Direct Debit Receipt Fails approval with "Authorization of credit card transaction failed"

We are implementing Direct Debit funds capture process and are having an issue when approving a direct debit receipt batch.

We have done following:

• created a DD Receipt Method
• created couple of invoices with DD receipt method
• created the receipt batch for the invoices
• created the remittance batch for the receipts
• submitted approval for the receipt batch

The "Automatic Remittances Creation Program" completes normal but the "Automatic Receipts/Remittances Execution Report" shows following exception for all receipts:

"Authorization of credit card transaction failed."

The receipts remain in CONFIRMED status instead of being REMITTED.

N.B. we did perform minimal setup as per