revealed the majority of eCommerce companies experience them, with some reporting payment failure rates as high as 20%

So how do you solve payment failures and mitigate revenue loss? 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.

What are payment failures?

Payment failure happens when a customer's payment attempt is declined or cannot be processed. They are typically classified into two primary categories: soft declines and hard declines. 

Hard declines occur when the issuing bank denies payments for reasons such as incorrect card details, reported stolen or closed cards, and other related issues. Hard declines are irreversible and should not be subjected to retry attempts.

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.

Payment failures lead to a negative customer experience and can result in short-term and long-term revenue loss. 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 proactively prevent a significant portion of these issues from happening. 

One of the most effective ways of reducing soft declines is to incorporate a smart payment retry into your payment tech stack.

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 an intelligent payment retry system involves some initial effort, the long-term benefits 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 2%.

💡Discover more ways to boost your payment success rate and increase revenue.

3 considerations when implementing payment retry into your payment system

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

  1. Add a token vault: Token vaults securely store 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 vaults also enable 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. Define a retry strategy: To effectively manage payment retries and prevent an infinite loop 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.

➡️ Schedule a payment retry demo with one of our team members.

How to minimize payment failures

Next to incorporating payment retry into your payment infrastructure, there are other proven ways to reduce payment failures. Consider incorporating the following features into your payment process:

  • 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.

Create your own payment retry scenarios with Payrails

There are several factors to consider when building an effective payment retry system, and Payrails' payment operating system delivers all the necessary components. Our team of payment experts collaborates closely with merchants to develop highly efficient payment retry scenarios, with multiple benefits:

  • Eliminates the needs for time-consuming and expensive in-house development
  • Removes the challenges of combining fragmented solutions from different providers
  • Takes care of PCI compliance

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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