A soft decline happens when a transaction is initially authorized by a financial institution but is later reversed, leading to the rejection of the payment. This technical phenomenon can leave merchants, especially those with high risk merchant accounts, seeking clarity on the reasons behind approved transactions being denied.

In this article we will delve into soft declines, exploring their root causes, implications, and technical strategies to effectively manage this complex occurrence.

Why Do Soft Declines Occur?

Soft declines are best described as authorized transactions that face unexpected rejection during further processing. They often leave both customers and merchants puzzled, as the initial approval might suggest a successful payment, only to be followed by a decline.

Causes of Soft Declines

Soft declines can be attributed to several factors, including:

1. Insufficient Funds: Soft declines may occur when the customer's account lacks the necessary funds to cover the transaction at the time of settlement.

2. Card Expiry: If a payment card's expiration date has passed, the transaction might receive initial authorization but face decline in subsequent stages.

3. Technical Glitches: Technical issues within the payment processing system or communication errors with the financial institution can lead to soft declines.

4. Account Limits: Soft declines can arise due to transaction or spending limits set by the customer's financial institution, preventing the payment from proceeding.

Managing Soft Declines

Effectively addressing soft declines requires technical strategies:

1. Clear Communication: In cases of soft declines, transparently inform the customer about the issue and offer alternative payment methods to complete the purchase.

2. Retry Mechanism: Implement a retry mechanism that resubmits declined transactions after a short delay, as some soft declines may be temporary and can be resolved with a subsequent attempt.

3. Card Information Update: Encourage customers to update their payment card information regularly, especially when the card is nearing expiration, to prevent potential soft declines.

4. Optimizing Authorization Requests: Ensure that authorization requests include all essential transaction details, reducing the likelihood of declines due to missing information.

Implications of Soft Declines

Soft declines can have significant implications in the payment processing landscape:

1. Lost Revenue: Soft declines can lead to lost sales opportunities and revenue for merchants, particularly those with ecommerce merchant accounts, impacting their bottom line.

2. Customer Dissatisfaction: Rejected payments can result in customer frustration and dissatisfaction with the purchasing experience.

3. Impact on Reputation: Frequent soft declines may adversely affect a business's reputation, leading to customer mistrust and potential negative reviews.

Example Of Soft Decline

An example of a soft decline in payment processing is when a customer attempts to make a purchase using their credit card, and the transaction receives initial authorization from the issuing bank.

However, during the following processing stages, the bank detects that the customer's card has expired, leading to the transaction being declined. In this case, the initial approval created the impression of a successful payment, but the soft decline occurred due to the technicality of the card's expiry date.

How To Assess Declines

By comprehending the root causes and implications of soft declines, businesses can implement appropriate strategies to mitigate their impact.

Employing clear communication, retry mechanisms, and timely card information updates can help merchants, including those managing subscription merchant accounts, navigate the complexities of soft declines and ensure a smoother transaction journey for customers. Embrace the technical challenges, and through diligent application of strategies, unravel the intricacies of soft declines in the pursuit of efficient payment processing.