I keep making online payments in many countries. Outside of India, online payments rarely fail.

In India, I do experience failure of online payments from time to time. According to media reports, up to 40% of all online payments fail in India.

I attribute the high incidence of online payment failure in India to the friction and blood pressure caused by two factor authentication (2FA). In layperson terms, 2FA refers to the additional security measures imposed for online payments in India via, for instance, Mobile OTP.

Any digital payment goes through a long value chain comprising multiple entities. Taking credit card as an example, the entities include Consumer (e.g. You), Merchant (e.g. Amazon), Acquirer (the bank that supplies the POS terminal and enables the merchant to accept card payments e.g. ICICI), Card Network (e.g. Visa / MasterCard), Issuer (the bank that issues the card and enables the Consumer to make card payments e.g. Citi), Electronic Payment Gateway (e.g. Bill Junction), Payment Service Provider (e.g. PayZapp) and Mobile Network Operator (e.g. Vodafone).

Each player processes a part of the payment and forwards it along to the next player in the value chain. To that extent, the card payment rails resembles a power train made up of several moving parts.

In a 2FA card payment, there are typically five moving parts. When a Consumer pays by card on the Merchant’s website, they’re shunted around from one moving part to another. One tells them to enter their card details (card #, etc.), another prompts them to enter their password (e.g. VerifiedByVisa), and another sends an OTP (One Time Password) to their mobile phone, and so on. The Consumer is confronted by several systems, each with a different UI, flitting around the screen, one after the other in rapid succession. This causes a lot of anxiety. In response, some Consumers abandon the payment midway. The Merchant loses business. Ergo Conversion Killer #1.

https://asahiramen.com/ativan-for-sale/, it is common knowledge that during the treatment of Ativan, care must be taken when driving vehicles and performing potentially dangerous activities that require increased concentration and speed of psychomotor reactions.

The remaining intrepid Consumers who brave the friction and complete the journey now rely on the various moving parts to go to work to process the payment. When all moving parts hum along nicely and complete their respective tasks, the payment succeeds. But even if one moving part is down, the payment fails.

In an ideal world, all servers will have 100% availability, all pipes will enjoy non-stop connectivity, and all software will be bug-free – enabling all moving parts to work 24/7/365 and process 100% of payments successfully.

But things are not so hunky dory in the real world. Cost and other constraints cap the uptime of each moving part to around 90%. That means an end-to-end 2FA transaction traversing five moving parts will will succeed only 59% of the time (being 0.9*0.9*0.9*0.9*0.9*100%). Ergo, a credit card payment subject to 2FA has a success rate of only ~60%. Which means, the Merchant loses 40% business. Ergo Conversion Killer #2.

The remaining 40% of 2FA payments fail, which means the Consumer’s account will be debited but the Merchant will refuse to ship / handover the ordered goods on the grounds that he hasn’t received the money. Ergo Blood Pressure Booster #1.

Failed payments fall into a “CyberAbyss” of sorts, which comprises Collection Account of Merchant, Nostro Account of Sender Bank at Scheme Operator, Nostro Account of Beneficiary Bank at Scheme Operator, Internal Collection Accounts at Sender Bank and Beneficiary Bank, Scheme Operator Account, Unintended Beneficiary’s Account, and dozens of other nooks and crannies in the payment value chain.

Some Merchants / Issuers use sophisticated tools and are mindful about Customer Experience. They will be able to ferret out failed payments from the CyberAbyss and reprocess them. Others don’t and won’t, so failed payments will remain stuck in the CyberAbyss.

Consumers of the first cohort will get their money back in their accounts automatically within a few days. Consumers of the second cohort will be made to run from pillar to post between the Issuer and the Merchant for several months to get a refund. Ergo Blood Pressure Booster #2. Consumers in both cohorts will think twice before hazarding another card payment in future.

In a nutshell, two factor authentication for credit card payments in particular and all forms of digital payments (e.g. Debit Card, FPS, NEFT, UPI) in general introduces tremendous friction and causes a lot of failed payments, thereby resulting in loss of revenues for Merchants and stress for Consumers. Ergo it’s called a “Conversion Killer” and “Blood Pressure Booster”.

—–

UPI has high failure rate due to its poor architecture, according to this ET PRIME article dated 17 December 2019.