BlogJune 1, 2022

Father’s Day False Declines

Father's Day False Declines

Father’s Day, founded in 1910, and celebrated on the third Sunday every June, was commercialized by retailers decades before President Richard Nixon signed a proclamation in 1972 making Father’s Day a federal holiday. Economists estimate that over $20 billion will be spent on Father’s Day gifts this year, explaining the enthusiasm of businesses for the sentimental holiday. 

 Traditionally, a new grill or power tool was the gift of choice for the dad in your life, although lower budget items such as a wallet or personalized keychain hand delivered by the grandkids with balloons and a sandwich, are equally welcomed. Since the pandemic induced shift in consumer spending from in-store to online, 40% of shoppers are opting to buy presents online and having them shipped directly to their dads, according to the National Retail Federation

The change in gifting trends, while greatly beneficial for eCommerce businesses, doesn’t come without its challenges. 

The Dangers of False Declines

False declines, also referred to as false positives, indicate orders placed by legitimate cardholders that are falsely flagged as fraudulent and declined. Research on false declines by Javelin reports that 15% of legitimate orders are falsely declined due to suspicions of fraud. Alarmingly, eCommerce businesses are employing fraud prevention techniques that are costing their businesses more than fraud itself. It’s estimated that $230 billion in revenue losses will be amassed this year due to false positives, while actual fraud will cost merchants $130 billion

Take Sammy Johnson, for example, a graduate student at Hunter College in New York City, who decided to purchase a digital picture frame online for his newly widowed father living alone in Adamsburgh, South Carolina. He made his choice, proceeded to checkout and input his payment information, opting to ship the gift directly to his dad. Unfortunately, his credit card was declined by the merchant due to the distance between the shipping address and billing address, which can be a sign of fraud. Feeling miffed, he resolved to never revisit the offending website and toyed with the idea of leaving negative feedback. Needless to say, Sammy took his business elsewhere.

Falsely declining a customer due to suspicions of fraud will result in an immediate loss of the sale, loss of the customer acquisition costs, and loss of the customer’s lifetime value. 40% of declined customers will likely never return to your website and may also leave a negative review deterring other potential customers. A staggering 92% of customers surveyed by Baymard Institute reported abandoning a cart due to negative customer reviews.

Best Dad
Source: PaperSource.com

Best Strategies to Prevent False Declines this Father’s Day

  1. Rules Should Not Have the Final Say

Avoid declining an order based entirely on inflexible rules, such as an Address Verification Service (AVS) mismatch. Use those tools as indicators of concern, highlighting transactions that require further review, instead of relying on rules to make final decisions. Consider all data points of an order to determine a transaction’s authenticity, such as email age, account history, IP location, device fingerprinting and BIN/IP country proximity. Be especially sensitive to shipping and billing mismatches as this is a popular gift giving season. When in doubt, reach out to the customer via email, call or text, and ask them to verify the purchase.  

  1. Count Declined Customer Complaints as a Blessing

Declined false positives will often be mistakenly characterized by an eCommerce business as a successful avoidance of a fraudulent order. While many falsely declined customers disappear without ever returning, some indignant consumers will reach out to the merchant to inquire why the card was declined and to ask for assistance in placing their order. These customers are a blessing. They not only shed light on a silent source of lost revenue, they are essentially providing the business with an opportunity to recoup the lost sale and mend the relationship with the customer. Businesses should make a serious effort to track declined complaints and use the interaction as an opportunity to legitimize the order and uncover possible flaws in their fraud prevention strategy. 

  1. Track and Analyze Second Attempts

A customer who was falsely declined may attempt to re-input their payment information. Tracking second attempts that were approved on the second try can be very telling. Analyzing the information to discern what changed between attempts can help eCommerce business pinpoint inflexibilities in their fraud detection and prevention systems.  

  1. Employ Fraud Prevention, not Sales Prevention

There are many full service fraud prevention solutions out there. An AI-only fraud protection system that offers a financial guarantee against chargebacks is likely to veer on the side of caution, opting to employ strict rules to decrease their liability. A very low chargeback rate may be a sign of a high false decline rate. To ensure your fraud prevention solution isn’t blocking good business, seek out a system that combines machine learning with expert analyst oversight. The more flexible and collaborative the solution, the more orders they will be able to approve.  

  1. Consider a Checkout Upgrade

Most customers who make it to checkout, intend to complete their purchase. A decline at checkout is incredibly frustrating. One way to ensure that your legitimate customers are not falsely declined is by upgrading your checkout experience. NoFraud Checkout, a revolutionary product, prioritizes fraud prevention built into a frictionless customer journey. By embedding fraud detection into the checkout flow, low-risk shoppers can be ushered through with minimal information, while customers who require more scrutiny are given the opportunity to correct typos or provide validating information. Treating customers as individuals and dynamically adapting checkout to each shopper, improves conversions by 55% and can eliminate false declines. 

Takeaway

Detecting and eliminating false declines will result in an immediate increase in revenue this Father’s Day gift buying season and the effort invested in reviewing fraud systems and procedures, investigating false positives, and analyzing approved second attempts will help improve revenue year round. Ensure your full service fraud prevention system is helping your business and not holding you back. Learn more about how NoFraud and NoFraud Checkout can reduce your false positive declines and improve conversions HERE.  

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