Why Payment System Outages Drive Consumers Away

The world loves digital payments. Their convenience, ease of use, and ubiquity have caused their popularity to soar to a point where the vast majority of retail payment and e-commerce transactions across the globe are done with cards, wallets, phones, or smart watches.

Just read our blog on the Preferred Payment Methods in 2025. Many consumers have embraced this digital future to the point where they no longer bother to carry cash. 

Visa says payments have changed more in the past five years than in the previous 50, and it would be hard to dispute this fact - when everything works as it is supposed to. The growth in digital payments has resulted in a significant increase in the complexity of our payment systems - and unfortunately, things don’t always work as they should.

In this blog, we'll explore some of the causes and impacts of payment system failures, the financial and reputational risks involved, and how robust payment testing strategies can help prevent these costly disruptions.

Consumers have come to expect that they can use their card or phone or watch whenever and wherever they want to pay, and they are greatly disappointed when things don’t work like they are supposed to. Whether they are standing in the supermarket checkout line buying groceries, shopping online, or visiting an ATM to get cash, they expect a seamless payment experience, meaning the availability and reliability of our payment systems has become a critical component of consumer trust.

In an era where digital wallets, contactless payments, and e-commerce transactions dominate the payments landscape, even minor disruptions can ignite a firestorm of negative social media activity - with the resultant fallout from an outage sometimes causing more damage than the actual event itself.

“When a major payment system goes down, the news spreads quickly across social media platforms and news outlets. The resulting bad press can have lasting effects on a company's image, with hashtags, memes, and viral posts serving as constant reminders of the failure… Once trust is broken, regaining customer loyalty can be an uphill battle. Businesses may find that customer acquisition costs increase as they work to attract new clients while addressing the reputational fallout. Existing customers may require additional assurances, while new clients may be hesitant to engage with a company that has a history of outages.”

- Forbes

For businesses, payment system outages are not just an operational inconvenience, they are a financial liability. These disruptions lead to lost revenue, increased chargebacks, customer churn, and the potential for increased regulatory scrutiny. The reputational damage caused by a lengthy outage can have long-term repercussions, driving customers toward competitors with more reliable systems.

Understanding Payment System Outages

A payment system outage typically refers to any disruption that prevents retail or e-commerce transactions from being processed correctly. Outages can be partial (affecting only certain transaction types or regions), intermittent (causing sporadic failures), or total (shutting down payment services entirely).

Common causes of outages include:

• Technical Failures: Server crashes, software bugs, incorrect message processing, and spikes in transaction volumes can lead to unexpected downtime.
  
  
• Cybersecurity Attacks: DDoS attacks, ransomware incidents, and data breaches can disable payment processing capabilities.
  
  
• Infrastructure Issues: Network congestion and data center failures disrupt payment flows.
  
  
• Third-Party Dependencies: The payment ecosystem has become increasingly complex, with a wide variety of payment options and providers available. An outage caused by a third-party provider is still an outage. 

Why Customers Leave

Consumers love the convenience provided by digital payments and have come to expect a fast, secure, and seamless payment experience any time and anywhere they choose to transact.

Any disruption to the typical "I want it now" payment experience can have a significant impact on customer loyalty, resulting in: 

• Loss of Trust: A single failed transaction can erode confidence in a brand.
  
  
• Cart Abandonment: E-commerce businesses risk abandoned shopping carts when payment failures occur.
  
  
• Competitive Shifts: Customers may switch to competitors with more stable payment solutions.
  
  
• Negative Publicity: Frustrated customers often vent on social media, damaging brand perception. Just look at websites such as downdetector.com, isitdownrightnow.com, and downforeveryoneorjustme.com to see how much customers care about payment system outages.

As an example, let’s look at the Square outage that occurred in 2023. This multi-hour outage left small business clients of Square across the US unable to process payment transactions. Many merchants lost significant revenue, with some deciding to switch to alternative payment processors out of frustration at the experience with Square.

In the wake of this incident, Wolfe Research Analyst Darrin Peller told Payments Dive that the outage could lead to 1-2% more customer churn than Square would have typically experienced during the quarter.

Unfortunately, the complexity and interconnectedness of our current payments ecosystem means these outages are becoming increasingly common and expensive.

The Business Cost of Payment Outages

A payment outage also has severe financial implications for businesses. The most immediate consequence is lost revenue. Every minute of downtime equates to lost sales, affecting merchants and service providers alike.

For large enterprises, these losses can amount to millions of dollars, especially during peak shopping seasons. According to Oxford Economics, downtime now costs businesses a staggering $400 billion each year.

Fraud attempts often increase during downtime as cybercriminals exploit vulnerabilities in disrupted systems. Additionally, payment system outages often result in additional chargebacks and increased operational expense - with customer support teams overwhelmed with complaints and claims.

Beyond direct financial losses, outages also generate increased regulatory and compliance overhead. Many industries must adhere to strict Service Level Agreements (SLAs), which impose fines or penalties if uptime requirements are not met. Frameworks such as PCI DSS, PSD2, and FFIEC set compliance standards to help ensure payment system security and reliability.

Payment Testing Help Prevent Outages

“More than 60 percent of operational failures result in at least $1 million in total losses. To avoid these kinds of liabilities, payments companies need to take concerted action to bolster their operational resilience. A good place to start would be to conduct a top-down review of operations, including those provided by third-party service providers, to define the critical business services (CBS) and processes. After this identification, firms can evaluate and rank risks associated with continuity and redesign risk management practices to enhance resilience - for example, creating centralized units for monitoring and testing.”

- McKinsey

Payment Testing Help Prevent Outages

Effective testing is an absolute requirement for ensuring the reliability, security, and efficiency of mission-critical payment systems. Without rigorous testing, payment processing systems, applications, and networks remain vulnerable to outages that can disrupt operations and erode consumer confidence. 

Many payment outages occur due to unexpected issues following system upgrades or integrations with third-party providers. One of the key benefits of an automated payment testing platform is its ability to efficiently simulate large volumes of real-world transaction scenarios for regression testing, which is necessary to detect and correct potential issues before they can cause negative customer impacts.

Testing automation is also required to effectively manage the capacity of payment processing systems, ensuring that they can effectively respond to spikes in transaction activity and handle peak season workloads.

How Paragon Can Help

For more than 30 years, Paragon Application Systems has provided innovative payment testing solutions that help financial institutions, merchants, and payment processors ensure the availability, reliability, and scalability of their mission-critical payment processing systems.

Our modern, server-based, and web-enabled solutions, like Web FASTest and VirtualATM, have been specifically designed to address the unique demands of the payment industry, offering robust capabilities to help organizations improve testing speed, accuracy, and efficiency.

With Paragon, you can:

• Automate tests to speed up projects and product deliveries
  
  
• Improve testing quality and increase coverage
  
  
• Manage functional, regression, and performance testing in one platform
  
  
• Ensure compliance with industry regulations and standards
  
  
• Improve consumer confidence by delivering a superior experience on every transaction

Payment system availability, reliability, and scalability are of paramount importance for both consumers and businesses in the digital first world we live in today. Investing in modern payment testing solutions can help prevent costly outages, protect your brand reputation, and deliver a superior experience to your customers with every transaction.

Contact Paragon today to learn how we can help improve the operational efficiency and resiliency of your payment processing systems.