Excerpt: ‘Do Not Honour’ or ‘error code 05’ – is the most common response that comes up when a credit or debit card is declined.
In the dynamic world of eCommerce and retail transactions, facing a vague error message during the payment process can prove to be a frustrating experience for both customers and merchants. According to research by PYMNTS, nearly 40% of businesses in the US say that failed payments directly hurt their profits and 67% of merchants struggle to win back customers after a payment is declined.
Furthermore, any hiccups in the process can impact negatively the overall customer experience. For instance, a whopping 88% of consumers in the UK are likely to give up on a purchase when faced with friction. These facts show how crucial it is to offer a smooth payment flow for customers. Equally, it’s paramount for merchants to understand why payments get declined so they can provide clear guidance to their customers if they face issues with declined transactions.
In this article, we unpack all you need to know about ‘Do Not Honour’ codes, why they occur and what steps your business can take to manage declined payments effectively.
What does 'Do Not Honour' mean
‘Do Not Honour’ (also known as ‘error code 05’ and previously referred to as ‘error code 2000’) takes place when the customer’s bank declines a transaction. This error can occur both in-store and online when the customer pays with a credit or debit card. Unfortunately, the 'Do Not Honour' code lacks specific details and in most cases, the advisable line of action is to recommend the cardholder to use another payment method.
Suggesting another payment option to your client is a temporary fix for 'error code 05'. For a long term solution to this important issue, you need to understand the underlying reasons behind this error to ensure as frictionless transactions as possible and prevent lost sales in the future.
What causes an ‘error code 05’ card decline?
Understanding this error code isn't always straightforward. Several factors may cause a 'Do Not Honour' code to appear. Let's explore some potential reasons behind this error code.
Insufficient funds
In certain situations, the 'Do Not Honour' error code indicates there aren't enough funds for the transaction. This can occur when issuing banks don't provide the correct payment error codes due to insufficient funds in the customer's account.
Frozen or locked card
The customer may have frozen their card for a specific reason and forgotten to reactivate it, which could lead to a card decline. Another possibility is that the issuer locked the customer's card due to multiple consecutive declined payments or suspected fraud (more on this below). In such cases, the cardholder needs to contact their bank to unlock the card. Alternatively, they can often unfreeze their card through their mobile banking app.
Wrong information provided
The 'Do Not Honour' decline code can indicate a transaction rejection due to a credential mismatch, such as an incorrect CVV or billing address input. Sometimes, customers mistakenly provide inaccurate payment details during transactions.
In such cases, during the authorisation stage, if the billing address doesn't match the one linked to the customer's bank account in the Address Verification System (AVS), a rejection may occur. (If you want to learn more about AVS, take a look at our article on the topic).
Payment failure due to suspicious activity
Some declined transactions may prompt a 'response code 05' due to suspicious actions flagged by the issuing bank's anti-fraud system. Factors like high purchase amounts, suspicious geo-locations, or transactions at unusual times can trigger these alerts. Moreover, customer activity on different platforms can impact the bank's decision.
For example, if a cardholder recently made large transactions on suspicious sites, the issuer may decline transactions, resulting in a payment failure as a side effect.
What to do when a ‘Do Not Honour’ code appears?
When a customer pays with a credit or debit card, they might see 'error code 05' on the card machine or payment page if the payment gets declined. Merchants can also notice this error when reviewing transactions in their merchant dashboard. Identifying the exact cause of this error code can be challenging, so it's best to resolve it promptly rather than just fixating on the cause.
Here are steps to take when dealing with a decline code:
Request a different payment method
Before you do that though, ask the customer to try the transaction again using the same card. If the card still doesn't work, advise your customer to use an alternative payment method. Another suggestion is ask your customer to contact their issuing bank to report the issue.
Send automated emails
Consider sending follow-up emails to your customers following a transaction failure. Automating this process ensures prompt communication regarding the issue at hand. Within these emails, you can explain the cause of the failure and provide clear instructions on how the customer can proceed. Whether it's directing them towards alternative payment options or suggesting a different payment method, your guidance is crucial.
Furthermore, you may consider offering incentives such as discount coupons and encouraging customers to make another attempt at completing the transaction.
How to prevent 'Do Not Honour' declines?
There are specific strategies and solutions merchants can take to efficiently handle payment error codes. Let's explore them.
Handling suspicious activity
When implementing robust fraud prevention measures, you can significantly reduce instances of suspicious behaviour that may lead to payment error codes. For instance, asking clients for their billing address during the payment process and then verifying it using AVS, can be an effective solution. On top of that, incorporating 3DS2 and two-factor authentication into your payment flow can further reduce the risk of fraudulent activities. These combined steps not only prevent payment failure but also help safeguard your revenue and make your customers feel safe when shopping on your website.
Investigating 'Do Not Honour' decline
Sometimes, an 'error code 05' could indicate a legitimate decline due to potential fraud. As a result, merchants need to investigate why a transaction was not approved. For instance, if many transactions are declined for similar reasons, it's worth taking a closer look and possibly adjusting your risk settings.
You can achieve this by delving into your transaction reports to identify areas for improving acceptance rates and spotting common problems. Another good strategy is to work with a trusted payment service provider to help you finetune your risk management strategy.
Offering multiple ways to pay
Even after identifying the reasons behind 'error code 05' and adopting a tailored risk strategy, it's also crucial to integrate various payment options into your business. Offering alternative payment methods not only enhances customer flexibility and convenience but also acts as a proactive measure to alleviate the effects of declined payments.
In light of this, merchants should establish partnerships with a trusted payment service provider (PSP) enabling them to accept a wide range of payment methods. These may include eWallets, Buy Now Pay Later (BNPL), local payment methods, bank transfers and more.
How emerchantpay can help
As a leading payment service provider, emerchantpay helps you implement a robust risk management strategy to tackle fraudulent transactions, chargebacks and declined payment (including the 'Do Not Honour' error code). Our fraud prevention solutions and rule-based risk engine conduct real-time analysis to ensure this. This involves velocity checks and transaction thresholds, among other functionalities, effectively minimising risk.
Partnering with an experienced payment service provider like emerchantpay, grants you access to a dedicated Risk Analyst who can share insights on declined payments and your acceptance rates, sharing data-driven recommendations tailored to your business needs.
To learn more about improving your payment acceptance, contact our payment specialists today!