Chris Laumans, Adyen Product Owner

“05 :Do Not Honor” is one of the most common responses received from credit card issuers for declined Ecommerce payments. This refusal can represent anywhere from 10-60% of refused transactions, depending on the market. It maybe 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 their customers at a loss about how to act in response.

Figure 1: Percent of refusals due to “05 : Do Not Honor” by market

Although unfortunately there isn’t an easy, single answer about what this refusal reason means, there are several suggestions as to what could be the cause behind the non-descript message.So, given there isn’t a single answer, what might the “05 : Do Not Honor” mean? From our experiences analysing authorisation rates and working with issuers and schemes, here are a few explanations.

Insufficient funds in disguise

In probably half of the cases, “05: Do Not Honor” is likely just an “Insufficient Funds” refusal in disguise. Reality is that some issuers (or their processors) do a poor job of returning the appropriate refusal reasons back to the merchants. This is both due to the use of legacy systems at the issuer side as well there being no mandates or monitoring by the schemes on this, letting issuers continue to use it as a blanket term.

By looking at the data from various banks, it is easy to see how “Do Not Honor” and “Insufficient Funds” can often be used interchangeably. Our records that show a disproportionately high level of “Do Not Honor” and a low level of “Insufficient Fund” refusals would suggest one masquerading as the other. Through identifying these cases, Adyen can help merchants optimize their retry strategy when receiving a “05 : Do Not Honor” refusal.

Figure 2: Breakdown of “Do Not Honor”, “Insufficient Funds”, and Other Refusals for 5 GB and US issuers

Refusal due to credential mismatches

Although the words “Do Not Honor” aren’t the most telling, sometimes other data points can be clues for the refusal. Obvious things to look at are the CVC response, card expiry date, and, to a lesser extent, the AVS response. For lack of a better reason, issuers will frequently default to using “05 : Do Not Honor” as the catch-all bucket for other denials. Even in the case that a more appropriate reason may be available issuers may still fail to appropriately assign a reason to this and stick with the “05 : Do Not Honor”.

In addition to the data points available at the transaction level, there is also a lot that can be learned from looking at aggregated data. In some cases, the “05 : Do Not Honor” refusal received may be particular to, for example, a merchant’s business line (their mcc) or the type of transaction they’re trying to do. Adyen’s Inferred Refusal Reason functionality is designed to help shed light on this by identifying the likely reason for a refusal by leveraging its PSP wide insights. This enables merchants to more appropriately respond when a transaction is refused with this notorious reason.

 Suspicion of fraud

The most appropriate use of “05 : Do Not Honor” would be for declining transactions due to suspicious activity on the card. 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 on a given transaction. For example, a high value transaction made at 3am from a foreign based merchant without any extra authentication, may trigger a few too many risk checks on the issuer side. These types of refusals will again unfortunately be designated into the “05 : Do Not Honor” category, with merchants drawing the short straw. Even though issuers may be able to point to specific reasons why the transaction was refused, issuers have no way to communicate this back to the merchant and are forced to pick a response from the available responses codes defined in the ISO 8583 standard.

Some astute merchants might point out that issuers should be able to use “59 : Suspected fraud” in these cases. This is true, and some issuers may actually be using this refusal reason, however merchants and acquirers do not know this since VisaNet remaps all “59 : Suspected fraud” refusals to “05 : Do Not Honor”. The reason for this is again, likely legacy: to protect store owners in the POS environment and avoid uncomfortable situations with the shopper standing in front of them.

Collateral damage

Finally, the reality is that your likely not the only merchant that a given shopper interacts with. Regardless of how good your business is or how clean your traffic is, a shopper’s (recent) history with other merchants will influence the issuers decision on your transaction. For lack of a better reason, the catch-all “05 : Do Not Honor” refusal that you receive can therefore 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, there is the possibility that the issuer may decline the transaction at that moment in time. In these cases, having again the right billing and retry strategy can be crucial to minimizing the number of “05 : Do Not Honors” received.

In conclusion

“05 : Do Not Honors” represent a large cost to merchants and anything done to reduce the number of them will go a long way to improving customer satisfaction and the revenue stream of the business. To minimize these types of refusals, a multipronged approach is advised: Traffic should be kept clean to minimize the number of suspicious transactions and a smart retry strategy should be implemented using any and all information available. To help achieve this, Adyen can offer tools to help: RevenueProtect to block fraudulent transactions before they are sent to the issuer and RevenueAccelerate to maximize the number of approved transactions and create more insight into the reason why a transaction was refused.

