Let’s take a typical scenario. A customer from Brazil tries to buy a product from an Africa-based tourism website. The transaction is declined. Then, he tries to buy the same product from another Africa-based tourism website, and the transaction is successfully processed.

What causes the transaction to be successful on one website but not another?

Usually, it is caused by the different payment service providers (PSPs) used by each website, but it can also be a result of the customer’s bank.

Here are the three most probable reasons why such a situation may occur:

Different PSPs use different fraud prevention tools

Let’s say that the first merchant uses PSP #1 for their website, and the second merchant uses PSP #2. PSP #1’s fraud prevention tool may decline certain transactions that PSP #2’s fraud protection tool would approve. Different fraud prevention techniques and algorithms can produce different results. This can also be seen through different transaction limits or risk limits.

For example, one tool may check the customer’s IP address against the billing address of the cardholder, and if it isn’t a match, the transaction may be flagged as fraudulent. So, if the customer in Brazil was using an African credit card, the payment would not go through. However, another tool may not carry out this process and so the transaction would go through. It’s also possible that the customer’s country, email address, IP address or credit card details are on a blacklist used by one tool and not the other.

Different acquirers result in different transaction results

The two PSPs may work with different acquirers. Particular limits or fraud prevention tools used by the acquirer can also result in a declined transaction. It’s also possible that a merchant account is not set up properly. Improper configuration can lead to unexpected results, including unsuccessful transactions.

When applying for a merchant account, you must fill out an in-depth application, providing a lot of information pertaining to your business model and finances. For example, if you’ve configured your merchant account to specify that you do business with countries like Kenya and Tanzania, and then you get an order from Brazil, the acquirer might reject the transaction because it is not in line with how your merchant account was initially set up and could be fraudulent.

The transaction is declined by the customer’s bank

Even if the acquirer and fraud prevention tools would approve a transaction, sometimes the customer’s bank can decline it. This could be caused by certain limits, including daily transaction limits, or if the customer’s available balance is insufficient. Issuer banks also have their own fraud prevention tools and may reject an unfamiliar payment simply because it was made at an unusual time, from an unusual place, or the customer has never bought from anyone in the merchant’s country before. The Brazilian customer’s first payment to an African merchant could well be flagged as unusual.

What to do about a declined transaction

As a merchant, you can use your PSP’s integrated dashboard to find out the reason behind a declined transaction. Transaction decline codes may show who is responsible for the decline. For example, it might say “card declined” or “rejected by credit card company”, which implies the bank is rejecting the transaction.

Alternatively, it may show that the PSP or acquirer is the one behind the rejection. It may give a description as to the reason why the decline occurred. If the response codes don’t give enough information, you should contact your PSP to find the exact reasoning.

Common reasons may include:

• Incorrect credit card number or expiry date
• Expired credit card
• Customer has insufficient funds or credit limit has been reached
• Bank fraud rules – the transaction looked suspicious or unusual compared to the customer’s usual purchases
• Charge rejected based on location e.g. overseas transactions

When a declined transaction occurs, it is critical that you reach out to customers immediately by phone or email, to find a way to reverse the decline, retain the customer as your own, and recapture lost revenue.

How to prevent declined transactions

One way to prevent declined transactions before they occur is to contact your PSP and ask if it’s possible to set up multiple merchant accounts in different acquiring banks. In the event that a transaction is declined, another merchant account could be used, which could circumvent problems caused by the acquirer. Automatic tools can be used to choose the best merchant account for each transaction to avoid a decline while maintaining high levels of fraud prevention.

Requesting information from your customers, such as a billing address or a credit card CVV code, can also prevent declined transactions, as these are indicators of an authentic transaction.

Understanding why declined transactions occur can help you set up processes that will prevent them from occurring in the first place. When a declined transaction does occur, taking steps to reverse the decline and finding out why it happened can enable you to retain both customers and your profits.