The Financial Consequences of False Declines

Published: July 31, 2022 by Kim Le

There’s no doubt that fraudulent transactions can end up costing businesses money , which have led many to implement risk-mitigation strategies across every stage of the purchasing journey. However, this very same protection can increase false declines, and the associated friction can create high rates of cart-abandonment and negative impacts for a business’s brand.

What is a false decline?

A false decline is a legitimate transaction that is not completed due to suspected fraud or the friction that occurs during verification. False declines occur when a good customer is suspected of fraud and then prevented from completing a purchase. This happens when a company’s fraud prevention solution provides inadequate insight into the identity of the customer, flagging them as a potential bad actor. The result is a missed sale for the business and a frustrating transaction and experience for the customer.

Are false declines costing your business money?

False declines have high revenue and cost consequences for e-commerce marketplace merchants. By denying a legitimate customer purchase at checkout, businesses risk:

Loss of new sales directly impacting revenue

  • 16% of all sales are rejected by e-commerce merchants unnecessarily costing businesses ~$11B in sales annually,1 with an estimated 70% of unwarranted friction as a contributing cause.

Loss in customer loyalty and lifetime value

  • Blocked payments can leave customers with a poor impression of your business and there’s a good chance they’ll take their business elsewhere.

Tarnished business reputation

  • Today’s customers expect businesses and online services to work seamlessly. 81% of consumers say a positive experience makes them think more highly of a brand. Therefore, your brand might take a hit if unnecessary obstacles prevent them from having a good experience.

High operational overhead costs

  • The average business manually reviews 16% of transactions for fraud risk. It is estimated that 10 minutes are needed for each review. This inefficiency can be costly as it takes time away from fraud teams who can work on higher priority or strategic initiatives.

Businesses can benefit from a seamless and secure payment experience that drives real-time resolution and eliminates a majority of false declines and bottlenecks, ultimately helping increase approval rates without increasing risk.

Get started with Experian Link™ – our frictionless credit card owner verification solution.

Learn more

1“E-Commerece Fraud Enigma: The Quest to Maximize Revenue While Minimizing Fraud Report” Aite-Novarica Group, July 2022

Related Posts

Learn what a TOAD attack is and effective measures you can take to safeguard your organization. Read more!

Published: June 6, 2024 by Alex Lvoff

Experian’s award-winning platform now brings together market-leading data, generative AI and cutting-edge machine learning solutions.

Published: May 22, 2024 by Julie Lee

“Learn how to learn.” One of Zack Kass’, AI futurist and one of the keynote speakers at Vision 2024,...

Published: May 22, 2024 by Stefani Wendel