The ecommerce industry continues to achieve year-over-year growth, making it increasingly critical for merchants to understand the significant impact of false declines on their bottom line.

Recent studies highlight that false declines can pose a greater threat than fraud itself. These erroneous rejections not only result in immediate lost sales but also damage customer satisfaction and loyalty. A PYMNTS report found that 47% of retailers believe false declines have a highly negative impact on customer satisfaction.

Moreover, the prevalence of false declines is significant. In 2024, 56% of U.S. consumers reported experiencing a false payment decline in the past three months, leading to frustration and potential loss of future business.

Addressing false declines is essential for maintaining customer trust and optimizing revenue. Implementing advanced fraud detection systems and collaborating with payment service providers can help balance security measures with a seamless customer experience, reducing the occurrence of false declines.

What Are False Declines?

To understand false declines, you need to understand what happens behind the scenes when online orders are placed.

Online transactions must pass through payment gateways that are set in place by companies. These gateways may contain filters at each step during the online order process, set up to try to detect fraud. Orders are not approved unless they pass gateway filters. If one of these filters indicates that an order is fraudulent, the order gets blocked by the system and cannot be placed by the consumer.

While these filters may do a fair job of detecting the most obvious fraud attempts, they often make mistakes. When a fraud filter flags and blocks legitimate transactions, this is called a false decline (or a false positive).

False declines are not usually accounted for in fraud losses because they can be tough to quantify. Many companies are unaware that many of their orders declined on fraud suspicion are actually from good customers. Yet, as many as 80% of declined transactions have been proven to be perfectly legitimate orders. This is costing companies money and repeat business.

How False Declines Happen

Since fraud filters use simple rules or algorithms that judge common characteristics of fraud as inputs, there are many reasons why a purchase can be declined.

Some typical reasons orders get declined include:

• If the location of the shopper is different than previous purchases
• The delivery address is different than the consumers billing address
• If the shopper requests the fastest shipping method
• Inconsistent order data – for example: if the zip code and city don’t match
• Larger than average order
• Multiple shipping addresses
• Multiple orders from many credit cards
• Missing card information

False declines are so common because companies are over-reliant on automation to screen their orders. For instance, there might be a legitimate reason why the customer’s billing address doesn’t match their shipping address. And companies who only rely on simple fraud filters are missing out on several diverse data sources that give you a much more complete picture of the transaction’s risk profile.

The Cost of False Declines

While false declines have an immediate impact on revenue due to canceled orders, the main cost of false declines is the long-term result of unhappy customers. After an experience with a false decline, dissatisfied customers tend to take their business elsewhere – perhaps never to return – and spread their poor experiences with others. But that’s not the only cost of fraud.

3 Major Ways False Declines Hurt Your Company

1. More unhappy customers
2. Less revenue generated
3. Damaged Reputation

Unhappy Customers

Look at a false positive from the lens of a buyer: You spend hours researching a product online, comparing features, and reading reviews. Finally, you decide to buy the item at a trusted store, only to have your purchase blocked by the store. How would that make you feel about the company you had decided to trust?

From a customer’s perspective, a false decline can be unsettling. With 56% of consumers experiencing a false payment decline within the last 90 days, it isn’t just an inconvenience but embarrassing and aggravating. The impact on businesses is significant—32% of shoppers say they wouldn’t return to a merchant after experiencing a false decline, leading to long-term revenue loss and diminished customer loyalty.

Less Revenue Generated

In 2023, U.S. ecommerce firms were projected to lose $157 billion due to false declines, with $81 billion of that amount permanently lost despite recovery efforts.

Despite the substantial financial impact, only 33% of online retailers have implemented screening solutions to identify potential fraud as the cause of failed payments. This oversight represents a missed opportunity to minimize false declines and improve profitability.

Moreover, 47% of retailers agree that false declines have a highly negative impact on customer satisfaction, underscoring the importance of effective fraud management strategies.

Damaged Reputation

Negative customer experiences can have a significant impact on businesses. According to Zendesk’s Customer Experience Trends Report 2025, more than half of consumers will switch to a competitor after only one bad experience. Furthermore, 73% of consumers will switch to a competitor after multiple bad experiences. These dissatisfied customers often share their negative experiences, influencing potential future customers. In today’s digital age, such feedback spreads rapidly through social media, product reviews, and business review sites, shaping the decisions of prospective buyers.

How to Reduce False Declines

1. Stop Relying on Gateway Filters: Unfortunately, simple rules such as auto-declining orders with an AVS mismatch are not a smart way to manage fraud. In fact, at NoFraud, we find that about 90% of transactions with an AVS mismatch are accepted as good orders. If you’re relying only on gateway filters, you’re almost certainly being way too conservative in your approach.

