With year-over-year growth for desktop and mobile commerce continuing to clip along at 8% and 70% respectively, ecommerce sales are showing no signs of stagnating. But sustaining strong sales growth also requires overcoming potential barriers - one of the most prominent being credit card declines.
While some declined payments protect your company against fraudulent activity and costly chargebacks, one-third of online credit card declines are both unnecessary and preventable. The financial ramifications of these blocked sales total $40 billion each year in the U.S. alone and when it comes to recurring payments, a change of 1% in declines can mean a difference of millions of dollars to your bottom line.
With that in mind, here are five ways you can minimize and mitigate credit card declines to improve your bottom line
At present, the cardholder billing address (AVS) and security code (CVV) are often not required, giving online merchants the ability to submit and receive approvals without including this customer information.
But for one-time sales, capturing a valid CVV and AVS will not only protect you against fraudulent transactions but will also provide additional information to the issuing bank, increasing the probability of a transaction approval. While, ultimately, the card issuer is still capable of declining the transaction, it is imperative online companies provide the best possible customer information to increase the validity of each order and minimize card issuer side declines.
Whether it’s a new address or a new credit card, keeping this information up-to-date is one of the best ways to prevent avoidable credit card declines. This can be done through automatic email prompts to your customers to update their information themselves or you can use an ecommerce platform with an automatic updater function.
Luckily, credit card issuers also have a strong interest in approving valid transactions and, as a result, offer a variety of tools to help improve authorizations and protect card not present revenue.
MasterCard SecureCode and Verified by Visa are two cardholder authentication tools which are comparable to the chip and pin security measures seen in card present transactions. Using these tools, customers are prompted to enter a pin or passcode when making an online purchase, authenticating their identity.
Similar to capturing the CVV and AVS, this measure helps to validate customer orders and minimize card issuer side declines. If you pursue this option, make sure you clearly explain to your customers how these authentication tools are set up and why they’re needed, as this will reduce friction.
Some declines occur because card holders have insuffient funds, they’ve exceeded their daily limit or another similar reason. In these cases, dunning management practices can help recover the payment by re-trying later based on the reason for the decline.
In some cases, ‘card declined by processor’ errors will be unavoidable in which case you can offer your customers alternatives. These can include using another credit card, an alternative payment method or a combination of both.
Subsequent to the decline, you can pre-populate relevant customer data into a new checkout form and request an alternative credit card as a another option. The disadvantage here lies in whether the customer’s second credit card is issued by the same bank or linked to the same account, making it susceptible to the same reason for declines.
It is paramount that ecommerce merchants aim to differentiate fraudulent transactions from preventable credit card declines, as one in ten online shoppers will select a different online merchant and 14% will abandon their purchase altogether when faced with a blocked purchase.
While card issuer declines, or hard declines, often require action on behalf of the issuing bank or the cardholder, making authorization less likely with subsequent retries, there are many steps merchants can take to maximize retention and increase the probability of transaction approvals. By exercising the strategies above, online merchants can improve their bottom line in card-not-present transactions.
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