Why Payment Declines Are The Reason For Your Low Conversion Rate
“The customer is always right” is a timeless tenet of customer service policies. Even though we all know that not every customer is right all the time, we understand that this phrase is meant to work towards the key to merchant success: customer satisfaction and loyalty.
Keeping customers coming back for more establishes a strong brand reputation that can significantly cut business expenses and generate profits through increased lifetime value. Acquiring a new customer is five times as expensive as retaining an existing one. Plus, returning customers are more likely to convert at checkout than a new shopper. Increasing customer retention by just 5% can increase profits by at least 25%.
To keep customers happy, merchants must do everything possible to make their shopping experience seamless and delightful. This is becoming increasingly difficult to achieve as customers are demanding more than ever of today’s brands and retailers. Any lapse in order confirmation, lack of desired payment option or delayed fulfillment can lead to checkout abandonment, chargeback, or loss of customer loyalty.
Why Customer Patience is Thinning
Going back to our initial adage, customers have been conditioned to view themselves as the authority on how merchants should operate their business. They expect companies to provide better quality products and services at cheaper prices with instant access. Since the invention of smartphones, everyone has access to everything in the palm of their hands. Consumers have become impatient, with expectations of delivery diminishing to a one-hour window from the 2-day or even one-week standard. Waiting more than a couple of seconds to receive an order confirmation can decrease consumer confidence in the checkout experience, which can tarnish their attitude towards that merchant. Customers don’t want to wait and usually don’t need to. With endless alternatives on the market, customers can easily go somewhere else to get what they need, and with brand loyalty decreasing, they don’t even think twice about making that decision.
Impact of Payment Declines on Customer Satisfaction
Given that consumer patience is wearing thin, merchants can’t afford to lose customers to things that are seemingly beyond their control. Payment declines are a leading cause of customer friction and it’s estimated that nearly $600 billion in global eCommerce revenue was lost to payment declines in 2020. A payment decline occurs during checkout and is often the result of an issuing bank or payment gateway deciding that the customer in question is either fraudulent or does not have the proper funds to cover the transaction. Merchants usually receive little to no reasoning for why their customers are declined during this step, and it’s costing them loyal customers and potential revenue. According to our research, 40% of customers abandon their cart after the first payment decline.
While some customers will just abandon their purchase after experiencing a payment decline, others will reach out to customer service for answers. When rates of payment declines are high, customer service teams can be overburdened, which delays response time. 90% of customers rate receiving an immediate response as very important when engaging with a customer support team. Another two-thirds of consumers report that the most frustrating aspect of customer service is waiting or having to explain the same information to multiple people. Since the payment decline is often out of the merchant’s control, there is little that the customer service team will be able to do to remedy the situation, which could lead to further customer frustration. By allowing customers to go this route, merchants could be risking millions of dollars in lost revenue.
As if these pain points weren’t enough, payment declines can lead to a tainted brand reputation. When customers get declined, the majority will blame the merchant, not the issuer, who is usually the one enforcing the decline. Recent Riskified studies show that 14% of consumers will shop with a competitor instead after experiencing a payment decline. As stated earlier, losing an existing customer leaves significantly more revenue on the table. What can merchants do to prevent payment declines from becoming such an impediment to online conversion and customer satisfaction?
There is little that can be done to capture lost revenue and combat payment inefficiencies once a customer has experienced a payment authorization failure. Since declines are bound to happen, it is essential for merchants to have a real-time solution that enables declined customers to complete their online purchases without creating too much extra friction. With Deco, legitimate shoppers are identified and offered the option to continue checking out with Deco immediately following a payment decline. According to a PYMNTS report, 80% of consumers say that they would rather receive a prompt to verify their transaction than experience a decline. Deco provides a frictionless solution to overturning decline decisions and retaining satisfied customers. Get in touch with our team to learn how Deco can immediately convert 10-20% of declines into revenue and keep customers coming back for more.