Turning Declines into Insights: How Understanding Response Codes Helps You Recover Sales

When a payment fails, it can feel like a dead end — a lost sale, a frustrated customer, and a mystery to solve. But every declined transaction carries a message. Understanding what that message means is the key to improving approval rates, reducing customer friction, and recovering revenue that might otherwise be lost.

At Magnetiq Bank, we believe in transparency and smarter payments. That’s why we’ve introduced two new tools to help merchants make the payment process more transparent, efficient, and profitable.

• Mastercard Merchant Advice Codes (MACs)
  We’ve integrated Mastercard’s Merchant Advice Codes — short informational messages that explain the real reason behind a transaction decline and provide guidance on what to do next. This information is available directly in the Merchant Portal. Simply click on the Payment ID within the Payments section to view the details, or export the data to XLS format for further analysis.
• New Manual – “Understanding Response Codes: Best Practices for Merchants”
  Available in the Help section of the Merchant Portal, this document is designed to help merchants improve authorization approval rates, reduce fraud, and enhance cardholder satisfaction. It includes a comprehensive list of decline codes, their descriptions, recommendations, and the most common scenarios involving Response and Merchant Advice Codes.

The Main Problem of Declines

Issuer banks do not always interpret or generate decline codes correctly when responding to authorization requests sent through payment systems such as Visa or Mastercard. Older issuer processing platforms do not support the full range of ISO 8583 response codes.

In any non-standard situation, the system often returns a generic decline without further details. For example, an “invalid CVV” error is often mapped by issuers to “Do not honor” instead of “Invalid CVV2.”

Result: The terminal receives a “Do not honor” response instead of the specific reason for the decline.

This leads to a loss of context — making it impossible to distinguish whether the issue lies with the cardholder (e.g., insufficient funds, limit exceeded) or the issuer (e.g., system error, unavailability).

As a result, acquirers and merchants receive inaccurate or incomplete decline reasons, which:

• Hinder proper transaction classification (e.g., fraud, insufficient funds, or system error)
• Degrade analytics and payment conversion rates
• Complicate retry logic and payment recovery processes

Why Payment Declines Matter

Declines are a normal part of the payments ecosystem. They protect both merchants and cardholders from risk, fraud, and technical issues.

However, not all declines are the same — and knowing the difference can make all the difference.

There are two main categories of declines:

• Hard declines – Permanent issues such as expired or invalid cards, closed accounts, or insufficient funds. These transactions shouldn’t be retried automatically.
• Soft declines – Temporary issues such as authentication timeouts, network errors, or daily limits being exceeded. These can often be retried later or completed after the customer takes action.

When merchants can distinguish between these types, they can respond intelligently — recovering sales and maintaining customer trust instead of guessing what went wrong.

The Main Benefits for Merchants

By learning what each response code means, merchants can gain a real operational edge:

1. Faster problem resolution
   Recognizing the nature of each decline helps teams identify issues immediately and take the right corrective action.
2. Reduced transaction declines
   Understanding hard vs. soft declines allows for strategic retries, improving authorization rates and recovering legitimate transactions.
3. Improved customer experience
   Clear communication with customers about failed payments (e.g., “Please update your card details” vs. “Try again later”) reduces frustration and cart abandonment.
4. Lower operational costs
   Fewer unnecessary retries mean fewer error investigations and support tickets — saving time and resources.
5. Fraud prevention support
   Response codes linked to suspected fraud enable merchants to take the right next step — such as verifying the transaction — without automatically rejecting genuine customers.
6. Better collaboration with acquirers
   Merchants who understand response terminology can describe issues precisely to their acquiring bank, speeding up support and resolution.
7. Optimized payment strategy
   Over time, analyzing response code patterns provides valuable insights into approval ratios and issuer behavior — helping fine-tune routing and retry logic.

What Response Codes Can Tell You

Here are a few examples of common response codes and what they mean in practice:

These insights help merchants take the right action immediately, whether that means retrying, requesting new payment data, or avoiding unnecessary follow-ups.

Smarter Analytics in the Medoro Platform

To make this process even easier, Magnetiq Bank has enhanced the Medoro system with new analytical indicators and export options.

Merchants can now view and download detailed transaction metrics in XLS format, including:

• Mastercard Merchant Advice Code
• 3DS Challenge Cancel Indicator
• Transaction Status Reason
• Transaction Error Code

This added transparency empowers your finance and risk teams to track decline trends, pinpoint root causes, and continuously optimize acceptance rates.

Fom Declines to Data-Driven Growth

Understanding response codes isn’t just about fixing failed transactions — it’s about building a smarter, more resilient payment strategy.

At Magnetiq Bank, we help our clients see what’s happening behind the scenes and turn those insights into results. By combining clear decline analytics, fraud prevention tools, and dedicated account management, we make payment optimization a continuous process, not a guessing game.

Ready to take a closer look at your payment data?

Contact our Magnetiq Bank account managers to learn more about the Medoro platform and how these insights can help improve your authorization rates.