As a company, you invest a significant portion of your time and resources into customer acquisition. From advertising your products to cold calling leads, your marketing costs are a major investment. The last thing you want to do is waste all of your marketing effort on failed payments. It doesn’t matter how many customers walk through your door. If they can’t swipe their card successfully, you don’t bring in revenue.
If you want to know why card payments failed at your business or what you can do to prevent declined transactions in the future, we’ve got you covered. Read on to learn more about this common payment processing issue.
TL;DR
- Failed payments can happen for a range of reasons, such as declined transactions, fraud, insufficient funds, or expired cards.
- When they do occur, they mean lost revenue for your business.
- A failed payment can occur with a card, digital wallet, or app.
- You can reduce your failure rate by keeping your payment gateway or point of sale (POS) software up to date, providing multiple payment options, adopting fraud prevention tools, and working with a reliable payment processor.
What Are Failed Payments?
Failed payments are essentially any payment that doesn’t go through. This can happen with digital wallets or physical payments. Besides insufficient funds, there are a range of reasons why a payment might not be possible to process. For example, many recurring payments fail because the card on file has expired.
Risk-Level Influences Failure Rates
Your approval rate may also be influenced by the risk level of your business.
- Low-Risk Businesses: A low-risk business typically has a low rate of chargebacks. It operates in a stable industry that has a low risk of fraud. These companies have the best approval rates and enjoy access to lower payment processing rates from mainstream payment processors.
- Medium-Risk Businesses: These companies are in industries where there can be sudden increases in volume, occasional declines, or similar problems. Smart payment routing and fraud prevention are essential to prevent failed transactions and declined cards.
- High-Risk Businesses: High-risk businesses are in sectors like gambling, adult entertainment, or CBD. These sectors have lower approval rates because chargebacks and fraud are more common. Many mainstream payment processors won’t work with high-risk businesses or require added measures, such as rolling reserves.
Region Plays a Role in Specific Types of Payment Failure
In addition to the company’s risk level, the region may also play a role. For instance, some countries in Latin America use a cash voucher system that has drop-off issues. The cash vouchers are physically delivered to the individual. Then, the individual must pay in person. Similarly, the incompatibility of different mobile money systems in Kenya leads to payment failure.
Common Reasons for Failed Payments
There are many reasons why failed payments can happen at your business. The following chart includes just a few of the most frequent causes.
| Reason | Why It Occurs | How To Prevent or Resolve the Issue |
| Insufficient Funds | There isn’t enough money in the customer’s account at the time of the transaction. | Provide the customer with a different way to pay or let them update their payment information. Alternatively, try to charge them again in 24 hours. |
| Suspected Fraud | A security-related decline happens if the bank suspects fraud, such as a large purchase amount or an unusual transaction location. | Confirm the customer’s identity. Then, discuss potential retry options. To prevent future issues, adopt strong fraud protection tools. |
| Expired Card | If the card has expired or is invalid, it won’t run. Similarly, the transaction can be declined if the customer types their card number incorrectly. | Remind customers to keep their card details current. Set up your payment processing system so that it sends out automatic reminders when a card has expired. |
| Network and Technical Errors | This reason happens when there is some type of connection issue between the customer, issuing bank, and payment gateway. | Retry the card again. Ideally, switch to a payment processor that has fewer connectivity issues. |
| Timeout or Customer Cancellation | This occurs when the customer abandons the checkout process before they finish. | Send a follow-up reminder or cart recovery message. To prevent future issues, simplify your checkout process and set up one-click payments. |
| Cross-Border Problems | Sometimes, banks block payments that occur in different regions or currencies. | Besides offering local payment options, you can switch to a payment processor that is experienced with global payments. |
| Payment Gateway Issues | If the payment gateway, merchant system, or settings aren’t configured properly, payments may fail to process. | Make sure your credentials and APIs are updated. Pay attention when failed payments happen, so you can reach out for help from your payment gateway provider. |
Different Types of Failed Payments and How To Prevent Them
If you’ve ever wondered why a PayPal payment failed or why Afterpay payments failed, you’re not alone. The following are some of the most common types of payment processing failures and why they happen.
