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Merchants Struggling With False Payment Declines in Online Transactions; Here's What Can Be Done

PYMNTS Intelligence research recently found that many merchants are simply asking consumers to reattempt payment using the same payment method. 
Cover Image Source: Failed credit card payments can lead to customer loss (representative image) | Getty Images | Anna Shvets
Cover Image Source: Failed credit card payments can lead to customer loss (representative image) | Getty Images | Anna Shvets

False payment declines are a huge problem that needs to be addressed right away. A false payment decline is a legitimate card transaction that is denied either by the bank or the merchant as it is mistakenly considered fraud. As a result, when a consumer abandons the shopping cart, it is lost sales and hardly ever regained by the merchant. To counter false declines and prevent losses, PYMNTS Intelligence research recently surveyed 300 respondents and found that 8 in 10 merchants are simply asking consumers to reattempt payment using the same payment method. 

 credit and debit cards |  Getty Images | Matt Cardy
Credit and debit cards | Getty Images | Matt Cardy

In the report, "The Role of Fraud Screening in Minimizing Failed Payments," a PYMNTS Intelligence and Nuvei collaboration talked about how customers have been encouraged to reattempt purchases using the same payment methods when a given failed payment is flagged as potentially fraudulent. It was also found that merchants that collaborate a lot with payment service providers are most likely to do this, with 85% of these merchants engaging in this practice vs 70% of those with no PSP collaboration. Merchants are trying this way in hopes of regaining a part of their lost sales which have caused revenue losses for them. In an interview, Elizabeth Graham, the product manager at Entersekt noted that false rejections are risky for merchants who are trying to maintain their consumer loyalty. 


"False declines are such a problem in the industry that 80% of merchants use this measure as a key metric within the organization," Graham told PYMNTS. In another interview with PYMNTS, FlexPay CEO, Darryl Hicks talked about the importance of addressing failed payments. He talked about how one can get massive, outsized and sometimes even unexpected gains from focusing on this and understanding how much this payments problem, what seems like a transactional problem, is significantly tied to the financial performance of your business.

Shopping Cart and Laptop | Karolina Grabowska | Pexels
Shopping cart and laptop (representative image)| Karolina Grabowska | Pexels

According to another study by PYMNTS, around 11% of U.S. firms experience failed payments on online sales. Apart from the direct loss of sales for the merchants, they also recognize that false declines affect customer satisfaction as 47% of online players indicated a negative impact on sales. It was also reported that 58% of companies with revenues between $100 million and $250 million are affected.

Graham also talked about how false declines can also affect consumer loyalty, "It’s incredibly frustrating and causes consumers to feel not only that it’s a nuisance — because they cannot buy the product they want to — but also almost like there’s been a personal insult," she said. Another issue is that in most cases it's almost impossible to tell whether the failure in the transaction was stored to the bank or the merchant or simply due to any technical glitch with the credit card. As per data, 8 in 10 retailers said they found it difficult to determine the cause of the failed transaction. 


Graham also talks about how some of this can be combated with technology. "We can mitigate some of the challenges that we experience with false declines as open banking payments integrate with existing options such as credit cards, debit cards, and digital transfer services typically offered by eCommerce retailers at checkout," Graham said.