The Elephant in the Room: False Declines Send Customers Packing
**All details have been anonymized.
Alice** was buying furniture for her move to New York City.
After a full day of price comparing, reading reviews, and calculating the right measurements for her new apartment, Alice decided on her purchase. At 5 pm, she ordered a $200 couch and a $300 mattress from a retailer we’ll call FurnitureDiscount. FurnitureDiscount is known for its incomparable low prices. Alice paid for the items with a Bank of America Visa card, with a billing address in Boston and a New York shipping address. The billing and shipping name matched the credit card.
When Alice tried to place her order, she didn’t get a confirmation. Instead, she got a message saying that she would receive an approve/decline notice in 24 hours. The next day, an email from FurnitureDiscount notified Alice that the payment could not be authorized. Contact your issuing bank to learn more, it said. But Alice’s bank representative explained there were no blocks or pending payments, and that the problem must be on the merchant’s end. Frustrated, Alice tried to contact FurnitureDiscount, but their customer service call center was down.
With 3 days to her move, Alice placed an order at another, more expensive merchant – we’ll call it Luxe-Fast. After choosing new products with Luxe-Fast, she was able to promptly check out and received an immediate confirmation of her order. She spent more than she wanted, but at least the ordeal was over.
A couple of hours later, Alice received an email from FurnitureDiscount which said: thank you for your order. Afraid she would be receiving double the furniture, Alice searched for the ‘abort’ button. Hidden within the text of the email was a link to order status, which redirected to a new page, where it was confirmed the order was canceled. Not only was the communication confusing and slow-to-arrive, she didn’t receive any further information from FurnitureDiscount as to why her order was turned away in the first place. Alice won’t be shopping with that brand again.
Home goods online retailers have come a long way, but still have more to go.
Retailers in this space saw online sales soar during the pandemic. Between October and December of 2020, eCommerce furniture and home improvement saw sales growth of 16.2% and 14.1% year over year. As quarantines and social distancing forced people to spend more time at home, it became common to do a bit of redecorating. Savvy furniture retailers stepped up with innovative platforms, from AR tools to expedited shipping options and personalized recommendations – to shift the preference of in-store furniture shopping to online.
Technology played a big part in streamlining the buying experience, but that doesn’t mean that shopping for furniture online is easy – customers, like Alice, often spend hours comparing and planning every color, material, and size available and put a great deal of thought into their purchase. After all, these items are often a sizable investment and difficult to return.
Unfortunately, many merchants have outdated fraud management strategies that can lead to false declines and missed opportunities.
Our internal data estimates that as many as 66% — that’s 2 out of 3 — orders declined by merchants are actually legitimate orders. For a customer who has just spent hours if not days carefully selecting pieces for their home, the effect can be devastating. And for a merchant like FurnitureDiscount, they didn’t only miss out on a sale, they sent a customer straight to the competition.
So what did FurnitureDiscount do wrong?
Alice’s billing address matched the billing address on record at the issuing bank. Her name matched the billing and shipping information. The only mismatch was the Boston billing address and the New York shipping address.
FurnitureDiscount probably flags address mismatch orders for manual review – where an order is far more likely to be declined due to risk aversion and queue overload. But these mismatches are actually very common and aren’t a big risk indicator. In fact, since April 2020, we have seen more safe orders with an address mismatch than fraudulent ones. More than ever, customers have been shopping from new locations, but not updating their billing information. This makes sense as lockdowns and restrictions pushed many people out of cities temporarily. These insights are often missed by rule-based systems, and merchants like FurnitureDiscount end up absorbing the costs.
Rule-based systems also don’t have the benefit of data enrichment. For example, IP address information, including proxy use detection can help determine that, at the very least, the order was placed by someone in the geographic vicinity of the billing address. So although Alice was shipping to New York, she was browsing from a Boston IP, which matched her Boston billing address. And if this isn’t enough – one of the best ways to determine order legitimacy is with behavioral analytics. The customer’s behavior during a shopping session can be a major tip-off. Fraudsters tend to go straight to checkout or opt for high-stake goods. Legitimate customers, especially when it comes to furniture, take their time to shop around, compare goods and are far more likely to visit pages about the returns policy.
No industry or sector is immune to the impact of false declines.
But furniture is a big commitment, and when shoppers are finally ready to take the plunge, a decline can be even more disappointing. Unfortunately, Alice’s story is one of many similar experiences. In Alice’s case, the 24-hour wait to know the status of her order was only exacerbated by unclear communication that had her spend unnecessary time calling her bank and customer service. All of this could’ve been avoided if she had received an accurate decision from the start. Today, Alice is a loyal customer of Luxe-Fast and has since purchased from them again, and again.