05: Do Not Honour is one of the most common responses received from credit card issuers for declined e-commerce payments. This refusal can represent anywhere from 10% to 60% of refused transactions, depending on the market. Chris Laumans, Adyen product owner, writes
Do Not Honour may be the largest frustration for any merchant that regularly analyses their payment data, and although it can account for the majority of refusals, it is also the vaguest reason, leaving merchants and customers at a loss about how to act in response.
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While there is no easy, single answer on what this refusal reason means, there are several suggestions as to what could cause it.
Insufficient funds in disguise
In probably half of cases, 05: Do Not Honour is likely just an Insufficient Funds refusal in disguise. Some issuers or processors do a poor job of returning appropriate refusal reasons to merchants – due both to the use of legacy systems at the issuer side, and there being no mandates or monitoring by the schemes, letting issuers continue to use it as a blanket term.
Looking at data from various banks, it is easy to see how Do Not Honour and Insufficient Funds can be used interchangeably. Records that show disproportionately high levels of Do Not Honour and low levels of Insufficient Funds refusals suggest one masquerading as the other. Through identifying these cases, Adyen can help merchants optimise retry strategies.
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By GlobalDataRefusal due to credential mismatches
Although the words Do Not Honour are not the most telling, other data points can be clues for the refusal. Obvious things are the CVC response, card expiry date, and to a lesser extent, the AVS response. Issuers will frequently default to using 05: Do Not Honour as the catch-all bucket for other denials, even if a more appropriate reason may be available.
In addition to data points at the transaction level, a lot can be learned from looking at aggregated data. In some cases, the 05: Do Not Honour refusal received may be particular to, for example, a merchant’s business line or the type of transaction they are trying.
Adyen’s Inferred Refusal Reason functionality is designed to identify the likely reason for a refusal by leveraging its PSP-wide insights. This enables merchants to respond more appropriately when a transaction is refused.
Suspicion of fraud
The most appropriate use of 05: Do Not Honour would be to decline transactions due to suspicious card activity. In some cases, although the card is in good standing and has not been reported lost or stolen, an issuer might choose to err on the side of caution due to a combination of characteristics.
For example, a high-value transaction at 3AM from a foreign-based merchant with no extra authentication may trigger too many issuer risk checks. These types of refusal will, again, be put into the 05: Do Not Honour category, with merchants losing out.
While issuers may be able to give specific reasons why a transaction was refused, they have no way to communicate this to the merchant and are forced to pick a response from the ISO 8583 standard.
Some astute merchants might point out that issuers should be able to use 59: Suspected Fraud in these cases. Some issuers may actually be using this reason, however, merchants and acquirers do not know this as VisaNet remaps all 59: Suspected Fraud refusals to 05: Do Not Honour. The reason for this is, again, likely legacy – to protect store owners in the POS environment and avoid uncomfortable situations with the shopper in front of them.
Collateral damage
You are likely not the only merchant that a given shopper interacts with. Regardless of how good your business or how clean your traffic, a shopper’s (recent) history with other merchants will influence the issuer’s decision on a transaction. For lack of a better reason, the catch-all 05: Do Not Honour refusal can, in some cases, be seen as collateral damage.
If the shopper, coincidentally, just made a large purchase on a high-risk website or went on a shopping spree before reaching your store, it is possible the issuer may decline the transaction at that moment. In these cases, again, having again the right billing and retry strategy can be crucial to minimising the number of 05: Do Not Honours received.
05: Do Not Honours represent a large cost to merchants, and anything to reduce their number will go a long way to improving customer satisfaction and revenue streams.
A multi-pronged approach is advised: traffic should be kept clean to minimise the number of suspicious transactions, and a smart retry strategy should be implemented using all information available.
