Why do online payments fail and how to handle them in 2024

By understanding why online payments fail and how to handle them, businesses can ensure a seamless shopping experience for the customer while maintaining smooth financial operations.

What Does an Online Payment Look Like?

When a customer buys something from a website and makes an online transaction, here is what a typical flow of the transaction looks like -

• The customer initiates the payment.
• This request goes to the payment gateway.
• The payment gateway sends the request to the issuing bank to process the transaction.
• The issuing bank communicates the approval or rejection of the transaction to the payment gateway.
• The payment is sent to the acquiring bank.

The process can vary based on the payment mode, security protocols, and other factors. Each step has its security protocols to ensure the payment is safe. However, there are instances when an online payment can fail. 

Possible Reasons for Online Payment Failures

There can be multiple technical reasons for the failure of online transactions. Some common reasons are -

• Technical Issues: Technology has transformed the way people shop, yet there are occasional glitches. Sometimes the payment gateway experiences a momentary outage or a hiccup in communication between the seller's website and the processing system. This can lead to payment failures. This issue can be resolved by testing the payment gateway regularly. For organisations with a large volume of online payments, collaborating with a reliable and trusted payment gateway is essential to ensure efficient online transactions.
• Downtime and Maintenance: Payment failure due to server downtime is a prevalent issue, especially among UPI users. Banks often have to take their servers offline for maintenance, resulting in downtime and online payment problems. Banks notify their customers about scheduled downtimes for maintenance. However, unscheduled maintenance can potentially result in payment failure.
• Wrong Transactions Details: Sometimes, customers enter the wrong transaction details on the transaction page, like the wrong CVV, card number, expiration date, etc. There are instances when customers use an expired card or enter an incorrect UPI PIN. All of these errors can result in payment failure.
• Network Issues: Network issues are often the main culprits of online payment failure. An unstable connection, slow internet speeds, or the use of a VPN can result in online payment failure. Hence, it is always recommended to have stable internet access for any online transaction.
• Fraud Detection Systems by Banks: Banks have robust fraud detection systems in place to combat cybercrime and protect their clients' assets. While they usually work flawlessly, there is a potential that they will flag a valid transaction as fraud. In this circumstance, even a genuine transaction may fail.  

How to Handle Online Payment Failures?

As previously indicated, online payment failures can occur for a variety of reasons. As a result, the business and payment gateway must exercise caution when dealing with them. This not only ensures a smooth purchasing experience for the customer, but also helps keep a clean financial record. Here are some good practices for any online payment gateway to handle online payment failure -

• Transparency in Communication: Customers can get irritated if their order is cancelled due to payment problems. This issue worsens if their money is debited and the payment fails. In any situation, the payment gateway must provide a clear explanation to the customer, assuring them that their funds are secure. The payment gateway should also specify when this payment failure issue will be resolved.
• Multiple Payment Options: Payment gateways should not restrict users to a single payment method. India is a leader in digital payments and payment gateways, and businesses should offer a variety of payment methods, such as UPI, digital wallets, and credit and debit cards. This way, businesses don’t have to lose a customer because one mode of payment didn’t work.
• Retry Option: When a payment fails due to temporary issues such as network outages, the payment gateway usually retries automatically within a short period and completes the online transaction.
• Frequent Maintenance: Both payment gateways and banks should ensure that their servers and software use the best and latest protocols to identify weak points. Not only does this practice help them keep online transactions secure, but it also reduces the risk of payment failures.
• Collaboration with Banks: It’s important for payment gateways to collaborate with banks to make online payments a seamless experience for both businesses and customers. Payment gateways should work closely with banks to resolve any issues arising from online transaction failures. 

In Conclusion

While online payments are undoubtedly convenient, the occasional failure can be frustrating for both businesses and customers. By identifying the main causes of these failures and employing preventive tactics, businesses can significantly reduce declines and improve the shopping experience. One of the best ways to ensure a higher transaction success rate is to use a reliable payment gateway such as Worldline, give it a try