Ecommerce merchants lose customers for all sorts of reasons, but one of the most pressing is a reason few are aware of: payment authorization failures. About 1 in every 7 eCommerce dollars is declined during payment authorization. Riskified data also reveals that up to 72% of these orders are placed by legitimate customers who can afford to make the purchase. In addition to alienating good customers, these declines leave $600 billion in global revenue on the table every year.
Our latest guide, Overcoming Payment Authorization Failures, explores the reasons many merchants are unable to effectively manage this problem, and lists actions merchants can take to recoup lost revenue. It includes insights on why payment failures are difficult to measure, where they are most likely to occur, and which customers are at a higher risk of decline. Here are some of the report’s key findings:
Why Payment Declines Are Difficult to Measure
One of the reasons many retailers aren’t aware of the payment authorization failures problem is lack of transparency. Payment and banking systems are black boxes, and merchants do not have insight into why a specific purchase was not authorized. Even though payment gateways and issuing banks will provide payment decline codes when a transaction fails authorization, the codes are too vague to be of any value. Riskified found that about 70% of the time, the decline code provided by the declining entity is generic and provides no reason for the decision. This lack of transparency makes it extremely challenging for businesses to understand the scope of their payment decline problem – namely how many of their eCommerce orders are needlessly declined.
Where Failures Are Most Likely to Occur
Payment authorization failures are more common in purchases of expensive items, because shoppers are more likely to surpass their credit limits and issuers are wary of fraud. That’s why younger shoppers get declined more often, since it’s easier to go over their spending limit when they have a lower threshold. Issuers can also be particularly squeamish about orders placed with foreign payment methods. As a result, travelers are often targeted for payment authorization failures because shopping from a different geographic region looks risky. When it comes to industries, Riskified has found that many big-ticket fashion retailers experience payment authorization failures in more than 10% of their eCommerce orders and OTAs can experience double or even triple the average payment decline rate.
How Merchants Can Fight Back
The payment authorization process is clearly inefficient and lacks transparency. But on top of that, we have found that most merchants aren’t following best practices to mitigate the problem. Even though merchants can’t control an issuing bank’s rules on payment declines, they can give shoppers the ability to overcome the decline after the bank has unauthorized the purchase. Riskified’s latest product, Deco, uses machine-learning models to identify legitimate shoppers whose payments are declined during the authorization process and offers them an alternative path to checkout. With Deco, payment-declined shoppers complete their purchase immediately, friction-free, and at your store, which prevents them from shopping with a competitor instead.
Download the Report
These are just some of the insights included in our latest report on payment authorization failures. For more insights and revenue recouping strategies, download a complimentary copy of the full report.