Are declined transactions damaging your business?

Declined payments are bad news for merchants and consumers but there is a solution. Rob Crutchington, CEO of Encoded, explores the power of payment orchestration for healthier profits and a smoother checkout experience.

Last summer, when a worldwide tech outage left shoppers unable to make card payments across the UK, the evils of an increasingly cashless society were exposed. Despite this, card payments continue to rise. ‘Worldpay Global Payments Report 2025’ predicts that cards will account for 56% of global consumer payment value in 2030, roughly the equivalent of a staggering US$ 32.5 trillion!

Great news for e-commerce but unfortunately, card payments don’t always work and they come with hidden costs. Online authorisation sees payments declined at a rate of nearly four times higher – 15% versus 4%, compared to when a card is presented physically. Even worse is the impact on customer satisfaction, brand loyalty and sales. More than half of would-be customers will abandon a purchase that requires multiple attempts to complete.

Merchants need to find ways to ensure card payments are processed efficiently and ideally, first time to avoid expensive fees and chargebacks.

Valuable insight helps make the right decisions

The first step to overcoming failed payments and to reduce profit-eating costs is to understand what is going on behind the scenes:

Understand declined codes

There are many reasons why card payments fail but the real problem for merchants is receiving just a declined error message and not knowing why the payment was declined. Considering there are over 40 potential error codes divided into ‘soft’ and ‘hard’ categories, finding the culprit is a bit like finding the proverbial needle in the haystack. ‘Soft’ codes usually mean insufficient funds, the number of transactions supported, or fraud concern. ‘Hard’ codes reflect more factual reasons, such as incorrect expiry date, the card limit has been exceeded, a new card has been issued or the customer has cancelled the transaction.

Identify which declined codes are actionable

Understanding whether declined codes are actionable can make a huge difference in increasing the number of payments accepted. For example, 54 (Expired card) or Error 51 (Insufficient finds) presenting a sympathetic and meaningful response requesting an alternative card might have a positive outcome. Always keep in mind that the card issuer is ultimately responsible for generating the authorisation code. Ensuring that as much relevant information is collected as possible and sent to the issuer can make all the difference. An example of the non-actionable decline code might include 07 (Pick up card-fraud). As suggested, the issuing bank has stopped the card due to suspected fraud.

Monitor payment decline ratios

This is an important measurement for merchants. To discover your own payment decline ratio, simply compare the number of declined transactions with the total number of attempted transactions then monitor this ratio over time to identify trends and potential issues. Make it a regular exercise and act upon the results.

3 reasons to explore payment orchestration

Modern tech innovations such as payment orchestration are a welcome addition to a payment gateway by offering a secure, frictionless online payment process from payer to payee using one integrated solution.

The technology safeguards against payment failures in the following ways:

1. Cure-all for declined transactions

Unlike the majority of tech that just says a transaction has been declined but not the reason why, payment orchestration is able to support a limitless number of Merchant Identification Numbers (MIDs) from multiple acquirers at any one time. MIDs are unique codes assigned by an acquiring bank to process card transactions for businesses and are essential for securely accepting payments and routing funds to the correct merchant account. Using payment orchestration, merchants can go one step further, quickly identifying the most common declined codes to nip payment processing issues in the bud.

2. Bespoke product-specific acquiring services

That meet the unique payment processing challenges of different customer types are a competitive differentiator. For example, e-commerce customers require fraud prevention tools, secure payment gateways and integrations with popular e-commerce platforms; subscription businesses benefit from specialist recurring payment features and travel companies expect tools to handle international transactions and currency conversions. Payment orchestration makes this level of customisation possible, boosting brand satisfaction and revenues.

3. Consumer choice, tangible business savings

Payment orchestration integrates with a variety of card issuers, card schemes, gateways, open banking, acquirers and even the latest APMs like Apple Pay or Google Pay to give consumers choice and a smoother payment experience. Meanwhile, the technology supports intelligent, dynamic routing to reduce costs. As an example, a merchant can set a rule to automatically route transactions that offer high-risk customers low-risk payment options or select a channel that offers the current lowest costs for transactions. For businesses such as utilities or the wine industry, this powerful least cost acquiring functionality can translate into savings of up to 90%.

With the right information and technology, merchants can ensure every transaction is a profitable one. For more ideas on how payment orchestration can keep your business healthy and customers on your side, download Encoded’s Guide to Payment Orchestration.

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