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 payment experience, and one of the biggest sources of friction is false declines. Here are a few industry statistics from to demonstrate what we mean.
27% of online shoppers in APAC faced at least one legitimate transaction being declined in a year. This rises to 36% for multiple false declines. 1
Card-not-present (CNP) fraud on Australian-issued cards was A$325 m in 2023 (A$1.06 per $1 k spent domestically) — the risk backdrop that pushes issuers and merchants toward tighter rules 2
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 like:
- What are false declines?
- What causes a false decline?
- How does a high rate of false declines impact small businesses?
- How can we help software companies optimise the checkout experience?
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 information entered 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. In fact, 83% of shoppers who experienced a false decline said they would not return to that retailer.3
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 committed to helping software companies create frictionless experiences for their customers and, in turn, their cardholders through our suite of tokenisation 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 authorisation. 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 optimise the checkout experience.
By creating a frictionless shopping experience with tokenisation, 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.
Learn more about tokenisation strategies to boost your software performance.
1 Ecommerce False Declines and Consumer Behavior Report, Clear Sale
2 Australian Payment Fraud Report 2024, Australian Payments Network
3 Ecommerce False Declines and Consumer Behavior Report, Clear Sale