Chris Laumans, Adyen Product Owner

“05 :Do Not Honor” is one of the most common responses received from credit card issuers for declined Ecommerce payments. This refusal can represent anywhere from 10-60% of refused transactions, depending on the market. It maybe 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 their customers at a loss about how to act in response.

Figure 1: Percent of refusals due to “05 : Do Not Honor” by market

Although unfortunately there isn’t an easy, single answer about what this refusal reason means, there are several suggestions as to what could be the cause behind the non-descript message.So, given there isn’t a single answer, what might the “05 : Do Not Honor” mean? From our experiences analysing authorisation rates and working with issuers and schemes, here are a few explanations.

Insufficient funds in disguise

In probably half of the cases, “05: Do Not Honor” is likely just an “Insufficient Funds” refusal in disguise. Reality is that some issuers (or their processors) do a poor job of returning the appropriate refusal reasons back to the merchants. This is both due to the use of legacy systems at the issuer side as well there being no mandates or monitoring by the schemes on this, letting issuers continue to use it as a blanket term.

By looking at the data from various banks, it is easy to see how “Do Not Honor” and “Insufficient Funds” can often be used interchangeably. Our records that show a disproportionately high level of “Do Not Honor” and a low level of “Insufficient Fund” refusals would suggest one masquerading as the other. Through identifying these cases, Adyen can help merchants optimize their retry strategy when receiving a “05 : Do Not Honor” refusal.

Figure 2: Breakdown of “Do Not Honor”, “Insufficient Funds”, and Other Refusals for 5 GB and US issuers

Refusal due to credential mismatches

Although the words “Do Not Honor” aren’t the most telling, sometimes other data points can be clues for the refusal. Obvious things to look at are the CVC response, card expiry date, and, to a lesser extent, the AVS response. For lack of a better reason, issuers will frequently default to using “05 : Do Not Honor” as the catch-all bucket for other denials. Even in the case that a more appropriate reason may be available issuers may still fail to appropriately assign a reason to this and stick with the “05 : Do Not Honor”.

In addition to the data points available at the transaction level, there is also a lot that can be learned from looking at aggregated data. In some cases, the “05 : Do Not Honor” refusal received may be particular to, for example, a merchant’s business line (their mcc) or the type of transaction they’re trying to do. Adyen’s Inferred Refusal Reason functionality is designed to help shed light on this by identifying the likely reason for a refusal by leveraging its PSP wide insights. This enables merchants to more appropriately respond when a transaction is refused with this notorious reason.

 Suspicion of fraud

The most appropriate use of “05 : Do Not Honor” would be for declining transactions due to suspicious activity on the card. 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 on a given transaction. For example, a high value transaction made at 3am from a foreign based merchant without any extra authentication, may trigger a few too many risk checks on the issuer side. These types of refusals will again unfortunately be designated into the “05 : Do Not Honor” category, with merchants drawing the short straw. Even though issuers may be able to point to specific reasons why the transaction was refused, issuers have no way to communicate this back to the merchant and are forced to pick a response from the available responses codes defined in the ISO 8583 standard.

Some astute merchants might point out that issuers should be able to use “59 : Suspected fraud” in these cases. This is true, and some issuers may actually be using this refusal reason, however merchants and acquirers do not know this since VisaNet remaps all “59 : Suspected fraud” refusals to “05 : Do Not Honor”. The reason for this is again, likely legacy: to protect store owners in the POS environment and avoid uncomfortable situations with the shopper standing in front of them.

Collateral damage

Finally, the reality is that your likely not the only merchant that a given shopper interacts with. Regardless of how good your business is or how clean your traffic is, a shopper’s (recent) history with other merchants will influence the issuers decision on your transaction. For lack of a better reason, the catch-all “05 : Do Not Honor” refusal that you receive can therefore 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, there is the possibility that the issuer may decline the transaction at that moment in time. In these cases, having again the right billing and retry strategy can be crucial to minimizing the number of “05 : Do Not Honors” received.

In conclusion

“05 : Do Not Honors” represent a large cost to merchants and anything done to reduce the number of them will go a long way to improving customer satisfaction and the revenue stream of the business. To minimize these types of refusals, a multipronged approach is advised: Traffic should be kept clean to minimize the number of suspicious transactions and a smart retry strategy should be implemented using any and all information available. To help achieve this, Adyen can offer tools to help: RevenueProtect to block fraudulent transactions before they are sent to the issuer and RevenueAccelerate to maximize the number of approved transactions and create more insight into the reason why a transaction was refused.