All Solana transactions must have a fee in the form of SOL tokens. The fee will pay for processing of the transaction by the network, which includes verifying its signature. The account that pays this fee is known as the fee payer.
Typically, the fee for the transaction is paid by the same wallet that initiates the transaction. Nevertheless, there is the option to select another fee payer for the transaction, provided all necessary permissions and signatures are in place.
Prior to the execution of the transaction instructions by Solana runtime, it is checked whether there are enough SOL tokens in the fee payer's account to pay for the fee. If this is not the case, the transaction fails with an error like InsufficientFundsForFee.
For instance, a user may possess USDC in his/her wallet but have no SOL for the transaction fee at all. Possessing sufficient USDC tokens for making a payment is not an automatic way to cover the network fee. Otherwise, another fee payer must be found.
If the fee payer does not have sufficient SOL, the instructions within the transaction will fail to execute. As a result, the desired transfer or other transactions will not go ahead using that particular transaction.
It is worth noting that there is a difference between a transaction that has passed fee validation but fails during execution and one that fails because the fee payer lacks sufficient SOL. In the former case, despite reverting all other state changes, Solana still charges the transaction fee. For a failed balance check, no further instruction will be executed since the transaction has failed.
The solution here is to make sure that the fee payer has sufficient SOL for the transaction fee. In cases where the transaction is also making transfers of SOL, the fee payer should have a balance that covers both the transfer and fee, according to the Solana protocol.
There are applications that sponsor transaction fees or provide alternatives for paying the fee, depending on how each application and transaction is designed.
In essence, just having a token on the Solana network does not necessarily translate into having enough SOL for transaction fees.
