Online retailers: The quickest way to frustrate a customer

3-minute read

Tue Nov 28 2017

You’re probably familiar with this scenario: after a few hours researching the internet, you’ve landed on the perfect product. You enter your payment details, check your delivery address, and – after a momentary pause – hit ‘buy’.

But instead of the satisfying ping of a ‘Thanks for your order’ message, you’re met with one of online retailing’s most dreaded pop-ups: ‘transaction declined’.

It’s a situation that can send the most placid souls spiralling into a rage. You probably emit a yowl like a timber wolf stubbing its toe; you may even shake a fist or two. And if you don’t hurl your computer into the sea, the chance of starting the process again with a smile on your lips is pretty remote.

If you’re an online retailer, the process can be a double blow to your business; not only have you missed out on a sale, but your now fuming customer may leave you for a competitor.

The growth of ‘false positives’

Unfortunately one of the most common reasons for a sale being declined is a 'false positive' – legitimate cardholders who have been incorrectly identified as fraudsters. 

In the UK, over one-in-five of all declined payments online turn out to be false positives (21%) – a similar figure to the US (20%) and far higher than continental Europe (14%)¹ .

It’s a costly business: in the US alone, around $118 billion of sales were declined in false positives in the last year². But in fact only a small fraction of this - $9 billion - turned out to be from genuine, confirmed fraud³. And decline rates are on the up. UK merchants have seen a steeper rise in declines than any other market – a jump of almost 33% from the year before ⁴.

For retailers who regularly accept payments online – or plan to – this is a major problem: you need to tackle fraud, but not at the risk of jarring your checkout process, alienating potential customers and impacting revenue.

In terms of retaining customers and your company’s growth, false positives can be an even bigger threat to your business than fraud ⁵. Business Insider reports that US ecommerce merchants lost over $2 billion more in falsely declined transactions in 2016 than the cost of actual fraud.

The long-term hidden costs can be even more damaging: to fully consider the cost of false positives to your business, keep in mind the cost of acquiring customers and your customers’ potential lifetime value, both of which could be undermined if you wrongly decline their order.

Why are online transactions sometimes declined?

There can be many legitimate reasons an online purchase is declined – usually divided into two broad groups: ‘soft’ and ‘hard’ declines.

'Soft’ declines are usually temporary and can be easily rectified. Reasons for these include:

• The billing address doesn’t match the one on file
• The bank is experiencing processing errors
• Perceived security violations – e.g. the three-digit CVV2 or CID code is in an invalid format

'Hard' declines are issues that can’t be resolved immediately, and usually mean the card issuer has encountered a more serious reason to decline your customer’s card:

• The card number is expired or card type is not supported by the processor
• The card has been reported as lost or stolen
• There isn’t enough money in the account
• Suspected fraud

What you can do to reduce false positives

The task of cutting false positives out of your checkout process can be pretty overwhelming. So we’ve identified the main issues you might face and how you can start dealing with them, all available in our study on how to improve your eCommerce payments’ acceptance rate.

In the Javelin whitepaper, sponsored by Barclaycard, you’ll find recommendations for your business, including:

• Finding ‘invisible’ options to keep your checkout process as frictionless and fraud-free as possible, such as geolocation, behavioural analytics and device fingerprinting (p6)
• Monitoring your payment acceptance partners’ capabilities and performance for preventing fraud (p5)
• Choosing partners that meet your changing requirements for flexibility and transparency (p4)
• And identifying additional partners for specific aspects of your business, such as mobile and international payments (p20)

Declining payments needlessly can be one of the quickest ways to frustrate your customers – and possibly send them directly to your competitors.