False declines in credit card processing are a significant concern for ecommerce merchants, often costing them more than actual fraud. Balancing customer experience with effective fraud prevention is a challenge, leading to valid transactions being mistakenly declined.
The Dilemma of False Declines
A false decline occurs when a genuine purchase is wrongfully rejected due to suspected fraud. Such declines not only frustrate customers but can also damage the merchant’s reputation. Unfortunately, the responsibility of these declines often falls on the merchant, even though the decision originates from the cardholder’s bank.
These declines can result in customers abandoning their purchases and possibly not returning, leading to lost sales and damaged customer relationships.
Underestimating the Impact
While merchants are rightly concerned about online fraud, many do not fully comprehend the extent of damage caused by false declines. Recent studies indicate that false declines could reach an estimated $443 billion by 2021, far surpassing losses due to actual fraud.
The Increase in False Declines
The rise in ecommerce, especially during the pandemic, has led to an increase in both fraud and false declines. Enhanced fraud prevention measures, while crucial, often mistakenly flag legitimate transactions as fraudulent.
Triggers for False Declines
Common triggers for false declines include bulk purchases, differing shipping and billing addresses, and transactions from unfamiliar IP addresses. With changing consumer behaviors due to COVID-19, such legitimate scenarios are increasingly mistaken for fraudulent activities.
Optimizing Fraud Prevention Strategies
Merchants need to refine their fraud prevention tools to balance security and customer experience. Adapting fraud detection strategies to current shopping trends is essential to minimize false declines.
Manual Review and Automated Systems
Implementing a system where flagged orders undergo manual review can help distinguish genuine transactions from fraudulent ones, improving the accuracy of fraud detection over time.
Layered Fraud Detection Approaches
Newer fraud prevention solutions employ a layered approach, re-evaluating flagged orders before outright rejection. This method allows for a more nuanced detection of fraud, reducing the number of false declines.
Addressing False Declines During the Holiday Season
With the surge in holiday online shopping, addressing false declines becomes even more critical. By closely reviewing flagged orders, merchants can boost profits and enhance customer relationships. A smarter fraud detection system not only reduces current false declines but also improves future accuracy.
Long-Term Benefits
By tackling the issue of false declines, merchants can expect higher profits, reduced customer acquisition costs, and improved customer lifetime value. The effort to refine fraud detection strategies offers numerous lasting benefits.
To explore how our fraud detection software can help reduce false declines in your ecommerce business, contact us today!
