Turning Away Good Customers Hurts Issuers
As ecommerce fraud rises, it’s no surprise that both online merchants and issuers are starting to batten down the hatches to stop more of it and reduce losses. The unintended consequences? With tighter fraud rules and screening comes the risk of declining good customers (called ‘false declines’ or ‘false positives’) – that can have a big impact on ecommerce revenues and brand reputations.
You know it’s a mainstream issue when a major daily like USA Today is on the story and highlighting the impact on consumers. According to the story, 27% of all U.S. cardholders have experienced false declines, and 48% are concerned about it. While lost sales, customer insults and lower card acceptance are major pain points for online merchants, the impact on card issuers is equally damaging.
“When a consumer is rejected, card issuers are often the first line of customer contact and many consumers blame issuers for being turned away,” says Trevor Clarke, Ethoca Co-Founder and EVP of Card Issuer Relations. “Worse yet, many merchants may encourage the cardholder to use a competitor’s credit card and attempt to make the purchase a second time. Again, the issuer loses out: consumers lose confidence and trust in the card brand, directly impacting card usage and the fees that issuers gain from it.”
The big problem is the lack of real-time merchant-issuer collaboration during the approval and fraud screening process. Since merchants and issuers are each running their own fraud screening tools, it’s entirely possible that an issuer will authorize a transaction that a merchant has flagged in their order reject queue. How do you bridge this divide without engaging in a real-time conversation with the cardholder to provide confirmation? The short answer: before Ethoca, you couldn’t.
It’s a massive – and completely avoidable – issue that Ethoca’s collaboration-based network and innovations are solving for issuers. During Ethoca’s recent breakthrough trial with issuers and merchants, in 74% of cases merchants accurately detected fraud through their fraud screening tools. A large percentage of that – approximately 30% – is fraud the issuer had not yet identified. The reason this number is so high is that, before now, there was no effective way for merchants and issuers to benefit from each other’s cardholder intelligence to increase transaction acceptance and stop more fraud.
But with Ethoca as the pivotal link between these two often isolated worlds, cardholders no longer have to pay the price of false declines. Through their direct relationships with the cardholder and participation in Ethoca’s network, issuers have a win-win on their hands. They can not only confirm if falsely rejected orders are actually good and help merchants save them – they can also confirm if their own issuer fraud screening tools made the right authorization decision in the first place. Issuers will stand to benefit from not only more transaction volume and stronger customer relationships, but also the ability to identify fraudulent accounts faster and stem further losses.
When consumers get declined less often, it drives more transaction acceptance for issuers and protects the value of their card brands. Through Ethoca’s rapidly expanding network and upcoming transaction acceptance innovations, issuers will be ideally positioned to help take away the consumer pain that comes from false declines and increase card usage.
If you would like to learn more about Ethoca’s innovations and how they can help you accept more transactions and stop more fraud, reach out to us at email@example.com.