2. Rely on Dedicated Fraud Analysts: In organizations where customer service representatives primarily manage fraud screening, you might have more false declines than expected. This is because most CSRs don’t have the expertise or incentives to take measured risks regarding fraud pass/fail decisions.

While it’s easy to determine which representative is responsible for approving an order that ended up being a chargeback, false declines are nearly impossible to track. Additionally, CSR performance is measured based on customer satisfaction, not on revenue or order approval rates. Therefore, most CSRs tend to be overly cautious, resulting in more false positives.

3. Choose the Right Partners: There’s a reason why full-service fraud prevention solutions are known to improve order approval rates. Fraud companies leverage diverse data sources and large customer networks that ecommerce businesses just don’t have access to. This results in far more accurate decisions than simple rules-based filters can provide.

At NoFraud, accurate decision-making is nothing short of an obsession. We know through experience that pushing order approval rates as high as possible requires a combination of powerful analytics, diversified data sources, AND expert review. While 99.5% of transactions are determined through advanced machine learning, NoFraud also automatically escalates all “grey” orders to seasoned fraud analysts. We call this Proactive Review, and it’s the reason why merchants who switch to NoFraud can cut their order declines in half.

False declines can be highly damaging to a company’s bottom line. With the continuous growth of the ecommerce industry, merchants need to realize how false declines happen, and more importantly, how they can prevent them.

Businesses are enjoying a surge in e-sales this season, thanks in large part to the most recent emergence of the omicron Covid variant and the public’s growing reliance on the online marketplace for everything from groceries and other everyday purchases, to seasonal, electronic, automotive and lifestyle items.

Despite this growth, online profitability is not nearly what it could be, due to both increasingly sophisticated internet fraudsters and the growing costs of false declines.

What are False Declines?

The term “false decline” is applied to a situation when a legitimate credit card purchase is erroneously declined and a sale prevented when it was truly legitimate and should have been approved.

These declines are almost always triggered by some form of automated fraud prevention software that seeks out fraud at various levels, multiple times throughout a transaction. Although occurring within just an instant, each point of examination reflects an opportunity for a false decline.

How Common are False Declines?

A recent study cited that the average online store declines almost 3% of all orders because of suspected fraud. Investigations have revealed that almost 60% of all declines should have been approved, and a staggering 15% of US consumers have reported having their attempted purchases falsely declined at one time or another. Why does this happen and why is it of concern to both retailers and customers alike?

It is well-documented that cyber-crime is at an all-time high, and what began with viruses, malware, phishing, and pharming has evolved into a nefarious fraud-riddled arena of increasingly complex, sophisticated, and deceptive scams that are expected to cost businesses a painful $12 billion this year alone. Retailers seeking to limit their exposure to these sorts of attacks have implemented robust anti-fraud filters that are oftentimes overly hermetic in their approach.

Each step of the sales process is examined with some of the most common filters scanning parameters such as customer location, or shipping address, with the most complex among them inspecting up to 500 individual factors. Some companies even set blanket decline conditions based upon country of sales origin. With anti-fraud software programmed to detect mundane details and even the most minute of discrepancies, it is no wonder that legitimate sales are getting caught up in their net. And that net is only expanding.

Since the advent of Covid, online shopping continues to rise, translating into an influx of what are considered “new shoppers” to the online shopping space. Being “new,” they are not recognized as “return customers” by anti-fraud software aimed at identifying risky sales, as there is less data to rely upon for their positive identification and verification purposes. In fact, first-time shoppers at an online store are up to seven times more likely to suffer a false decline on an attempted purchase than a repeat customer.

Another example is with vendors selling high-priced luxury items. Statistically, the rate of declines increases with higher-priced merchandise, as those retailers tend to apply extra-stringent parameters to their anti-fraud filters, yielding more declines than are truly warranted. And who among us hasn’t experienced an embarrassing payment decline while traveling to another city or country? In their quest to protect their online businesses and sales, retailers are effectively harming themselves by embracing protocols that are too discriminatory in practice.

Why does any of this matter? For starters, nobody likes to be falsely accused of something they did not do. A would-be customer may take a false decline very personally, thereby resulting in uncomfortable friction between them and the vendor.

The Costs of False Declines are Staggering

A recent research study revealed that a sobering 33% of American consumers say that they would never shop in a store again that had erroneously declined their purchase. That reflects an immediate sales loss for the retailer, not to mention whatever repeat business that may have transpired over the course of a consumer’s lifetime.

