How Merchants Can Avoid Payment Processing Outages
Any number of links within the transaction chain can cause payment processing outages. Processor outages, network issues, third-party systems latency and outages, and many other scenarios can bring POS interactions to a grinding halt, increasing customer frustrations and leading to cart abandonment online and in the store. To mitigate or eliminate the harmful effects of these occurrences, merchants should consider turning towards offline processing as a convenient backup method.
Offline processing, which includes stand-in processing, allows merchants to continue to process electronic transactions even while one or more points along the process flow are not available, preventing the standard processing of the transaction. OLS can help merchants navigate the complexities of stand-in processing, prepare their systems properly, and mitigate future payment processing outages.
How can I reduce the impact of payment processing outages on my business and customers?
Payment processing outages are inevitable, but merchants can use offline processing to continue to take payments. A payments orchestration partner can help merchants with various offline processing options, including stand-in processing, store and forward, and intelligent routing of transactions to redundant service providers or processors.
Stand-In Payments Processing
Stand-in processing allows for the completion of certain transactions when authorization from the service provider is unavailable. Some of the most common events that can cause downstream payment processing outages include:
- Network
- Processor
- Association
- Authorizer
- Third-party service provider
An important consideration is identifying when offline processing is appropriate since some transaction types are more suitable for stand-in processing. In contrast, other transaction types make poor candidates for a stand-in.
Most suitable transactions for stand-in processing:
- Gift Card//Stored Value Pre Auth
- Gift Card//Stored Value Activation
- Credit Card Purchase
Poor candidates for stand-in processing:
- Pay-by-the-minute phone cards
- Some gaming cards
- Digital media purchase cards
Why Merchants Need Stand-In Processing to Avoid a Payment Processing Outage
Consider this scenario: over a 5-day holiday period, one merchant activated 8.9 million gift cards. Of those gift cards, 0.15% needed stand-in processing, accounting for approximately 13,700 activations. Of those activations that needed stand-in processing, 36 percent were cleared within 5 minutes, 61 percent were cleared within 10 minutes, and 100 percent were cleared within 15 minutes.
Without stand-in processing, the merchant would have missed out on that revenue and risked creating frustrated customers. Gift cards, in particular, make good candidates for offline processing because they are products that a customer will most likely use in the future. They are often purchased for gifts for someone else, meaning it will be some time before the card is redeemed. Conversely, a pay-by-the-minute phone card is generally a poor candidate for offline processing because it is likely to be used immediately, meaning it can increase the risk for the merchant.
Ensure Stand-In Queues Process In Order
Merchants must ensure that stand-in queues are run in sequence to avoid confusion or errors when the system goes back online. For example, let’s say a gift card is purchased while stand-in is in effect, the merchant activates the gift card, and then the customer decides to return the card. The proper process would be for the merchant to cancel the card and do a reversal transaction before the same card gets put back on the shelf. Otherwise, if the transaction is processed improperly or in the wrong order, it can cause an activated card to be returned to the display.
While one transaction done out of order may seem minor, there are times when merchants may be dealing with extreme events, where a large volume of stores and transactions are affected by processing outages. In these cases, merchants may be utilizing offline processing for hundreds or thousands of transactions, causing real consequences if done incorrectly. In addition, care must be taken to ensure that these transactions are processed responsibly once connectivity is restored. It’s a delicate balance to process these transactions quickly enough to empty the queue soon but without overwhelming downstream partners.
Providing Queue Visibility and Limiting Exposure
Too often, businesses don’t understand what their stand-in queues look like. OLS understands that merchants need visibility into the stand-in queue, which is why OLS provides merchants with real-time reporting via a complete dashboard. This gives merchants access to critical metrics, including:
- Transaction velocity
- Number of transactions still in the queue
- Dollar exposure of queue
OLS also makes sure that merchants can limit their exposure when it comes to stand-in processing. This includes identifying and setting limits for purchase transactions during stand-in. Various factors can restrict exposure, including card type and dollar amount.
A Payments Orchestration Partner Can Help Merchants Enable Stand-In Processing
Every point along the payments transaction chain is vulnerable to payment processing outages. To overcome these challenges, merchants need a payments orchestration partner who can help them understand the complexities of stand-in processing, provide queue visibility, and help them limit exposure and risk. Contact us today to learn how OLS Payments can help you manage offline processing challenges.
Key Takeaways
- Stand-in processing allows merchants to continue to process electronic transactions when they experience a payment processing outage.
- Some transaction types, such as gift cards, are more suitable for stand-in processing than others.
- Merchants must ensure that stand-in queues are run in sequence when the system returns online.
- OLS can help merchants understand the complexities of stand-in processing, provide queue visibility, and help them limit exposure and risk.