Learn to Love Authorization Reversals

Feb. 19, 2023 - PRLog -- MNTS explained in its article on Saint Valentine's Day that Data Entry Errors are a major contributor to decline rates. But does this miss the real issue?

From research in 2022, 23% of consumers found that it was card data-entry mistakes that led to authorisation declines – with the conclusion that more stored payment information solutions are needed.

We accept that updates to stored 'payment information' is important, but there are other cardholder processes at checkout that must be improved, as the PYMNTS article focused only upon the second biggest challenge.

26% of declines were identified as due to Insufficient Funds, with an additional 15% for Not Enough Credit; meaning that this remains a far bigger challenge than data entry errors. Cardholders increasingly live on tight budgets and/or struggle to remember how much they have available to spend, based on this research. But there is another issue that I must challenge here.

When a merchant tells the cardholder that the issuer has declined the transaction, the cardholder is often sure that they have enough money. After investigation it seems that the decline is often caused by:

a) The merchant – or another merchant in an earlier transaction on that same card, or

b) The issuer - in the way that they have automated the authorisation decline decision.

How can this be? These two scenarios are linked by the mistreatment of authorisation reversal messages and adjustments made to available funds on a cardholder's account.  Problems often occur when partly or fully cancelled purchases are not reversed properly, e.g.:

-       When a purchase is cancelled or the amount reduced, a merchant must immediately reverse the transaction and using agreed authorisation message standards.

-       The issuer must then release its hold on funds to give immediate cardholder access to the money.

Getting this right for the customer relies on both the merchant and the issuer doing the right thing.
  • It is complicated for the merchant – that must ensure that all correct matching data elements are sent within authorisation reversals – full or partial, in a timely manner and to benefit the customer rather than that merchant. Afterall, if the customer transaction is reversed by a merchant, the customer may simply go next door to make a different purchase, AND
  • The card issuer must act immediately to match authorisation messages, apply reversals and remove unnecessary 'hold amounts' on cardholder funds. This allows the customer access to their money for the next transaction.

All parties, especially merchant acquirers, issuers and card schemes must step-up to find and correct exceptions and errors.

To read full story visit: https://www.riskskill.com/post/learn-to-love-authorizatio...

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