Recently, a study was conducted as to which is the biggest costing mechanism as far as e-commerce businesses are concerned and to everyone’s surprise, the main culprit turned out to be false declined payments. Basically, “A false decline is a legitimate card transaction that is ultimately denied, either by a bank or a merchant because it is mistakenly considered a fraud attempt.” Now, this should be the problem between banks due to their incorrect system but e-commerce merchants have to suffer due to this.
According to the study, on average, U.S. firms experience 11% of failed payments on online sales transactions. Nearly two-thirds of these failed payments are difficult to recover. False declines cause customers an unpleasant digital shopping journey and result in reputational damage. Many consumers are inclined to put the declined cards at the “back” of the wallet and opt to use the cards that are not being declined. Aside from the direct loss of sales, merchants recognize that false declines have a detrimental effect on customer satisfaction, with 47% of online players indicating a very or extremely negative impact. Fifty-eight percent of companies with revenues between $100 million and $250 million are affected.
Elizabeth Graham from Entersekt told PYMNTS that “False declines are such a problem in the industry that 80% of merchants use this measure as a key metric within the organization,” and added that “It’s incredibly frustrating and causes consumers to feel not only that it’s a nuisance — because they cannot buy the product they want to — but also almost like there’s been a personal insult”. The report further mentions that “In most instances, it is impossible to figure out whether the failure in the transaction was tied to the merchant or bank, or due to a technical issue with the credit card. According to data from the study, 8 in 10 online retailers cited difficulties in identifying the causes of failed payments.”
Graham added that “We can mitigate some of the challenges that we experience with false declines as open banking payments integrate with existing options such as credit cards, debit cards and digital transfer services typically offered by eCommerce retailers at checkout”. The publisher of this report found out that “Nearly all eCommerce firms are actively innovating their anti-fraud tools and screening mechanisms or planning to do so within 12 months”
