Shoppers have flooded online shopping sites in response to the pandemic, and now stores are expecting a further bonanza of e-commerce sales as consumers flock to sites for Black Friday and Cyber Monday deals. But while these two annual shopping extravaganzas will boost sales, they also are likely to have a big downside: false declines.
Legitimate transactions rejected on suspicion of fraud will total $682 million among U.S. merchants this Friday and the following Monday, according to estimates released this week by the consultancy CMSPi.
“This is a massive issue with customers going online on Cyber Monday,” says Toby McFarlane, head of e-commerce for CMSPi, in a statement. “Retailers are missing out on a substantial amount of sales and risk losing customers if their payment is declined. In this competitive retail environment, it is more important than ever for merchants and the supply chain to work together more productively to ensure all non-fraudulent customer payments are approved.”
A false decline, or false positive, occurs when fraud-detection technology wrongly identifies a legitimate transaction as fraudulent, leading merchants to reject the sale. Such technology has improved in recent years with the arrival of more-sensitive detection, as well as standards like EMV 3-D Secure, based on specifications from the global standards body EMVCo.
But the problem can grow worse when systems are flooded with new sales, particularly from consumers who may not have shopped certain stores or marketplaces before. The false-decline problem plagues all online sellers, but digital-content merchants are especially vulnerable because of the need to send product out the door to buyers instantaneously.
Merchants can prompt for an alternative payment method when a decline happens, but many fear the customer will simply give up and abandon the sale.
For Friday, CMSPi estimates the volume of false declines will total $314 million, while Cyber Monday’s toll will come to $368 million.