In 2019 US retailers spent more than $33B on digital advertising – a 20% increase from the previous year. Merchants make this investment to drive traffic to their websites and keep online shoppers engaged as they move along the funnel to checkout. Eventually, only a small percentage of site visitors make it all the way through and click the “buy” button. To make matters worse, many of those shoppers who do click “buy” end up being declined at checkout. The consequence is lost sales and offended customers who might never shop with the declining merchants again.
In this blog post, I will review the main reasons why high intent shoppers are turned away and what merchants can do to effectively convert them into buyers.
Why are customers getting declined?
Of all shoppers who visit a website, less than 50% view a specific product. Of them, less than a third actually add a product to the cart, and only a select few – about 3% of all visitors – proceed to checkout. These are high intent customers – they’ve made the decision, and they want to buy.
Surprisingly, many of those who hit the “buy” button are getting declined, despite the fact that they are placed by legitimate customers who can afford the purchase. These declines are the result of fraud prevention filters and decisions by issuing banks. The reasons vary – from unusual shopping patterns to data mismatches.
Some shoppers drop-off because of friction. This could be the result of an unnecessary verification process that is too cumbersome or time-consuming. For example, customers might be asked to verify their identity via email, text message, or 3-D Secure.
Strict and outdated rule-based fraud prevention solutions are behind most wrongly-declined transactions. For example, certain fraud solutions block entire regions or automatically decline all orders with mismatched billing and shipping addresses.
Other shoppers are getting declined by credit card issuing banks due to processing systems that are often too risk-averse and not conversion-driven. These are orders that follow a non-traditional shopping pattern, like high-value orders, large quantity orders, or just orders that come across as unusual. For example, a senior citizen buying 20 units of the newest iPhone, or a customer who has been buying low-value items for years who suddenly purchased $10.000-worth of gold.
And then there’s friction. For merchants, balancing fraud-prevention and frictionless customer experience is no small feat. As merchants optimize mobile sites and apps, or introduce new omni-channel flows, they inadvertently create new payment funnel vulnerabilities of which fraudsters can take advantage. But asking shoppers for additional verification can make checkout unnecessarily complicated. As a result, these shoppers who already chose to buy a product may quit without being converted into paying customers. Even worse, they may be going to competitors who have a smoother checkout flow.
What can merchants do about it?
To counteract friction – or stop relying on it – merchants need a system whose decisions they can trust, with adequate technology to accurately identify the customer, their device, and their IP. Meaning, the system should ensure that the shopping story behind the customer makes sense. Merchant then won’t need to rely on friction or worry about false declines. A fraud prevention solution that is based on machine-learning, rather than strict rules, can tackle these problems by relying less on single data points that may be perceived as risky. Instead, it can determine risk factors based on the customers’ shopping behavior and evolving fraud patterns. If the ML model is well trained it can quickly adapt to changes in shopping and fraud trends, no matter what device or geography they come from – to better discern legitimate orders from fraudulent orders.
There are various reasons—some clear and some more opaque—why issuing banks decline customers. Merchants, on their end, can address bank-led declines and recoup some of this lost revenue by offering alternative payment methods that circumvent outdated bank systems. That’s why merchants should adopt a product that leverages fraud-detection expertise to recoup such lost revenue.
Boost your revenue
With the amount of time, resources, and effort it takes merchants to drive traffic to their sites, they shouldn’t have to take on the additional cost of declining legitimate customers. Approving legitimate orders and minimizing false declines becomes easier when partnering with a fraud prevention solution that can review huge swaths of data in real-time. This kind of fraud prevention solution can leverage behavioral analytics and rely on an extensive network of cross-industry data-linking to identify consumers and their shopping history. Thanks to this innovative technology, merchants can drive approval rates and grow their bottom line as well as fully concentrate on what they know best: selling online and making customers happy. To learn more check out our resource center or request a personal demo of our solutions.