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.
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.
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.
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.
“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.
UK delays review of business rates tax until autumn
LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.
Many companies are demanding reductions in their business rates to help them compete with online retailers.
“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.
Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.
($1 = 0.7152 pounds)
(Writing by William Schomberg, editing by David Milliken)
Discounter Pepco has all of Europe in its sights
By James Davey
LONDON (Reuters) – Pepco Group, which owns British discount retailer Poundland, has targeted 400 store openings across Europe in its 2020-21 financial year as it expands its PEPCO brand beyond central and eastern Europe, its boss said on Friday.
The group opened a net 327 new stores in its 2019-20 year, taking the total to 3,021 in 15 countries. The PEPCO brand entered western Europe for the first time with openings in Italy and it plans its first foray into Spain in April or May.
Chief Executive Andy Bond said its five stores in Italy have traded “super well” so far.
“That’s given us a lot of confidence that we can now start building PEPCO into western Europe and that expands our market opportunity from roughly 100 million people (in central and eastern Europe) to roughly 500 million people,” he told Reuters.
To further illustrate the brand’s potential he noted that the group has more than 1,000 PEPCO shops in Poland, which has a significantly smaller population and gross domestic product than Italy or Spain.
The company, which also owns the Dealz brand in Europe but does not trade online, has already opened more than 100 of the targeted 400 new stores this financial year.
Pepco Group is part of South African conglomerate Steinhoff, which is still battling the fallout of a 2017 accounting scandal.
Since 2019 Steinhoff and its creditors have been evaluating a range of strategic options for Pepco Group, including a potential public listing, private equity sale or trade sale.
That process was delayed by the pandemic, but Steinhoff said last month that it had resumed.
“The business will be up for sale at the right time. It’s a case of when, rather than if,” said Bond, a former boss of British supermarket chain Asda.
Pepco Group on Friday reported a 31% drop in full-year core earnings, citing temporary coronavirus-related store closures.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 229 million euros ($277 million) for the year to Sept. 30, against 331 million euros the previous year.
Sales rose 3% to 3.5 billion euros, reflecting new store openings.
($1 = 0.8279 euros)
(Reporting by James Davey; Editing by David Goodman)
Fashion-focused livery launch reveals new colours for Gasly, Tsunoda in 2021
Scuderia AlphaTauri debuted their colours for the 2021 Formula 1 season as drivers Pierre Gasly and Yuki Tsunoda unveiled the team’s new look with the livery for their AT02 racecars. The setting was a fashion-forward launch in the all-new showroom of AlphaTauri, Red Bull’s premium fashion brand.
Salzburg (AUSTRIA) – Formula 1 team Scuderia AlphaTauri served up a stylish preview of the new F1 season with a presentation of its 2021 livery alongside key looks from the upcoming Autumn/Winter 2021 collection of Red Bull’s premium fashion brand, AlphaTauri. The launch – held at AlphaTauri’s new showroom in Salzburg, Austria and presented digitally – marked the first time that drivers Pierre Gasly of France and Yuki Tsunoda of Japan have appeared together as teammates.
After a successful first season racing in AlphaTauri colours, the Italian outfit is looking to challenge the top of the ultra-competitive midfield in 2021, and the two young drivers have been assigned clear-cut roles. Gasly is Team Leader. The 25-year-old, who made his Formula One debut with the team in 2017 under its former name, Scuderia Toro Rosso, has earned two F1 podiums. During the 2020 campaign, Gasly’s maiden win at Monza was a defining moment for him and the team under its new name.
Tsunoda, 20, is the first Japanese driver to race in F1 since 2014, his promotion coming off the back of a fast, four-season trajectory from winning the 2018 F4 Japanese Championship and finishing third in the 2020 FIA F2 Championship to entering the top-level ranks this year. Expectations are high for his rapid style of learning to complement the experience of Gasly.
“The decision to go for Pierre and Yuki in 2021 was taken because Scuderia AlphaTauri’s philosophy is still to give talented young drivers from the Red Bull Junior Program the opportunity to step up to F1 and to educate them – this is why Yuki now gets his chance,” explained Team Principal Franz Tost. “With Pierre on Yuki’s side we have an experienced driver, who can help our Japanese rookie to develop faster, but at the same time we can aim for good results. I think this pair is the best possible scenario to achieve both our targets, and I’m also confident this will be a successful one.”
In 2020, Scuderia AlphaTauri won best livery by a landslide, and the team’s all-new, matte blue and white racecar livery took center stage with the drivers at the fashion event, anticipating the 2021 model that will debut at pre-season testing in Bahrain on 12 March. The test is the precursor to an unprecedented 23-race schedule, and in preparation for the demanding calendar both drivers have spent time at Red Bull’s Athlete Performance Center for intense fitness testing.
“I’m ready to take on the role of team leader. Yuki is a very quick driver, and he will help us move the team forward – we will work together to achieve that,” said Gasly, the team’s all-time top points scorer. “I really believe last year was the team’s best in terms of the way it worked, the development, the performance and the way it managed the race weekends. I’m always hungry for more, and I’m sure we can achieve great things in 2021.”
Tsunoda, who was honored with the Anthoine Hubert Award for best Formula 2 rookie in 2020, added, “I’ve been lucky enough to spend some time with Scuderia AlphaTauri ahead of the season, so I’m already developing strong relationships and learning a lot from them – including Pierre, who is an incredible talent. My main goal is to learn quickly and deliver results as soon as possible, and I’m really excited to get started.”
The launch at the AlphaTauri Showroom not only gave Gasly and Tsunoda a preview of the AlphaTauri Autumn/Winter 2021 fashion collection, but the drivers had the chance to select their new off-grid looks ahead of the season start.
Ahmet Mercan, CEO AlphaTauri, summarized: “This is a triple reveal at a unique point of time: a new AlphaTauri Showroom where fashion meets F1, a first look at the AW21 AlphaTauri collection and the unveiling of the new Scuderia AlphaTauri F1 livery and driver pairing.”
Scuderia AlphaTauri fans don’t have long to wait for racing action: The FIA Formula 1 season kicks off at the Bahrain Test on 12-14 March, in preparation for the Bahrain Grand Prix on 28 March.
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