Eliminate Payment Declines by Enabling Crypto Payments

Payment declines are becoming a growing concern for online retailers. Merchants are losing over 62% of customers due to failed transactions. Every declined transaction is not just a lost sale. It’s a lost opportunity to build a lasting relationship with your prospects.

There are over 2,000 factors that cause card declines, from inaccurate information to insufficient funds and fraud. As a merchant, your job is to minimize card declines and streamline your checkout experience.

In this blog, we will learn everything about credit card declines, what they are, why payments fail, and how you can make card declines obsolete with cryptocurrency. If that sounds exciting, let’s get going.

1. Over-protective fraud prevention measures

Fraud prevention filters are crucial for ensuring all your transactions are safe and secure. However, overdoing it may result in legitimate transactions being rejected frequently.

A good example of this would be Multi-factor authentication (MFA). It adds another layer of security to online transactions by requiring customers to verify their identity through an additional step during the authentication process.

True that MFA can improve security. But it also introduces friction and inconvenience for customers. For instance, asking a customer to name their favorite school teacher, even when they have entered the correct login credentials, can create an unnecessary barrier. Chances are, they may have already forgotten the correct answer to the question.

Like MFA, there are several measures companies take to prevent fraud. While having additional security for online payments is healthy, the problem occurs when companies set extremely stringent verification processes to safeguard their transactions. 

2. Inconsistencies in cross-border payments

When it comes to international transactions, there are several factors in play. For instance, the local banking standards, currency conversion rates, and differences in the policies of credit card issuers and processors create a much longer payment chain, leaving ample opportunities for something to go wrong and cause payment failure.

False declines are also a huge problem in international payments. When the card issuer incorrectly declines any legitimate credit card transaction, it is considered a false decline. According to a study by Sapio Research, 33% of American consumers would “never place an order with that merchant again” if their order was declined. That’s not all. False declines may trigger an increase in the number of customer complaints, which will eventually lead to lost sales and customer dissatisfaction.

3. Tech issues

Stripe — a payment processor worth $94.4 billion, is used by over 3.1 million websites worldwide. The company’s entire infrastructure experienced a massive outage in July 2019. All its services went down for almost 2 hours — leaving millions of businesses stranded without any means to collect payments.

A single payment can involve three or more entities: the payment processor, the acquiring bank, the issuing bank, and the customer itself — everyone plays a significant role in facilitating a transaction. When so many entities are involved, the chances of something going wrong multiply.

Each entity can face a host of problems, from network issues and software glitches to hardware failures and security breaches. These issues can cause delays, errors, and, at times, even data loss — all of which can significantly cause a payment to fail, impacting your customer’s checkout experience.

4. Processing problems

When you spend using your credit card, the payment request is routed through several intermediaries, and it’s approved only if all the entities authorize the transaction. During this phase, if any authorizer’s communication lines go down or if they don’t respond to the payment request in a certain timeframe, the payment will inevitably fail.

Processing errors are frustrating as the customer is unable to complete their transaction despite entering the right details. As a merchant, you have little to no control over processing errors. So, you cannot possibly predict or prevent them from occurring.

5. Card limits and expiry

Credit cards are usually valid for approximately 36 months. A transaction fails when a user is trying to pay via an expired credit card. Moreover, several cards also have limits for usage. For instance, some cards are limited to domestic purchases only, whereas others have spending limits for international transactions. When a user has exhausted their limit for a certain type of transaction, the payment will be rejected.

Apart from the above-mentioned ones, there are several reasons a transaction may fail. It could be due to insufficient funds or if your card issuer has imposed restrictions on the customer’s account.

1. High costs with payment recovery

Recovering failed payments is a strenuous and expensive process. According to a study by Forrester Research, two-thirds of B2B and B2C businesses spend over 11% of their average payment size in recovering lost payments. These numbers are the same for over 80% of B2B-only firms.

2. Bad debt

Every time a payment fails, it results in bad debt. In fact, over two-thirds of B2B firms reported that 10% or more of their failed payments turn into bad debt. This not only hampers their revenues but also adversely affects their reputation. If you accumulate a lot of bad debt, you may be restricted from accepting a certain type of credit card or using a particular payment gateway. Companies may suspend your account indefinitely.

3. Customer churn

Failed payments not only affect your revenues but also result in a lost customer. This means the merchant loses out on a huge amount of potential revenue from that customer. Over two-thirds of B2B firms admitted that 11% or more of their payment failures result in churn — in a survey conducted by GoCardless. Repeated payment failures also result in customer dissatisfaction and an increase in support tickets, calls, and emails.

4. Lower profitability

Failed transactions can gradually kill your business if not handled properly. While they may not account for much initially, failed transactions can add up quickly and impact your company’s Key Performance Indicators (KPIs). Over half of surveyed merchants admitted that payment failures decreased their revenue and profitability.

1. Seamless global payments

Unlike credit card transactions, crypto payments are borderless. You can send and receive cryptocurrencies anywhere across the globe in real time. The cost of transferring crypto is significantly lower than credit card transactions. Anyone with a smartphone and an internet connection can start using cryptocurrencies to send and receive payments.

2. No chargebacks

Crypto payments are just like wire transfers/cash transactions — the money is sent directly from one party to another without any intermediaries. They cannot be reversed once sent. If a customer wants a refund, they will have to request the merchant. When you accept cryptocurrencies, you will always be in control of your funds.

3. Lowest transaction fees

Average credit card processing fees range between 1.5% and 3.5%. This means you will pay almost $350 or more for every $10,000 you collect. If you transact heavily, the fees can eat up a good chunk of your profits. However, processing crypto payments is much cheaper. Most payment gateways charge up to 1% transaction fees. That’s not all. Some payment processors also allow you to accept crypto for free. Thus, accepting crypto will help you save hundreds of thousands of dollars that would otherwise be spent on payment gateways.

4. Reach a wider audience

Enabling crypto payments will enable merchants to tap into new customer segments. Over one-third of adults — nearly 1.7 billion people around the world don’t have access to banking services. They don’t have a bank account or a credit/debit card. These citizens can use cryptocurrencies to transact online. If you start accepting crypto payments, you open yourself to millions of users worldwide who are devoid of banking services.

5. Easy to implement

Crypto payment gateways have low barriers to entry. Anyone with an internet connection can sign up with a payment processor. The onboarding process is easy, too. Most payment processors are lenient and don’t require KYC or documentation. All you need is a valid email address to start accepting crypto payments.