As a software company committed to your customers, you want to do everything you can to set them up for success.
For many of your customers, success begins and ends with a seamless checkout experience, and one of the biggest sources of friction is false declines. Here are a few industry statistics from PYMNTS Intelligence to demonstrate what we mean.
- 11% of digital transactions in the US are falsely declined.
- 70% of falsely declined transactions are difficult to recover.
- 60% of merchants (your software customers) cited adverse effects on their company’s reputation, staff workload, and expenses associated with tracking and resolving failed payments.
Fortunately, there are solutions you can offer your customers to help avoid these payment pitfalls. Throughout this blog, we delve into false declines through the lens of a software company, helping you answer top of mind questions.
What are false declines?
A false decline is when a legitimate transaction is rejected or declined by a bank or payment processor.
What causes a false decline?
Financial institutions and payment processors rely on systems to detect and prevent fraud. Sometimes they can be overly sensitive and cause payment rejections or declines. A false decline can happen for a myriad of reasons so let’s take a closer look at some of the most common reasons they happen. Understanding the reasons they can happen will help you and your customers understand what measures and management strategies you can put in place to avoid them in the future.
- Inconsistent spending: Banks and payment processors are constantly monitoring the spending patterns of their customers looking for inconsistencies, unusually large purchases, or a series of rapid transactions. Transactions that stray from a customer’s historical spending behavior may alert a monitoring system of potential fraud, and in some cases, can lead to a false decline.
- Exceeding transaction limits: Most financial accounts have a transactional limit set by the institution to mitigate potential fraud losses. If a cardholder tries to make a purchase and exceeds their transaction limits it may be declined.
- Incorrect information: When a purchase is processed, customer data must be verified, including billing address, card security code, and expiration date. If there is a discrepancy between the entered information and what is on file with the bank, the transaction may be declined.
- Expired cards or accounts: If a customer attempts to use an expired credit card or account their transaction will likely be declined.
- Technical errors: While technology is becoming more sophisticated every day, payment processing is complex, and sometimes technical errors can take place resulting in a false decline.
- Travel: Like monitoring for unusual spending patterns, transactions made from locations that are far from a cardholder’s home or in another country may be flagged as fraudulent, resulting in a false decline if the customer is in fact overseas or in a different region of the country.
- Sensitive fraud detection: Some fraud detection systems can be overly sensitive, flagging legit purchases as fraud, resulting in false declines.
How do false declines impact your customers?
False declines can cause problems for your customers, including increased operational costs, reputational damage, and revenue loss.
According to a recent report by PYMNTS Intelligence about fraud management and false declines, 70% of falsely declined transactions are difficult for businesses to recover. This statistic is further validated by an article in The Fintech Times sharing that 42% of shoppers claim that experiencing a false decline would lose the company they are trying to purchase from their business.
How we can help your customers mitigate false declines?
As you can see, a false decline can have a resounding impact on any business. We're is committed to helping software companies create frictionless experiences for their customers and, in turn, their cardholders through our suite of tokenization solutions.
Tokens swap a card’s primary account number and sensitive information with secure data. Network tokens are provisioned by card networks and help streamline card authorization. Through a strategic payment partnership, software companies can access tools that manage tokens for card-not-present and recurring card-not-present transactions to help increase authorization rates, decrease false declines, and optimize the checkout experience.
By creating a frictionless shopping experience with tokenization, software companies can help their customers optimize the checkout experience for consumers and possibly reduce interchange fees in the process. All of this and more is possible for your platform.