Why do online payments fail?

Today, majority of the business organizations in India are managing their financial transactions through digital payments. With the development of internet technology, the scope of digital payments has really improved.
For customers who initiate an online transaction, payment failures can be frustrating as there is an immense amount of trust that goes into putting their bank details online.

But, did you know not all payments are “failed payments” ?

 Yes, payments are not completed fully at times. But not necessary that they are failed. A lot of payments are also considered “incomplete” due to any missing activities at the user end.

Below are some common reasons we observed related to the transactions, which were not completed due to error/account problems at user end.

As you can see in the chart below, massive number of transactions are seen to be cancelled by the users. Other transactions are incomplete due to user having insufficient funds,”cancelled by the user, entering incorrect card details & what not.

These errors at user side are also responsible for a payment’s completion.

Let’s consider a simple example of a debit card transaction. A wife is about to pay for a product on any online shopping website. She selects to pay via debit card. That debit card is owned by her husband. So while paying, to authenticate the transaction , an OTP will be sent to the card owner’s registered mobile number.

This OTP has to be entered & the transaction will be successfully authenticated. Here the wife needs to enter the OTP which her husband will receive. Failing to enter this OTP within 15 minutes will not complete the payment successfully.

This will be an incomplete payment as the OTP was not entered within the time window & it will lead to time out.

Payment processing

Below is a typical payment gateway process considering the customer’s activities related to an online payment.

Payment gateway process

When customers initiate an online payment, these are some core entities (as shown in the diagram) that go into making the payment possible. Even a single glitch in any of these entities can lead to the failure of a transaction.

As the customers, merchants & the banks involved, problems or errors at any one of their ends could lead to failure of a payment.

Payment failures can occur due to :

1. Bad internet connection

A stable internet connection is absolutely necessary for a transaction to go through successfully. If the internet speed fluctuates heavily then it could affect the transaction. Also, closing the tab or window will result in failed payment or incomplete payment.

2. Authentication failure

Authentication failure results when wrong card details are entered. Sometimes the OTP cannot be verified or 3D secure password is not entered correctly.Online payments require manual entries which are not only time consuming but also increases chances of wrong inputs leading to failures.

Following errors are shown when the user enters wrong input.

1. Transaction cannot be authorized – due to wrong Password / OTP
2. Signature validation failed – due to wrong 3D Secure signature. 3D Secure signature enables buyers to validate transactions that you make over the internet by requesting a personal code.
3. Payment not captured – This error occurs due to insufficient balance in the account, incorrect CVV entry or incorrect expiry date entry.

Consider a case of net banking transaction. Here, the customer has multiple passwords – one password is to login to the net banking portal of the customer’s bank & another is for authentication of the transaction.Incorrect application of these passwords will lead to the transaction failure.There could be similar cases where manual error could lead payment failures in multiple payment modes like UPI, wallet, etc.In such cases, customer receives messages from the bank “The payment could not be processed”. Usually, money is not debited and customer can try another transaction after few minutes

 3. Technology Failures

The process of online payments is such that each transaction has to go through different entities. (issuer bank, acquirer bank, payment gateway etc.) The Acquirer bank maintains the merchant’s bank account. It enables merchants to process credit and debit card transactions.Issuer bank is the bank or financial organisation that provides payment cards (debit, credit, pre-paid or charge card) to their customer or card holder.The issuer has responsibility for transactions made on cards that they have issued, and will be responsible for debiting funds from the relevant card holder’s account.

Each entity involved in the payment must be able to smoothly connect and share data with others in an encrypted manner, and the data must meet the strict & unique security requirements of the receiving entity.

Due to technological fluctuations, there are chances of things going wrong and the information not being processed properly. Data flow sometimes does not fully meet the security requirements of the receiving entity, and thus the receiving entity is unable to respond to the information within the allowed time. Due to this, the transaction is forced to be cancelled.

4. Down time

Scheduled or unscheduled down time of the issuer, acquirer, payment gateway of the merchant leads to payment failure. This could happen often when there are large numbers of transactions happening through the system. If the payment gateway cannot reach customer’s bank to approve the transaction, they will typically decline the transaction in the bank’s place.

In this case, the customer can try again later when the system is back running.

5. Security Failures

Some issuing banks have aggressive fraud detection mechanism and block the transactions that they feel are not normal for customer’s spending habits. This is usually based on the past purchase behavior and transactions that do not conform with customer’s past spending behavior. These are often flagged as fraud. As part of this process, many genuine transactions are incorrectly flagged as fraud and rejected.

Some of these errors are:

      i. Denied by Risk– Transaction is declined due to the security threat from the issuing bank’s end.

     ii. Rejected by Payment Gateway – Payment gateway providers set a mutually decided transaction limit for merchants. If any transaction goes beyond this limit, it is rejected.

    iii. Card Bin rejected– BIN (Bank Identification Number) is the first six digits of the card, signifying which network and bank the card comes from. “Card bin stop listed” occurs when the BIN number (a part of customer’s card number) is among a list of black-listed on account of fraud threat and transactions from such BINs are rejected.

Similarly there are various reasons for incomplete payments. In all these cases where your money has been debited & you have no acknowledgement of it, is only but natural to worry.

The customers of Easebuzz’s merchants who experience any sort of incomplete payment errors are notified with respective errors in the browser window. Also in any case where the payment is failed or amount is deducted or no proper acknowledgement is visible, the customers are provided with the contact details of our support team, who will assist customers & take necessary steps to resolve the customer’s query.

One thing our customers need to know is that their money is not going anywhere and is safe.