The Truth About False Declines

It’s time to face reality and stop avoiding a very pressing topic—false declines. Too many e-commerce merchants fail to understand the cost and pressure false declines are placing on their businesses. In fact, it’s estimated that in 2016, false declines cost e-commerce merchants $8.6 billion.
The good news is that there are solutions to this real-world business problem. Getting a grip on false declines all comes down to your fraud management system, and most importantly how you’re handling friendly fraud.
There is so much effort placed on preventing friendly fraud from occurring that many merchants have become too aggressive with their fraud controls. This is to be expected, particularly if you’ve been a victim of friendly fraud on more than one occasion.
It’s important to recognize that the $8.6 billion in lost revenue to false declines overshadows the estimated $6.5 billion in prevented fraud. In other words, you’re only going to start winning the fight against friendly fraud when your fraud management system is truly working in your favor.
Find the Balance with Friendly Fraud Controls
E-commerce merchants like you are frequent victims of friendly fraud. So, you respond with an overly aggressive fraud detection solution. Gradually, you notice that though you’re not seeing as many friendly fraud chargebacks, you are seeing a definite loss in revenue.
How does this add up? You’ve tightened your fraud controls to prevent theft and chargebacks, and as a result you’re losing out on sales. This is the truth about false declines—they can hurt your business more than you realize.
Review your fraud management system and make sure you understand how and why customer purchases are being declined. Be aware of the following reasons for declined purchases:

  • Incorrect information:  The customer made a simple data entry error.
  • Expired card:  The purchase was declined due to an expired or invalid card.
  • High card activity:  The system determined there was too much card activity.
  • Cross-border purchaser:  The customer lives in a country that has high fraud rates.
  • AVS errors:  The billing address provided did not match the billing address linked to the credit card.

Studies show that when a customer’s purchase is declined, the customer does not attempt the purchase again. Customers simply give up in frustration and move on to your competitor. This has a deep trickle-down effect: you lost the original sale, the customer likely won’t return to buy another product from you, and the customer may become a recurring customer with one of your competitors.
Prevent False Declines and Friendly Fraud
The goal then is finding that perfect balance that keeps the friendly fraud under control but still prevents false declines. You’ll know you have reached this point when you see your fraud and chargeback numbers dropping and your sales steadily increasing.
The key to this is in making sure that your fraud management system is working for you and not against you. To review your fraud prevention management needs, consider doing the following to prevent false declines from hurting your business:

  • Understand your data:  Know why false declines are happening. There is likely a common thread connecting a large percentage of these decline purchases.
  • Review your rules engine:  Make sure the rules engine setting are not overly aggressive and blocking purchases due to obvious human error.
  • Contact your customers:  When a purchase is declined, reach out to the customer by email to verify their purchase or payment details.
  • Review your entire fraud solution:  Make sure you’re using a multi-layered fraud solution that is collecting data on your customers, reviewing transactions, and monitoring fraud risks.

Sooner or later, the costs of false declines will be too high to push into a corner. Take that same energy you’ve given to learning about solutions to friendly fraud and put it into reducing your false decline numbers.
With the right solution in place, you’ll keep your dedicated customers, acquire new customers, improve your brand profile, and win customers from your competitors who are still ignoring the realities of false declines.