The payments industry is evolving rapidly – but one thing hasn’t changed: merchants and issuers still don’t talk enough. And that’s a problem.
By working together, merchants and issuers can reduce false declines, improve approval rates, and deliver a smoother payment experience to their customers. Here are five key areas where collaboration can make a big impact:
1. Transparency on Decline Codes
Too many payment failures get lost in translation. Merchants see a sale that didn’t go through, but they often don’t know why. That’s because many issuers still use vague decline codes like “05: Do Not Honor.”
This lack of detail makes it hard for merchants to respond. Should they retry the charge? Ask for a different card? Flag it as fraud? Without clarity, they’re guessing.
Networks like Mastercard and Visa are pushing for better standards. They encourage issuers to send more specific decline reasons—things like “insufficient funds” or “expired card.” This helps merchants take the right action in real time.
Some processors, like Stripe and Adyen, offer dashboards where merchants can track decline patterns. That feedback can also help issuers refine their risk models. When both sides share data, they can reduce unnecessary declines and save more sales.
2. Fighting Fraud Together
False declines, where a good transaction is flagged as fraud, are frustrating for everyone. Nearly 90% of cardholders say they’ll use their card less after a false decline. That hurts both merchants and issuers.
Fraud systems are only as good as the data they have. Issuers rely on account history. Merchants see real-time behavior: device types, browsing patterns, shipping addresses.
The solution? Share that data.
EMV 3-D Secure 2.0 (3DS 2.0), a new, secure authentication system, lets merchants pass detailed info to issuers during checkout. That extra context, like whether the device is trusted, helps issuers approve more good transactions.
Visa, Mastercard, and platforms like Stripe have shown that when issuers trust the data, approval rates go up and fraud goes down. Tokenization also plays a big role. By replacing card numbers with secure tokens, transactions become safer and easier to approve.
3. Smarter Retry Strategies
A declined payment doesn’t always mean the end. But retrying blindly can do more harm than good.
Soft declines, especially due to insufficient funds (NSF), aren’t dead ends. They’re opportunities. But most merchants don’t treat them that way.
Mastercard and Stripe have shown that using AI to time retries leads to better outcomes. For example, some customers are more likely to have funds right after payday. Scheduling retries around those moments boosts approvals.
Issuers can also help by tagging which declines are terminal (don’t retry) and which are temporary. That way, merchants can optimize their retry logic and avoid unnecessary friction.
4. Coordinating on New Payment Trends
From digital wallets to buy-now-pay-later, customers want flexibility. But if issuers and merchants don’t align on which payment options to support, everyone loses.
Tokenized payments, like those through Apple Pay or Click to Pay, offer higher security and faster checkout. And the data backs it up: Visa reports a 2.5% lift in approval rates for tokenized transactions. Mastercard sees even higher gains when tokenization is used for stored cards.
Issuers need to support these payment types reliably. Merchants need to present them clearly at checkout. The same goes for fee-free overdrafts or issuer-backed installment plans. These options only work if both sides are in sync.
5. Working Together on NSF Declines
Not all declines are preventable – but many are.
That’s where Kipp comes in. Kipp enables real-time communication between issuers and merchants at the moment of decline, especially for NSF (insufficient funds) scenarios.
Here’s how it works: when an issuer is about to decline a transaction, Kipp checks whether the merchant is willing to cover a small fee to save the sale. If yes, the issuer approves the transaction instead of rejecting it. The customer never knows there was a risk of decline.
This process happens instantly. And the results are clear: merchants using Kipp recover up to 30% of transactions that would have failed. Issuers create new revenue streams and keep their card top-of-wallet. Merchants keep their customers. Everyone wins.
Let’s Talk More. Click here to chat with our team if you want to learn more about merchant / issuer collaboration ideas.
