Tag: false declines

E-commerce digital transactions are rapidly increasing as online shopping becomes more convenient. In fact, e-commerce is projected to exceed 17% of all retail sales worldwide by 2027. As a result, opportunities for fraudsters to exploit businesses and consumers for monetary gain are reaching high levels. Businesses must be aware of the risks associated with card not present (CNP) fraud and take steps to protect themselves and their customers. What is card not present fraud? CNP fraud occurs when a criminal uses a stolen or compromised credit card to make a purchase online, over the phone, or through some other means where the card is not physically present at the time of the transaction. This type of fraud can be particularly difficult to detect and prevent, as it relies on the use of stolen card information rather than the physical card itself. CNP fraud can yield significant losses for businesses — these attacks are estimated to reach a staggering $28 billion in losses by 2026. Many have adopted various fraud prevention and identity resolution and verification tools to better manage risk and prevent fraud losses. Since much of the success or failure of e-commerce depends on how easy merchants make it for consumers to complete a transaction, incorporating CNP fraud prevention and identity verification tools in the checkout process should not come at the expense of completing transactions for legitimate customers. What do we mean by that? Let’s look at false declines. What is a false decline? False declines occur when legitimate transactions are mistakenly declined due to the business's fraud detection system incorrectly flagging the transaction as potentially fraudulent. This can not only be frustrating for cardholders, but also for merchants. Businesses may lose the sale and also be on the hook for any charges that result from the fraudulent activity. They can also result in damage to the business's reputation with customers. In either case, it is important for businesses to have measures in place to mitigate the risks of both. How can online businesses increase sales without compromising their fraud defense? One way to mitigate the risk of CNP fraud is to implement additional security measures at the time of transaction. This can include requiring additional verification information, such as a CVV code or a billing zip code to further authenticate the card holder’s identity. These measures can help to reduce the risk of CNP fraud by making it more difficult for fraudsters to complete a transaction. Machine learning algorithms can help analyze transaction data and identify patterns indicating fraudulent activity. These algorithms can be trained on historical data to learn what types of transactions are more likely to be fraudulent and then be used to flag potentially fraudulent transactions before it occurs. Businesses require data and technology that raise confidence in a shopper’s identity. Currently, the data merchants receive to approve transactions is not enough. A credit card owner verification solution like Experian Link fills this gap by enabling online businesses to augment their real-time decisions with data that links customer identity to the credit card being presented for payment to help verify the legitimacy of a transaction. Using Experian Link, businesses can link names, addresses and other identity markers to the customer’s credit card. The additional data enables better decisions, increased sales, decreased costs, a better buyer experience and better fraud detection. Get started with Experian Link™ - our frictionless credit card owner verification solution. Learn more

Online transactions face a higher chance of being declined because face-to-face transactions come with a higher degree of confidence. Businesses who fail to address this problem run the risk of losing the customer permanently, damaging their reputation and bottom line. What can e-commerce marketplace merchants do to increase the approval rate of online payments without making fraud worse? Here are three tips: 1. Broaden access to data beyond what’s in the authorization stream. Merchants use a variety of solutions to prevent fraud and verify identities, but typically use very limited data to approve a transaction through the authorization stream between a merchant and issuer. The issuing bank often only compares the purchase data to the address listed on the card owner’s account, which can create discrepancies when a customer is trying to send an order to an alternate address from their primary home. That’s why it’s important for merchants to augment their decisioning with additional data sources to help inform the true customer risk profile. 2. Leverage capabilities that can assess risk for both the transaction and the individual behind it. Today, merchants leverage limited data including email address data, device information and other technologies in silos to augment their address verification capabilities. The challenge with these tools is that each judge the risk of a specific component of the transaction or the individual. Where integration is lacking, false positives are amplified. 3. Collaborate and share expertise and data across merchants and issuers. How can Experian help? Leveraging our multidimensional data, technical expertise and advanced analytics capabilities, we can help businesses frictionlessly authenticate valid customers, thus increasing revenue by increased approval rates, without increasing fraud or operating expenses. Only Experian Link™, our frictionless credit card owner verification solution can associate payment card with its owner. This solution combines Experian’s vast data assets – including over 500 million credit card account numbers on file in the U.S. across 250 million consumers – with our advanced analytics capabilities to match and assess the risk of the identity attributes presented to the merchant to the identity attributes contributed by the credit card’s issuer and to Experian’s network of credit and identity inquiries. The result: Experian Link’s patent-pending REST API simply and frictionlessly improves a merchant’s customer experience and helps increase revenue while reducing their fraud and operating expenses. Get started with Experian Link™ now. Experian Link

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

False declines are often unwarranted and occur due to lack of customer information Have you ever been shopping online, excited to get your hands on the latest tech gadget, only to be hit with the all-too-common disappointment of a credit card decline? Whom did you blame? The merchant? The issuer? The card associations? The answer is probably all of the above. False declines like the situation described above provoke an onslaught of consumer emotions ranging from shock and dismay to frustration and anger. Of course, consumers aren’t the only ones negatively impacted by false declines. Many times card issuers lose their coveted “top of wallet” position and/or retailers lose revenue when customers abandon the purchase altogether. False declines are unpleasant for everyone, yet consumers struggle with this problem every day — and fraud controls are only getting tighter. How does the industry mutually resolve this growing issue? The first step is to understand why it occurs. Most false declines happen when the merchant or issuer mistakenly declines a legitimate transaction due to perceived high risk. This misperception is usually the result of the merchant or issuer not having enough information to verify the authenticity of the cardholder confidently. For example, the consumer may be a first-time customer or the purchase may be a departure from the card holder’s normal pattern of transaction activity. Research shows that lack of a holistic view and no cross-industry transaction visibility result in approximately $40 billion of e-commerce declines annually. Think about this for a minute — $40 billion in preventable lost revenue due to lack of information. Merchants’ customer information is often limited to their first-hand information and experience with consumers. To solve this growing problem, Experian® developed TrustInsight™, a real-time engine to establish trusted online relationships over time among consumers, merchants and issuers. It works by anonymously leveraging transactional information that merchants and financial institutions already have about consumers to create a crowd-sourced TrustScore™. This score allows first-time online customers to get a VIP experience rather than a brand-damaging decline. Another common challenge for merchants is measuring the scope of the false declines problem. Proactively contacting consumers, directly capturing feedback and quickly verifying transaction details to recoup potential lost sales are best practices, but merchants are often in the dark as to how many good customers are being turned away. The solution — often involving substantial operational expense — is to hold higher-risk orders for manual review rather than outright declining them. With average industry review rates nearing 30 percent of all online orders (according to the latest CyberSource Annual Fraud Benchmark Report: A Balancing Act), this growing level of review is not sustainable. This is where industry collaboration via TrustInsight™ offers such compelling value. TrustInsight can reduce the review population significantly by leveraging consumers’ transactions across the network to establish trust between individuals and their devices to automate more approvals. Thankfully, the industry is taking note. There is a groundswell of focus on the issue of false declines and their impact on good customers. Traditional, operations-heavy approaches are no longer sufficient. A trust-based industry-consortium approach is essential to enhance visibility, recognize consumers and their devices holistically, and ensure that consumers are impacted only when a real threat is present.