Card transactions are one of the most convenient, easiest and ubiquitous ways to pay. When transactions happen there are many checks that accompany them to make sure that everyone is who they say they are.

However, inevitably transactions get declined – often merchants have no idea of the real reason why and this can be frustrating because of lost sales and poor customer experiences. There are some fairly basic reasons why transactions get declined:

• Expiry date mismatch – a common occurrence where the card details are being typed.
• Card has a ‘block’ of some kind – usually this is that the card is marked lost or stolen but also can be that the card issuer is looking to speak to the cardholder or that the card is already suspected of having been used fraudulently.
• Security code (sometimes called CVV or CVC – the number from the back of the card) – these are designed to add assurance that the person making a transaction has the card with them. Mis-keying is a common mistake leading to declined transactions.
• Funds not available – simple case of the card not having the available balance to allow the request to be approved.

Scratch under the surface and other reasons for declines get a bit more complicated… simple card information and questions like ‘is the card good?’ or ‘are the funds available?’ are too blunt to make informed decisions. Instead, issuers are increasingly relying on a variety of data sources and fraud decision engines to make approve or decline calls. Let’s have a look at a couple of examples:

• Address Verification Service (AVS) Check – AVS allows a merchant to get a response from an issuer to check the address the customer has given matches the address for the card. Using the numerical data in an address, issuers can respond by giving a full match, partial match or no match response. Decisions can then be made about whether to allow a transaction to proceed.
• Merchant category code gives an idea as to the nature of the goods or services being purchased. The difference between ‘Miscellaneous – Not Elsewhere Classified’ and ‘Stationary, Office Supplies’ can be the difference between approve and decline. Ensuring this is as accurate as possible is important to avoid unnecessary declines.
• Do I look like I am overseas? Each transaction carries location information about the merchant – if your transaction data makes it seem like you are overseas (maybe a registered office or an error?) then you look quite different to an issuer making an authorisation decision.
• 3D Secure – services like Verified by Visa or Mastercard Securecode allow the capture and transmission of dozens of additional data elements about device ID, location, IP address etc and is the best way to help issuers understand if a transaction is genuine. Using this data, the issuer can make a better decision and often will ‘passively’ authenticate a transaction (i.e. not interrupt the checkout flow) because they are confident in the data matching the customer profile.

Ensuring that merchants take the opportunity to check that data being sent to issuers is as accurate as it can be and implementing enhancements like 3D Secure are important first steps in increasing approval rates.