Why Finding Connections Is the Key to Reducing False Declines

As online threats grow, merchants have turned to fraud detection and prevention systems to monitor transactions. But with ecommerce sales now skyrocketing, a larger problem is surfacing: false declines. 

False decline costs are now outpacing ecommerce fraud losses, and those declines could spell out long-term financial damage for businesses. In addition to losing out on a lifetime of customer revenue to frustrating false declines, ecommerce companies are also wasting hours of time and pricey resources on outdated fraud-prevention methods.

However, there are ways to cut down fraud and minimize false declines at the same time. Read on to learn how to use online connections to reduce false declines, protect against fraud and save your ecommerce teams time and money. 

What Are the Costs of False Declines?

For ecommerce merchants, false declines turn into immediate financial losses. And damage to the customer experience is even more serious. According to Sapio Research, 33% of U.S. consumers say they would never shop with an online merchant again if their payment is declined. That means false declines don’t just turn away customers, but they also often damage a company’s reputation beyond repair.

Merchants aren't the only ones affected by false declines. Card issuers are too. A recent study found that when cardholders have been incorrectly declined two or more times within six months, 20% of them stopped using the card altogether. Issuers lose interchange fees from the declined transaction and future transactions, plus their marketing investment in the relationship crumbles when customers move to a competitor's card. And whether it’s retailer or issuer, it’s six to seven times more expensive to acquire a new customer than to keep one. 

Why Are False Declines on the Rise?

False declines are increasing because ecommerce transactions are catapulting. In fact, with the pandemic pushing more and more people into digital routines, ecommerce sales are now expected to surge by 50% over the next four years. 

The path to approval is complicated if manual reviewers and card issuers are relying on basic online identification data to monitor transactions. Most businesses rely on legacy infrastructures with rules-based systems that only work with limited data. Because they have no technology to verify online connections, these businesses often have no choice but to decline transactions whenever the online identity data they see doesn't match the rules. Unfortunately, this traditional approach to identity fraud is costing merchants billions. 

How Can Companies Eliminate False Declines?

By taking a proactive approach to fraud, ecommerce companies can protect their customers and eliminate false declines at the same time. Here are a few ways to adopt a more efficient fraud-screening process, lighten your manual review team’s workload and avoid costly false declines:

1. Drill into better data to identify connections.

To eliminate false declines, retail and financial organizations need to tap into data that detects trust and examines connections before payments are declined. Here’s why: Most businesses will have some basic information about the purchaser. So, if an existing customer provides data that matches, approval is easy. But what happens when identifiers and additional data points, such as delivery location, don't match? 

Suppose you order a product to send to an ex-coworker, and you use your phone number in the shipping details to receive updates. Although the individual identifiers can be verified as being legitimate, they still don't point to the same person, making the transaction appear fraudulent to a traditional system.

To confirm the trustworthiness of this type of complicated transaction, businesses need to be able to see a customer's identity as an interconnected web—not just three or four separate data points. Their view must include all of the connections the customer has made over time. By relying on an interconnected network, you can quickly see: 

• If the data elements involved in a transaction are connected 
• How they're connected
• Why you can trust those connections 

Ultimately, deriving deeper data connections allows teams to make confident decisions at a glance, saving time and reducing false declines. 

2. Slash false declines and reduce workloads with identity trust solutions.

If you want to eliminate false declines and protect against fraud, it’s important to empower your manual review teams with advanced tools. These teams are on the front lines when fraud pops up, and if they’re trying to address fraud in a reactive way, they could become overwhelmed fast. That’s why you need to give them the tools to verify customer identity data quickly without having to manually piece together a customer’s entire online story on their own. 

For instance, Pipl Trust is an example of an advanced tool that does the heavy lifting for your manual review team. In fact, this technology has helped reduce manual review times by 50%-60%. It works by handing your manual reviewers real-time reports that dig into identity connections, examine trust signals and reveal whether a customer is trustworthy—all in a matter of seconds. By enhancing your teams with this type of technology, they start using intelligence they can trust to verify a customer’s entire online story, saving time, lowering workloads and eliminating false declines.

Want to lead your ecommerce teams to fewer false declines and your customers to better experiences? Download our one pager to Reduce False Declines and Say Yes to More Trusted Customers.