In the digital payments industry, there’s often a heightened sense of urgency when it comes to fraud prevention, with good reason. If it’s not taken care of, fraud can create serious problems for online merchants, issuing banks, consumers and other organizations in this industry.
But when someone commits fraud against one of these institutions, it’s often a one-time occurrence. Most of the time, it’s very costly, however, one fraudulent act doesn’t typically have a lot of long-term ramifications.
Everyone in this industry is focused on fraud, however, there’s a more pervasive issue in the digital commerce community right now. Over the last couple years, false declines have emerged as a serious problem for all the players in this industry.
A false decline occurs when a legitimate consumer is wrongly declined during a transaction due to suspected fraud. This can happen for several different reasons, including rigid fraud prevention systems, a lack of strong, useful data and outdated authentication methods.
Grasping the reasoning behind a false decline is vital, however, the long-term effects from it are even more important, and could be potentially damaging.
Unlike fraud, false declines can have a long-lasting negative effect on an organization’s consumer base and revenue. Additionally, the aftershock of a fraudulent event is relatively short and noticeable but, with false declines, the effects are often hidden and drawn out, to the point that merchants and banks may not realize they’re losing substantial parts of their consumer base until it’s too late.
When a consumer is falsely declined during an online transaction, they will likely take their business elsewhere, to another online site, and never return to the original merchant. In today’s fast-moving digital world where consumers have limitless options, there’s little room for error. If a consumer encounters friction during their transaction, they will go somewhere else.
Alternatively, if a consumer is falsely declined while attempting to enter their card into an app that will automatically charge the card every time they use that app, it could spell trouble for that specific issuing bank. Since the consumer will likely use the app a lot, the issuer will have lost out on an incalculable amount of future revenue.
Cardinal is in a unique position in the digital payments space. For many years, Cardinal has worked with both online merchants and issuing banks to help bridge the information gap between these two institutions, to decrease incidences of fraud and false declines. With a singular focus on authentication, Cardinal has developed the Cardinal Authentication Network. Through constant and imaginative innovation, this network has delivered remarkable results for merchants and issuers.