Card Payment Failures: Why a Card Payment Failed
A card failure can occur if there aren’t enough funds in the individual’s account or if the card has expired. Additionally, some failures take place because of fraud.
To prevent these types of failures, it’s essential to use the best fraud prevention tools. Make sure customers regularly update the payment information on their accounts. For cases of insufficient funds, your company should offer multiple payment types.
Cash App Failures: Why a Cash App Payment Failed
To figure out why a Cash App payment failed, troubleshoot connectivity issues. If the customer has enough money in their account, there could also be an issue with the version of the app they are using. They should try to update to the latest version of the app and double-check to make sure their account has enough funds. As the merchant, you can offer to let them pay through a different payment type. Before you retry the transaction, verify that the customer’s account has been set up correctly.
Zelle Payment Failures: Why a Zelle Payment Failed
There are a few common reasons why a Zelle payment has failed. Often, the phone number or email address is wrong. Additionally, the person might not be enrolled. In some cases, they may have a spending limit in place and are already over it.
To address this problem, the customer needs to make sure that they are enrolled in Zelle. They should also double-check the recipient info before they press send. In addition, customers can check to see if there is a sending limit in place. These limits are set by the bank, so the customer may not be able to do anything about them.
Apple Pay: Why an Apple Pay Payment Failed
Why an Apple Pay payment failed can vary from case to case. Unsupported cards, expired cards, failed authentication, and outdated software are all common reasons for payment failure.
The client may need to update their payment information or add a new card. As the merchant, you can prevent Apple Pay failures by keeping your NFC terminal’s software up to date and ensuring the terminal supports multiple wallets.
Google Pay: Why a Google Pay Payment Failed
When it comes to why a Google Pay payment failed, there are a few frequent culprits. Security blocks, issues with the account setup, and card-related problems can all be at fault.
To begin with, you should ask the customer to clear their cache and update the app. Then, they should verify that the card they are using is the correct one and hasn’t expired. Businesses can help by ensuring that the company’s payment gateways and networks are actually set up to process Google Pay payments.
Afterpay: Why an Afterpay Payment Failed
With Afterpay, payments may fail due to a transaction limit or insufficient funds. Sometimes, clients miss the installment payments. To prevent this, the customer needs to keep enough funds in their account to process payments. Additionally, they must be proactive about paying past-due payments. Meanwhile, merchants can help by sending out reminder notifications about upcoming payments due.
Venmo: Why a Venmo Payment Failed
If your client is unsure why a Venmo payment failed, have them make sure their bank transfer arrived in their Venmo account and wasn’t reversed. Venmo payments can also fail if the account hasn’t been verified or if some type of suspicious activity was detected.
Customers can help the payment process along by double-checking their information and verifying their accounts. As a merchant, you can also give them guidance on how to deal with Venmo failures and the alternative payments they can use instead.
PayPal: Why a PayPal Payment Failed
A PayPal payment can fail due to insufficient funds or account restrictions. Additionally, PayPal transactions can fail if the customer opens up a dispute, such as disputes about the item not being received, unauthorized transactions, or the item not being as described.
Customers can prevent PayPal failures by making sure their account is verified and in compliance. They should link multiple funding sources so that there is always money available in their account. Meanwhile, businesses can help by creating a verified PayPal business account and preventing account disputes.
Stripe: Why a Stripe Payment Failed
If you’re wondering why a Stripe payment failed, the answer may be related to incorrect API keys, expired cards, or fraud. Customers can prevent payment failure by making sure their payment information is kept up to date.
As the merchant, you should enable retries in Stripe’s system through its Smart Retries. Stripe also has built-in recovery tools, dunning tools, and an automated card updater that can help you prevent these types of issues from recurring in the future.