In fact, a documented 40% of customers admit that they would deliberately seek out a retailer’s direct competition to complete the purchase they originally wished to make.

And that’s not all. The age-old adage about the fury of a woman scorned may be applied to a rejected customer, who may take to the phone lines, email, and chat applications to issue complaints, tying up business resources. Or even worse, jilted customers may air their grievances via social media, which can last far longer than the feeling of insult itself, not to mention the untold reputational damage and potential loss of revenue that word of mouth reporting can wreak. While people may talk about the positive experiences they have had, studies show that negative experiences receive almost 50% more attention. What is known as “the negative effect” is, therefore, a real concern and risk to future business.

Statistics demonstrate that false declines are costing businesses up to seventy-five times more than fraud itself, to the tune of almost $120 billion per year. In fact, it can take upwards of twelve approved transactions to recoup the cumulative losses of just one false decline. No business with an online sales component is immune, and with sobering numbers like these, everyone should take notice.

Executive Summary

False declines—legitimate ecommerce transactions incorrectly rejected as fraud—represent one of the largest hidden costs in digital commerce. Multiple industry studies show that the revenue and lifetime value lost to false declines exceeds direct card fraud losses by more than 10×, with some analyses placing the figure closer to 13×. For modern ecommerce operators, reducing false declines is not a tradeoff against fraud prevention; it is a primary driver of growth, trust, and long-term customer value.

This article reframes false declines as a measurable, preventable source of value leakage and explains how NoFraud fraud prevention and Yofi post-purchase intelligence together form an end-to-end system that protects revenue before checkout and compounds value after delivery.

How the Ecommerce Risk Ecosystem Works

Every card-not-present transaction passes through a multi-party risk ecosystem that includes issuing banks, card networks, payment processors, fraud tools, and merchant-defined rules. Each participant optimizes for a different risk threshold, but the customer experiences only one outcome: approval or decline.

Industry data from card networks and payments analysts consistently shows that issuers and merchants often overcorrect for fraud risk, rejecting a significant volume of legitimate transactions in the process. Visa and Mastercard research has repeatedly highlighted false declines as a primary driver of ecommerce abandonment and lost customer trust (Visa Consumer Payment Insights; Mastercard Payment Intelligence).

In this environment:

• Issuing banks prioritize minimizing fraud losses and regulatory exposure.
• Conservative fraud systems amplify issuer caution by rejecting ambiguous but legitimate orders.
• Merchants absorb the full economic impact, including lost revenue, sunk acquisition costs, and future lifetime value.

NoFraud anchors this ecosystem by approving more legitimate transactions with a liability-backed decision model, while Yofi extends intelligence post-purchase to measure customer behavior, intent, and long-term value. Together, they transform risk decisions from isolated gatekeeping into continuous customer intelligence.

Use Cases and Benefits

1. Recovering Immediate Revenue at Checkout

False declines occur at the worst possible moment: after the merchant has already paid to acquire the customer and the customer has demonstrated clear purchase intent. According to industry estimates cited by the Federal Reserve and payments analysts, false declines account for billions in lost ecommerce revenue annually (Federal Reserve Consumer Payments Research).

Reducing false declines directly results in:

• Higher authorization rates without increasing fraud exposure
• Improved conversion on high-value and repeat customers
• Lower cost per acquisition through better funnel efficiency

NoFraud’s approach focuses on approving good orders by default, not by exception, allowing merchants to keep hard-earned conversions and capture revenue that overly rigid systems routinely reject.

2. Preserving Customer Trust and Brand Equity

From the customer’s perspective, a declined transaction is rarely interpreted as a security success. Research from Baymard Institute shows that payment failure is one of the top reasons for cart abandonment, and many customers never attempt to complete the purchase again (Baymard Cart Abandonment Research).

False declines:

• Signal unreliability at the most trust-sensitive moment
• Create frustration or embarrassment for legitimate buyers
• Push customers directly to competitors

By approving legitimate customers and backing decisions with a guarantee, NoFraud reduces friction at checkout while protecting merchants from fraud exposure.

3. Protecting Long-Term Customer Lifetime Value

The largest cost of a false decline is not the lost order—it is the customer relationship that never forms. Industry research from payments analysts consistently shows that first-purchase failure significantly reduces the likelihood of future conversion, even if the customer returns later (McKinsey Payments Insights).

When combined with Yofi post-purchase intelligence, merchants can:

• Connect approval decisions to repeat purchase behavior
• Measure how approved customers perform over time
• Quantify lifetime value recovered through smarter risk decisions