There are two very distinct shoppers inside every one of us – the boutique, in-person shopper and the online shopper. The boutique shopper makes the effort to stand in line to purchase clothes or food, and is willing to deal with crowds to find the special item they want. In this context, having to wait a few seconds for a credit card transaction to be approved is totally acceptable and in-line with the expectations of a customer’s shopping experience. People fundamentally agree to wait because the overall card experience tends to be simple and seamless, whether using contact or contactless. When shoppers enter their PIN code correctly for amounts over the contactless limit, they pretty much expect no surprises – in fact, it’s very rare to experience a transaction decline in-store.
The online shopper is very different: if they have too many buttons to click or too many steps to complete in order to make a payment over the internet, they are likely to abandon their shopping cart. According to a Barclaycard survey, British shoppers abandon online baskets worth almost £30 a month, potentially resulting in more than £18bn in lost sales every year. Filling in the Name of the Card Holder, PAN (primary account number), CVV, Expiry Date, Billing Address if different from the shipping address, you name it, does not amount to an all-round pleasant experience. Not to mention the “let’s do it again” effect of typos.
We use the same payment card to shop both at physical stores and online. Still, online shoppers are motivated individuals, often agreeing to fill all the forms it takes to get their hands on a bargain or a special product. But then, assuming they provided all their card details correctly, there is potentially one more bad surprise waiting for them: a “False Decline” despite perfectly accurate card information. In fact, 1 in 15 cardholders experienced a fraud-related false positive in the past 12 months, and those who shop online frequently have an almost triple risk of false-positive declines. According to Javelin Market research, we have all experienced this at least once in the last two years. Even worse, for Millennials that tend to have more sensitive profiles from a risk-management perspective, 25% of them have experienced at least one False Decline in the last 12 months. And what do you do when you get a False Decline after minutes of filling forms? You lose your patience and never visit that merchant site ever again! For online merchants, not only do false declines leave money on the table, they also put merchants’ relationships with their customers at risk. In fact, between 33% and 40% of consumers say they won’t shop again with a merchant that falsely rejects their order.
How can False Decline possibly happen?
It typically happens when the card issuer’s risk management software has rated the context of a given transaction as suspicious, and therefore declines it. Cards issuers are constantly monitoring usage patterns to detect incidents of fraud such as skimmed or stolen cards. They also reject transactions if, for any reason, the data set is incomplete. The bottom line is that there is always a possibility, small but not negligible, for the cardholder to experience this very frustrating scenario. Merchants have a vested interest to keep this from happening and focus on improving their approval rates.
For online merchants, a false transaction decline not only means a highly probable direct revenue loss, it also tends to make the customer lifetime value considerably shrink. It takes a lot to engage with customers, drive them to your website, convert traffic into sales and retain buyers. After such marketing and customer service efforts, no business wants to give up their investment return just because of one bad check out experience.
What is the solution for this?
EMV Tokenization for Cards on File! The merchant-bound EMV Token replacing the physical card credential during the transaction authorization affords a superior level of card assurance and cardholder verification. It comes with a dynamic transaction cryptogram, user authentication details and several additional risk management parameters for payment networks and issuers to accurately assess if the payment is genuine or fraudulent. With more transaction insights and enhanced fraud management False Declines get reduced drastically and are no longer a blocking point between online merchants and their customers. EMV Tokenization is a game-changer for checkouts in the eCommerce sector, find out more in our newly released whitepaper.
That’s part of the many benefits EMV Tokenization for Card on File brings to the digital commerce ecosystem. In addition to stronger security against data breaches and Account Take Over and better registered account renewals management, the terrible experience of False Declines is becoming a thing of the past.