$600 Billion Lost to Payment Declines Last Year, According to Analysis from Digital Commerce Fraud Prevention Fintech Riskified

The team at Riskified, provider of an “all-in-one” e-commerce fraud prevention solution and chargeback protection service for “high volume and enterprise merchants,” notes that digital commerce businesses spend most of their budget on “customer acquisition, focusing on getting consumers to hit the ‘buy’ button.”

While not being able to reach the appropriate audiences in the rght channel can be one the biggest factors leading to acquisition leakage, “another looming threat, the problem of payment declines, is often overlooked,” the Riskified team reveals.

They cited a report from the Economist which reveals that “1 in every 7 eCommerce dollars are declined during payment authorization.” Applying that to last year’s global digital commerce revenue, the Riskified team “estimates that roughly $600 billion were lost to payment declines in 2020.”

Riskified‘s blog post noted:

“Aside from massive losses in potential revenue, payment declines create massive friction between merchants and their customers. When a consumer gets declined, the majority will blame the merchant, not the issuer, which is usually the one enforcing the decline. Recent Riskified studies show that 28% of customers will completely abandon a purchase after experiencing a payment decline and another 14% will shop with a competitor instead. This creates negative word of mouth and endangers the merchant’s opportunity to create a loyal connection with the declined customer.”

All digital or online commerce purchases need to be authorized by various financial institutions before a customer can actually carry out a transaction, including the payment gateway, the payment processor or acquirer, and the card issuer, the Riskified team explained.

They added that the “unwieldy nature” of the payment authorization process makes it challengng to accurately identify which of these financial institutions may be responsible for the payment declines, and “why they decided to decline,” Riskified’s blog added. It also mentioned that customers may get declined “if the card has surpassed its credit limit, if there is a technical issue with the card, or if the transaction is suspected of fraud.”

Although these might be legitimate concerns, if customers are “wrongfully mistaken” for these issues, that can be “extremely costly to merchants who have no control over the outcome of these decisions,” Riskified claims while pointing out that research indicates that “72% of declined orders are placed by legitimate customers who can afford to make the purchase.”

Going on to explain what can be done in these situations, Riskified noted that merchants may have several options when it comes to “pre-empting declines from occurring earlier in the shopping experience, but there is little that can be done to capture lost revenue and combat payment inefficiencies once the issuer or gateway has declined a transaction.”

Riskified’s blog post concluded:

“There is no such thing as 100% authorization success; declines are bound to happen. That’s why it is essential for merchants to have a real-time solution that enables declined customers to complete their online purchases. Riskified’s Deco is the only proactive recovery solution at the point of payment decline.”

Riskified claims that if you get in touch with their team, they can help you “immediately convert 10-20% of failed payments into revenue generating approvals.”

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