Payment declines are an inevitable part of credit card processing. Yet most organizations, Merchants, and payment providers alike, pay little attention to the insights hidden within their decline response codes. Each decline tells a story and can reveal a huge range of issues within a Merchant’s transactions, including possible fraud.

For ISOs and MSPs, drilling into payment declines gives valuable insight into Merchant health. This granular level of insight can help reduce potential losses, protect against fraud, and even save your organization from regulatory and compliance inquiries.

The Current Narrative

ISOs and MSPs often gain the most margin by working with high-risk Merchants. The greater risk that’s underwritten, the more revenue that can be earned per transaction since high-risk Merchants typically pay higher processing rates. Underwriting risk is a numbers game, as more and more risky Merchants means more disputes, fraud and potential compliance breaches.

Not all declines are fraudulent or malicious. Many stem from a technical/payload error or something as simple as an out-of-date card. When the cardholder is present, the clerk might ask the cardholder to re-swipe the card or use another payment method.

While dozens of different response codes are returned to a Merchant on a declined transaction, we generally break them down into several categories: Insufficient Funds, Generic Decline (Do Not Honor), Fraud/Stolen, Data/Technical Error, Expired Card, Closed Account and Other.

Many ISOs and MSPs assume that declined transactions are solely a Merchant’s problem. In reality, inconsistent or unusual decline patterns can serve as an early warning sign of broader risk for the ISO/MSP as well.

The Problem With Not Tracking Your Merchants’ Decline Codes

A Merchant’s business naturally evolves over time. Some may share “clean” statements during underwriting, or their initial traffic may look low-risk. But as new campaigns, partners, or affiliates come online, the makeup of their transactions and their associated risk can shift dramatically.

The first place those changes usually are seen are NOT in dispute and fraud levels. They’re seen in the details of the response codes that are being returned to the Merchant. Ignoring the signals coming from the decline response data means taking unnecessary risks while you’re waiting for fraud and dispute data to mature.

Monitoring a Merchant’s mix of decline response codes over time, especially at the larger issuers, is critical to catching risky behavior before it grows. These large issuers have enormous sample sizes of transactions, and sophisticated fraud screening, all in an effort to reduce THEIR risk. They’re providing the ISOs/MSPs with a signal, if you have the tools to read what they’re telling you about a specific Merchant’s risk.

Rewrite the Story

Slyce360’s dispute and fraud management tools combine detailed processor/gateway data with disputes, fraud and CRM data to provide the most robust insights into a Merchant’s risk profile. Our automations and analytics proactively warn you of issues and provide prescriptive action plans for ISOs/MSPs and the merchants they serve.

Data without insights is useless. Unlock the true risk story of your data.

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