4 Ways to Protect Your Business from False Declines

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Unfortunately, fraud is an inherent part of e-commerce. In fact, according to the Better Business Bureau, online buying scams are the biggest type of consumer fraud in recent years. To that end, businesses are taking a more aggressive stance when it comes to preventing it. However, it’s opening businesses up to an even bigger problem: false declines.

False declines are valid credit card transactions that have been wrongly rejected. In an effort to protect themselves from fraud, businesses end up clamping down and rejecting transactions that are perfectly legitimate—and it happens a lot. In fact, according to a report from Business Insider, “False declines are becoming a costlier problem than actual fraud.” According to their research, in the US alone, e-commerce merchants are set to lose $8.6 billion in false declines. That’s $2 billion more than the estimated $6.5 billion in losses due to fraud.

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More often than not, there are perfectly legitimate reasons why there are mismatches to these details.

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For example, an online shopper purchasing a gift inputs their own billing address and the recipient’s home address in the shipping details. Overseas shoppers will likely be using foreign credit cards and a reshipper to deliver their purchases, especially if the retailer doesn’t deliver to their country. Whatever the case, the important thing to note is that across all transactions made, a significant chunk are wrongfully declined for being fraudulent.

So what can you do about it?

False declines Prevent fraud Fraud losses

$8.6

$6.5

$6

Estimated US e-commerce merchant fraud losses, prevention and false declines.2016, Billions ($)

Fraud security systems are designed to cross-check data from the customers, including billing and shipping addresses, IP address used and credit card information. In a lot of cases, inconsistent information from any of these elements raises red flags, causing a decline.

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1There could be multiple reasons why your fraud security system is declining transactions. The important thing is to understand what parameters your system uses to classify something as high-risk. For instance, most systems are automatically designed to decline purchases that don’t follow a regular customer’s purchasing patterns. Inconsistencies in billing and shipping addresses are also a common red flag, as are cards originating from specific countries. But what if your product is considered a great gift option? Or if you have a brand that has a strong global following?

Optimize your fraud detection and security settings based on what you know about your audience and their buying patterns. This should help increase the success rate of future transactions.

Get to know your audience and optimize your system based on their buying patterns

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Don’t base your security parameters on assumptions2

Certain security settings are based on general assumptions. For example, fraud security systems could flag cards issued from specific countries because fraudulent activity is reportedly more in those regions. However, just because the card being used originated from these countries doesn’t mean it’s fraudulent.

Be sure to fine tune your security measures based on strong research and data.

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3Learning the context behind a declined transaction can provide better insight into why it was declined by your fraud detection system. Sometimes, however, simply relying on automated systems won’t give you the full picture. When in doubt, it’s always best to get in touch with your customer.

If an unusually large purchase was made from your store and it’s a first-time buyer, a simple phone call to double check that the card wasn’t stolen is worth the effort. If there are conflicting billing and shipping details, it could simply be because the shopper wanted it delivered to their office instead of their home, or they’re sending it as a gift.

Supplement automated fraud security efforts

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False declines are often a result of implementing a one-size-fits-all approach to merchant security. This will often lead to unreasonably strict filters that then lead to legitimate transactions being flagged as fraudulent.

Address this by making sure your fraud prevention system is dynamic and flexible so you can easily tailor it to your specific needs.

Always choose a flexible and tailored fraud protection system for your business4

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For options, get in touch with us. Vesta offers scalable protection payment solutions and patented fraud protection services that can be tailored to your needs. We focus on protecting your revenue from chargebacks and fraud so you can focus on your company’s strategic growth.

Get in TouchFind out How

Vesta protects your business from False-Declines

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