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  • Bill Trueman

Learn to Love Authorization Reversals

PYMNTS 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.

Anecdotally, we note that many merchants and too many issuers still get this wrong and fail to act on authorization request adjustments in-line within card scheme requirements, and thereby detrimental to the interests of customers.

Card schemes are actively promoting transaction value adjustment functionality in more types of merchants – i.e., for more situations where the final transaction amount is not known at time of the authorisation. This makes it even more important that merchants and issuers ‘fall in love’ with proper authorisation message processing and ergo with their customers.

Failure to act will undermine cardholder confidence and drive the fear of being told: “You have insufficient funds”.

Yes, we do need to address all authorisation decline reasons and consider stronger stored payment information management options. It will be tough for the industry to progressively achieve this, with a focus on both merchants and issuers. Hopefully, it is somewhat easier than it was for Emperor Claudius to kill-off Saint Valentine several centuries earlier.

Kevin Smith and Bill Trueman are directors at Riskskill, and are payments and risk specialist, with over 25 years of experience. For more information about Riskskill visit website at or contact them at

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