What is declined payment and how to reduce it in your business?

Sometimes a sale can be lost because, when the customer swipes the card, a declined payment notification arrives. In this article, we tell you the most common reasons why this happens and what solutions you should apply in your business to reduce its impact.

What does a declined payment mean?

A declined payment is a transaction rejected by the bank or company to which a card belongs, which means that the customer cannot complete the purchase at checkout and take the product he wanted or settle his debt by receiving a service. 

Most common causes of a declined payment

There are different reasons why a card payment may be declined. Here are some of them:

• Expiredcredit card or debit card: this payment instrument has an expiration date and, once expired, you cannot use the card. 
• Insufficient funds or lack of available credit: cards have a credit limit and if it is reached or exceeded there is no more credit until part or all of the debt is paid. 
• Security measures of the issuing bank or card issuer: the card is blocked or rejected when there is suspicion of irregular movement or atypical payment. 
• Card data errors : incomplete or incorrect card information.
• Bank or financial institution problems: sometimes there are sufficient funds, but a communication failure between the point-of-sale terminal and the bank results in a declined card.
• Error on the part of the cardholder: entering erroneous data, failure to authenticate for the payment process, or failure to use credit history responsibly.

How does a rejected payment affect your company?

A rejected payment not only represents a lost sale, but can also affect your company or business if it becomes a recurring problem when the payment method is by credit card. Among the usual problems that this can cause are the following:

Loss of immediate income

Your business stops getting the corresponding money for the payment that should have been made for a product or service.

Additional operating costs

Sometimes, fees are charged for processing payments or transactions that, in the end, do not materialize. It is also important to consider that the time invested in managing the failed collection is also wasted.

Deterioration in customer experience

The customer may choose to stop buying from your business because it is difficult for him to settle the purchase, even if he has a credit line or because he cannot choose other payment methods. 

Impact on the statement of account 

A declined payment may not have a major impact, but when you review all recurring cases the impact on your statement is negative because it is a significant amount.

Inconsistencies in the company's bank account balance

They can occur due to recording errors, transactions that are not accounted for or appear duplicated, as well as amounts not recognized by the bank.

Distrust in payment methods

Just as the customer experience is affected, the use of a payment method can also generate distrust in the business, even to the point of prohibiting it, even if that means losses in the future.

Solutions to reduce declined payments

In addition to having the option to pay with credit and debit cards (Visa, Mastercard, American Express), it is important that your business incorporates various payment methods so that the customer can choose the one that suits him best. For example, you can opt for payment in installments, mobile payment, digital wallets, transfers, among others.

It is important that you have payment gateways that optimize your transactions, such as Rebill, which improves your approval rate by 20% compared to the average global payment provider charging in LATAM and offers automatic recovery of up to 71% of rejected payments with smart retries and automatic notifications. For example:

• Your company bills USD 100,000 per month in subscriptions. If 10% of the payments are rejected due to expired cards, insufficient funds or security measures by the card issuer, you would lose USD 10,000 each month. At the end of the year, that would be $120,000 in uncollected revenue. 
• With a solution like Rebill, which recovers up to 71% of declined transactions, your business could recover more than $85,000 annually that would otherwise be written off.

A declined payment doesn't have to be a lost sale for your company! Contact Rebill and start recovering revenue with our smart reattempt solution.