During my exchanges with e-commerce merchants, one question that keeps coming up is: why should a card payment that was not finalised the first time succeed instantly the second time it is processed with another payment provider (e.g. with Stripe)?
First, let’s list the main reasons why payments fail:
Nothing new here, except in their incidence rate. Since 2021 there has been a significant increase in payment failures to do authentication issues. At the heart of these issues, the new European payment directive (PSD2), which has changed the way online payments work with regards to strong authentication.
Since the implementation of the PSD2 in Europe, the authentication process is ultimately controlled by the bank issuing the customer’s card.
For the same purchase, the authentication process requested by the issuing bank will not necessarily be identical if the payment provider used to process the payment changes between the 1st and 2nd attempt.
Sounds counterintuitive? Definitely, but there is a reason for this difference.
Not all payment providers are integrated in the same way with the banking ecosystem. For the same purchase, even if the card/amount/… are identical, the payment requests are communicated to the issuing bank differently from one payment provider to another.
Thus retrying a payment can sometimes result in it being approved without requiring the customer to go through strong authentication again (frictionless payment), or at the very least offers the customer a second chance to authenticate him or herself correctly with the issuing bank.
Online payments involve many different actors: the e-commerce’s payment provider, the acquiring bank (merchant side), the card scheme network, the bank issuing the card (customer side), technical intermediaries (e.g. 3DS authentication), among others.
Retrying a failed payment can bypass technical problems. Indeed, the payment will be partly processed by a different group of actors, who are unlikely to be subject to the same errors and temporary unavailability at the same time.
Numerous checks are put in place by the banks of the parties involved (merchant and customer) to ensure that a payment is legitimate.
Bank systems are effective in detecting fraud, but they also reject legitimate payments, as shown by a Riskified study (link here) that found that 72% declined orders are placed by legitimate customers who can afford to make the purchase.
A significant number of failed payments can be saved, but not all of them. Those rejected for insufficient funds or incorrect information (such as wrong CVV/CVC) will not be approved with a retry.
In these cases, it is recommended that merchants encourage their customers to use another payment method to complete their purchase.
This article written by Gregory Zerbib, CEO and Co-founder of Zeppto.
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