Payment reason: insufficient_funds

What it means

The account had insufficient funds to cover the collection. A Direct Debit or card collection that bounced for lack of balance.

Where you see it

It arrives in the webhook payload:

{
  "data": {
    "object": {
      "id": "pay_7M3X1",
      "loan_id": "loan_2K9P4",
      "status": "failed",
      "failure_code": "insufficient_funds"
    }
  }
}

How to handle it

Respond supportively: a gentle reminder and hardship signposting, not pressure. The collection is usually re-attempted on schedule.

Reconcile against live state, since webhooks are unordered and a later event may supersede this one.

In practice

Treat insufficient_funds as one branch of your failure_code handling, not the whole story. For payments, the value tells you why a collection failed so you can respond proportionately — a technical failure needs no customer contact, whereas an insufficient-funds failure is a moment for supportive, hardship-aware messaging. Always confirm current state before acting, because a later success event (a retry that cleared) may already have superseded this failure, and webhook delivery is unordered.