Every day, across every card portfolio, legitimate transactions get declined. No fraud has occurred, no genuine credit limit has been breached, and no regulatory rule has been broken. The customer is real, the funds exist, and the payment still fails.
Datos Insights interviewed card issuers and processors across North America, Latin America, and Europe to understand why these unnecessary declines persist and what issuers need to fix them. The findings are published in the report The Smart Approval Advantage: Reducing Unnecessary Declines in Card Payments. One major cause for these declines is the trade-off between blocking fraud and preserving the customer experience. Issuers tend to set fraud and risk parameters more conservatively than the underlying risk warrants because they lack sufficient transaction-level context at authorization. The findings also reveal that organizational and operational barriers inside issuer organizations limit capability to implement new technology to tackle unnecessary declines.
One category of unnecessary declines is the false decline, a legitimate transaction wrongly suspected of fraud. Unlike a fraud loss, a false decline leaves no ledger entry. The revenue is simply never earned, and the customer quietly moves on. Datos Insights estimates the average false-decline rate among e-commerce merchants at 1.51% of annual sales, a figure that translated into US$213 billion in lost global revenue in 2025, and is projected to reach US$297 billion by 2029 as digital payment volume continues to grow.
False declines occur across every payment channel, and the underlying causes are common to all of them: conservative risk rules, fragmented decisioning systems, insufficient transaction context, and a structural tendency to treat an invisible false decline as less urgent than a visible fraud loss.
Cards command particular attention within this broader problem. Cards remain the world’s dominant consumer payment instrument, so even a small improvement in approval rates translates into significant revenue recovery. The reverse is also true: Even a modest rate of unnecessary decline adds up to substantial aggregate losses
across a large card portfolio. The consequences of an avoidable decline extend well past the lost interchange on that single transaction. Issuers interviewed for the report describe a cascading set of effects across five distinct cost categories.
Top-of-wallet loss. When a card declines at checkout, the cardholder may reach for another card, and that card could then become the new preferred payment method. A cardholder who calls to complain is, counterintuitively,
the easier outcome; the issuer at least gets a chance to explain and retain the relationship. The commercial stakes are higher still. One issuer described losing multiple commercial credit card clients, each representing multimillion dollar relationships, after those organizations experienced too many transaction declines.
Revenue leakage across the transaction life cycle. Beyond the lost interchange on the declined transaction, issuers see reduced card usage over time as cardholders gravitate toward alternatives.
Merchant retry costs. Each authorization attempt carries a direct per-transaction cost. These costs accumulate quickly when a merchant responds to an expired-card decline by guessing at the new expiration date and retrying the transaction multiple times. One Latin American issuer put the cost of each attempt at roughly US$0.30, which adds up fast across a large portfolio.
Customer service burden and operational costs.
Declines are a leading driver of inbound service contacts; issuers say they rank among the top two reasons cardholders call. Fraud blocks generate the most difficult contacts, since the issuer often cannot restore card functionality quickly, leaving the cardholder stranded. Proactive communication has proven effective at reducing this burden. One European issuer cut decline-related contacts significantly after introducing push notifications explaining common decline reasons and next steps.
Point-of-sale decline experiences. A recurring theme is the personal and reputational impact of a high-value transaction being declined at checkout, especially for premium and private banking clients. Single-purchase transaction limits, often set to average spending profiles, create embarrassing situations for cardholders making large purchases.
Why The Most Common Declines Are Still So Hard To Fix
Insufficient funds (NSF) and over-limit conditions account for most declines in issuer portfolios, followed by fraud blocks and expired-card failures on recurring payments. Each category is well understood, yet none is easy to solve within current systems. The core problem is architectural. Many issuers run authorization decisioning across multiple processing platforms, fraud engines, and data systems, each with its own logic and update cycle, so no single team has full visibility into why a given transaction was declined. For issuers that depend on third-party processors, even a minor rule change requires time-consuming support tickets and approvals.
Nearly one-third of NSF declines involve low-risk payments, small transactions or trusted recurring merchants, where a long-standing customer who is temporarily over-limit gets the same binary decline as a genuinely high-risk case. Fraud blocks present a parallel problem: Once triggered, they often suspend the card, with no real-time path for the cardholder to complete a legitimate purchase.
Much of this conservatism has a simple root cause: The issuer making the authorization decision typically knows less about a given transaction than the merchant. Device signals, purchase history with that specific merchant, and authentication data generated at checkout all sit outside the issuer’s view unless the merchant chooses to share them. Without that context, issuers fall back on stricter blanket rules than the actual risk warrants. Underneath the technology gap sits an organizational one. Issuers frequently identify a candidate fix but still fail to implement it, because fraud and compliance teams only see it at final approval and default to rejection. These teams need to be consulted early in the process.
Issuers told Datos Insights they need speed and context above all. On speed, a simple fraud rule can sometimes go live within minutes, while a policy-level change, such as adjusting NSF tolerance, can take months of design, testing, and approval. Issuers want the ability to apply targeted rules at the cardholder or merchant level without triggering a portfolio-wide policy change.
On context, issuers want decisioning that moves past binary approve/decline logic toward a view of risk that factors in transaction history, customer tenure, and merchant relationships. A recurring subscription payment from a cardholder who has paid on time for two years should not be treated the same as a first-time charge from an unfamiliar merchant.
Recurring payment intelligence is the clearest opportunity: Most issuers have no mechanism to keep subscription payments running on an expired or replaced card, even selectively, so a routine card reissue can quietly break a customer’s streaming or utility payment. Part of the fix sits outside the issuer’s systems. Richer transaction level data from merchants would give issuers the context to distinguish a low-risk transaction from a genuinely suspicious one. Without that data, even a well-designed internal decisioning platform is working with an incomplete picture.
Datos Insights recommends issuers start by auditing their decline metrics, broken out by volume, card type, merchant category, and cardholder segment, to quantify the revenue and retention impact and build the internal case for investment. Recurring-payment failures on expired and replaced cards are the clearest quick win: The customer-relationship data needed already exists in most cases, and the incremental risk is manageable. For premium and commercial clients, issuers should move toward cardholder level decisioning that does not require manual setup. Proactive, real-time communication at the point of decline also pays off, as the push notification example demonstrates.
Issuers should also pursue richer transaction data from merchants. Exploring 3DS Data Only messaging and other merchant data-sharing arrangements gives issuers the transaction-level context needed to set risk parameters accurately, rather than defaulting to blanket rules.
Above all, issuers should bring fraud, compliance, and legal stakeholders into the authorization-optimization conversation from day one rather than at the approval gate. Internal risk aversion is the reason well-designed, low-risk rule changes stall before reaching production. Issuers that close that gap will recover interchange revenue, cut operational costs, and protect the top-of-wallet position that took years to build.
For more analysis on authorization decisioning, read the Datos Insights report, The Smart Approval Advantage: Reducing Unnecessary Declines in Card Payments.
