Stop Insulting Your Customers with False Positives

Online commerce continues to boom, with sales of physical goods projected to reach close to $600 billion in 2024. Of course, with this surge comes large volumes of transactions – some will be valid, but others will be fraudulent. Companies justifiably implement rigorous anti-fraud measures to keep scammers out, but in the process, mistakenly turn away legitimate customers, which is known in the payments industry as a “customer insult” or “false positive.”

When customer experience is paramount, businesses cannot afford to turn away legitimate transactions and risk putting revenue on the line. In fact, a PwC study found that just one negative customer experience will send consumers running for the proverbial exits. 

We recently polled 1,000 consumers in the U.S. ages 18 and above* and discovered that different types of friction – from declined payments to extra security measures at checkout – can cause brand abandonment.

Every purchase is at risk.

Our survey found that 36% of consumers have had a transaction falsely declined due to suspected fraud. And it doesn’t matter if a consumer has an established relationship with a brand, or is shopping with them for the first time — either way, approximately three-quarters of those surveyed have had their transactions declined, whether by a brand they’ve purchased from previously or in a first attempted online purchase with a business. 

Declined? Time to move on.

According to CNP’s 2018 Fraud Operations Study, 42% of businesses don’t know their false-positive rates. And more broadly, many simply view customer insults as a cost of doing business online. Unfortunately, spurning customers does more than the lost revenue from a single purchase. When a legitimate customer is turned away, many don’t simply try again later – they instead turn to the company that will fulfill their order. After their first online purchase was declined, nearly a quarter of both first-time and repeat customers found another vendor from which to make the same or a similar purchase. The rate of abandonment is even higher among Generation Z (people born between 1995 and 2015), with 36% jumping to another brand to make the same purchase. 

Consumers ditch the cart at the first sign of trouble.

Shopping cart abandonment is inevitable, with many users adding items to their cart with no intention to buy. But businesses can control user experience and the friction their users feel when trying to make a purchase. Customers can be unforgiving, as our survey found that 38% of online shoppers will quickly abandon their cart because of an additional security check, such as an email/text verification code or a CAPTCHA.

Fraud can be debilitating for businesses, but a high rate of false positives can jeopardize revenue. Retaining a loyal customer base while effectively fighting fraud requires a delicate balance. Businesses that adopt a Digital Trust & Safety strategy can not only reduce friction for their customers but also unlock revenue growth. 

For more information on how you can reduce false positives while accelerating growth, request a demo of our newly released Insult Monitor – an industry-first way to measure false positives and adjust fraud thresholds so you can accept more legitimate orders.

*Methodology: Survey conducted by Dynata on behalf of Sift. Dynata polled 1,000 adults via online survey across the United States, age 18+, between January 22nd and 23rd, 2020.