Final Thoughts
Even with the best precautions, your company is going to experience failed payments from time to time. How you deal with this issue can determine whether the customer returns to your company in the future. Through preventative measures and a proactive response, you can prevent payment failures from happening and respond quickly when they do.
You can also reduce the odds of payment failures by updating your company’s internal systems. If a payment gateway goes down, your transactions will start failing right away. Because of this, you need to partner with a skilled payment processing company that understands how to use cascading and routing to avoid disruptions.
For more information on the best ways to handle failed payments, reach out to our team of experienced payment processing specialists today.
Ready to Transform the Way You Do Business?
Don’t settle for less when it comes to payment processing. With PayCompass, you get smarter, faster, and more reliable solutions tailored to your unique needs. Join thousands of businesses who trust us to keep their business moving forward.
Similar Posts
What Are MOTO Transactions in Payment Processing?
Mail Order/Telephone Order (MOTO) payments first came out in the early to mid-20th century. At the time, mail order catalogs needed a way to accept payments that didn’t involve waiting around for a check to arrive in the mail. The invention of MOTO payments greatly facilitated the growth of mail order catalogs and phone orders. […]
Embedded Payments for Travel Agencies: Key Advantages
When you’re shopping for a product, it’s annoying when an entirely new tab pops open each time you click on an item. By the time you finish shopping, you can easily have a dozen tabs running. Worse still, many companies deliberately have their systems set up so that a new tab appears when it is […]
High-Risk Merchant Account Instant Approval: Myth vs Reality
If you’re considered a high-risk merchant, getting a merchant account set up can take time. It can take anywhere between a few days and a few weeks to set up your account. While there are many ads boasting high-risk merchant account instant approval, the reality is that this just isn’t possible. Instead, most of these […]
Visa VAMP Changes Are Crushing High-Risk Merchants – Here’s What You Need to Know
Fraud is a major problem these days. Of course, it’s been an issue for a while, but with the sophisticated technology we have at our disposal, fraudsters find more opportunities to wreak havoc. This situation has pushed financial institutions and payment processors to do more to protect businesses and customers, leading to the birth of […]
B2B Payments: The Hidden Money Moves That Make or Break Your Business
There are many different types of payments that flow through payment processing systems every day, in fact, every single minute. Many of those are B2B payments, keeping the commerce industry ticking along. Many of those are B2B payments, keeping global commerce moving. According to 2024 NACHA data, the ACH network alone processed $58.24 trillion in […]
Best Payment Processor for a Small Business: The Real Deal on What Actually Matters
There’s a common misconception that small businesses are just mini versions of larger ones. People assume they run the same way, just scaled back, and that what goes on behind the scenes is relatively similar. If you’re a small business, you’ll know that’s certainly not true. Small businesses need their own specialized and tailored approaches […]
How to Register a Company in the US: The Complete Step-by-Step Guide I Wish I Had When Starting Out
You’re about to open a business, and you’re full of excitement and hopes for the future. It’s a great time, for sure, but there are many boxes you need to tick. Don’t allow your excitement to cloud what really needs to be done! For instance, your first priority should be learning how to register a […]
Square Statistics: The Numbers Behind America’s Small Business Payment Revolution
If you’re a small business, you face a few more obstacles when it comes to payment processing compared to large organizations. That’s not to say you don’t have options, but many are designed for big corporations, or at least medium-sized businesses with far more employees. For many, that’s where Square comes into the equation. The […]
Stripe Statistics That’ll Make You Rethink Payment Processing Forever
When you make a payment – personal or business – do you think much about what goes on behind the scenes? Probably not, and you’d be in the majority for thinking that way. Yet, the truth is quite surprising – the payment processing industry is booming; in fact, in 2023, around $1.8 quadrillion was handled […]
Chargeback vs. Refund: Understanding the Differences
As a business, you want every customer to be completely satisfied with their purchase. However, even when you have the best quality of products and services, there are times when customers decide to get their money back. Depending on the circumstances, this may lead to a chargeback or refund. For merchants, these transactions can quickly […]