Credit card issuers are doubling down on fraud detection. But unfortunately, this isn’t all good for retailers and eCommerce businesses. Now, along with malicious fraudsters, legitimate customers are being turned away in larger numbers.
In fact, more than 20% of online customers are getting declined at checkout, almost 17% more often than in-store customers.
How do these false declines impact the customer experience and long-term customer loyalty? You may have already guessed. But we’ll unpack the answers in detail here.
What are False Declines?
Card declines occur when credit card issuers fail to process a POS or online purchase. Often, this is due to some legitimate error with the card or the account, such as insufficient funds, expiration, fraud, or incorrect credentials. But sometimes, it’s simply the result of hypersensitivity or error. These cases, when card rejection is unjustified, are known as false declines.
How Do False Declines Impact Customers?
False declines come with several negative effects for both businesses and customers. Let’s look at just 3 of them.
Creates Friction in the Checkout Experience
First and foremost, false card declines cause frustration and inconvenience for customers, as they’re forced to enter their information a second time, switch to a new card, or call their card issuers’ customer support line.
But what most customers don’t know is that many false declines are actually made by their card issuer, not your business or payment portal. As a result, more often than not, they’ll lay the blame for the inconvenience at your feet. And since your employees have limited ability to help if the decline was issued by their bank or card issuer, your customers can quickly develop negative feelings toward your brand.
If the frustration is acute enough, this increased friction can also lead to cart abandonment and customer churn, which we’ll discuss below.
Increases Cart Abandonment
Recent studies have shown that the average shopping cart abandonment rate falls somewhere around 70%, give or take three to four percentage points. And 4% of abandonment rates can be attributed directly to card declines.
But as the number of eCommerce false declines grows, so does the likelihood for cart abandonment. And given the investment required to get customers to this point in the buyer’s journey and the potential for lost revenue, this is a cost that retailers and eCommerce businesses can’t afford.
Weakens Customer Loyalty
Unfortunately, the impacts of cart abandonment don’t end there, though. They also decrease customer retention, as 33% of shoppers permanently leave retailers who falsely decline their cards. Here’s why.
According to a recent survey conducted by the NRF, nearly 97% of surveyed customers have backed out of a purchase because it was inconvenient. And 52% claimed that at least half of their purchase decisions are driven by convenience.
As a result, when significant friction is introduced in the purchase experience, you increase the likelihood of abandonment and churn. Permanent customer losses are also a possibility, especially if the customer ends up buying from a retailer who delivers an exceptional purchase experience.
How Do You Prevent False Declines?
One of the best things you can do for your retail or eCommerce business is partner with an experienced Fraud prevention solution provider that has the capacity to prevent fraudulent activity without automatically declining so many legitimate customers.
Using a combination of machine learning, consortium data, and human intelligence, Radial enables retailers to protect their business, customers, and card issuers from fraud. And because we only reject 1% of orders while offering zero fraud liability, you can drastically reduce the amount of false declines that impact your customer experience.
Want to see how our fraud detection solution works? Reach out to our team today.