In the world of international ecommerce, false declines are a silent adversary, causing frustration for customers and revenue loss for businesses.
As the global ecommerce market becomes increasingly competitive, understanding and minimizing false declines is essential for maintaining consumer trust and optimizing sales. In this guide, we’ll look at the causes of false declines and share the measures that international ecommerce businesses can take to prevent them.
What are false declines?
False declines, also known as false positives, occur when a valid transaction is incorrectly refused by the payment processing system. This can happen when a fraud detection system mistakenly identifies a legitimate purchase as fraudulent and blocks the transaction, leading to a negative experience for the customer and a missed sales opportunity for the retailer.
Why ecommerce false declines matter for your business
Many businesses are laser-focused on preventing fraud but what if, in some ways, their approach is actually backfiring? One study found that among ecommerce businesses, losses caused by false declines were nearly 70 times greater than losses from actual fraud.
The negative impact of false declines extends well beyond the immediate rejection of a single transaction, however. Seamless customer experiences are so crucial to today’s ecommerce consumers—so much so that as many as 1 in 3 consumers will never shop again with an online merchant who falsely declines one of their transactions.
Brands that fail to minimize false declines risk turning off customers and losing out on their business—potentially permanently.
How do false declines happen?
Why are transactions falsely declined in the first place, though? The truth is that there’s often no simple, straightforward answer. False declines can arise from a complex interplay of various factors. While some can be linked to customer actions, many are related to the mechanisms ecommerce businesses use to authenticate transactions. Common reasons for false declines include:
- Payment system and software errors: Payment processing is a complex, technology-driven operation; failed payments do happen, even to the best-prepared brands. System outages, software glitches, or hardware failures can mistakenly cause legitimate transactions to be declined.
- Unusual spending patterns: If a customer suddenly makes a purchase that’s significantly different from their typical spending habits—whether in amount, frequency, or type of goods—this anomaly can trigger fraud detection systems, whether at the customer’s financial institution or on the ecommerce brand’s side.
- Incorrect payment information: Simple human error, such as entering a wrong CVV or expiration date, can result in a transaction being flagged and declined.
- Expired cards or accounts: Customers might not always be aware of their card’s expiration date or account status, leading to attempted transactions with invalid payment methods.
- Outdated authorization techniques: Some ecommerce systems still rely on outdated rule-based authorization which can’t adapt to the nuanced and evolving patterns of legitimate customer behavior.
- Poor or overly strict fraud detection: Fraud detection systems with stringent rules or outdated algorithms may not differentiate between actual fraud and atypical but legitimate transactions.
- Location-based issues: Transactions made from different locations than the consumer’s home are typically subject to greater scrutiny. Oftentimes, if a payment system detects an IP address that’s not associated with the consumer’s home country, or if it’s associated with higher rates of fraud, it may suspect fraud and reject the transaction.
Understanding that not all false declines are preventable by the merchant, businesses can still play a proactive role in minimizing their occurrence. By refining the processes that contribute to false declines, businesses can enhance the customer experience and preserve sales.
How to reduce false declines
Reducing false declines requires a blend of technology, customer communication, and data analytics. Here’s how businesses can address the issue:
- Utilize advanced fraud detection solutions: Employing ecommerce fraud detection that incorporates machine learning algorithms can analyze thousands of transaction variables in real time, resulting in more accurate decisions. Better yet, machine learning technology like that behind Digital River’s Transaction Defender™ will only improve over time as it continues to analyze millions of online transactions from all over the world.
- Regularly update customer data: Keeping customer profiles up to date, including payment methods and contact information, can help ensure transactions are not declined due to outdated details.
- Note your repeat, trusted customers: Creating lists of verified and trusted customers can help prevent their transactions from being flagged by automated systems.
- Monitor and review failed transactions: By setting up a system for immediate review of declines, companies can quickly address false positives and refine their verification processes.
- Use flexible controls: Every business’s fraud detection needs and risk profiles are different. Work with fraud management and payment solutions that are flexible and can be tailored to meet your needs while maximizing successful payments.
- Analyze your data in depth: As with almost any area of ecommerce, improving fraud detection and minimizing false declines requires a data-driven approach. Be sure that your solution delivers granular data to help you test and improve your approach to false positives over time.
By taking these actions, businesses can help ensure that their legitimate customers do not face the frustration of false declines, fostering a more reliable and customer-friendly shopping experience—and shoring up important sources of revenue.
How Digital River helps prevent false declines
Today’s businesses need to strike a crucial balance in protecting themselves from fraud and preventing false declines from harming revenues and hindering customer retention. On your own, finding this balance is no easy feat. But with the right partner, you can more easily optimize payment experiences while securing your business and you expand around the globe.
Handling back-end processes of payment processing, fraud prevention, and more, Digital River is at the forefront of an ever-changing ecommerce landscape. We can help you reduce false declines and simplify global growth with:
- Sophisticated fraud management tools: Our state-of-the-art, machine learning-powered fraud management solutions are continuously updated to stay ahead of the latest trends and technologies in fraud prevention.
- Global payment network: With decades of experience and access to the industry’s largest local acquirer network, we understand and integrate regional payment intricacies that can often lead to false declines if overlooked.
- Customer-focused approach: We maintain a balance between security and user experience, ensuring that effective and flexible fraud prevention measures do not stand in the way of winning, localized checkout processes.
- Insightful fraud analytics: Our systems and our global experts are always at work analyzing transaction data, learning, and adapting to minimize the risk of false declines while maximizing approval rates. Plus, we’ll equip your team with the robust fraud analytics data you need to take well-informed action.
Contact us today to learn more about how Digital River can help you increase your revenue through frictionless checkout experiences and take on the risk and complexity of international commerce so your business can move—and grow—faster.