By Anish J. Sharma, Senior Product Manager
Have you ever extended a business trip for a few days and worked remotely out of that new city? Or have you been to a foreign country on vacation? While traveling, many of us have had the frustrating experience of trying to make a purchase online and being declined. Sometimes we’re even prompted to enter a one-time passcode on our mobile devices or email, adding additional steps to the purchase.
But if you’re using a Digital SIM card in another country, you may have trouble receiving those text messages— making it nearly impossible to complete the transaction. This is one example of additional friction in the purchasing process that has downstream effects.
Situations like these are more common than you might think and something we hear about often from the merchants and payment service providers we work with here at Forter.
These false declines can significantly impact revenue for both the merchant and the Payment Service Provider. It’s estimated that, depending on the industry, anywhere from 30% to 65% of all declined transactions are legitimate. Worldwide, this represents over $640 billion in lost revenue for retailers.
Not only do merchants risk losing that individual sale, but they may also lose the customer for life, causing frustration between merchants and their PSPs. If that wasn’t bad enough, PSPs are also losing out on the ability to collect the fees for the declined transaction.
Why should PSPs care about their approach to fraud
- Checkout Friction — As detailed in the scenario above, consumers want a speedy checkout process with few to no barriers to completing their purchase. Adding friction into the funnel to prove their legitimacy can lead to a lost consumer for this specific transaction and life.
- Merchant Churn — Merchants may churn from their current payment provider if they receive too many fraud declines for their customers without solid justification. This issue can intensify for merchants that may already suffer from low sales volume or low margin businesses (especially in the current economic environment). Every approved transaction and customer experience matters.
- Inability to expand to new verticals — With a fraud solution geared to decline too many ‘risky’ customers, PSPs struggle to accept merchants in a higher risk category like luxury goods or crypto, thus limiting how many merchants they can support.
- Insufficient Analytical and Reporting Capabilities — It can be challenging for a PSP to scale and manage a portfolio of thousands or even hundreds of thousands of merchants while maintaining a lean operation. Understanding when a merchant is under a fraud attack, why a transaction has been declined, or if the chargeback ratio for a particular set of top-tier merchants has fallen is critical information for a PSP — and potentially their acquirer.
Why are good customers getting blocked?
The travel scenario described earlier typically occurs when a merchant or payment processor uses a rules-based fraud solution or relies on a solution baked into their processor (rather than a standalone platform). Often, these solutions are too simplistic to register the identity behind the purchase. Most of these rules-based solutions also require manual intervention by in-house fraud teams who continue to set new rules based on new fraud trends and reactions to data.
How Forter Can Help
Suppose these problems sound familiar (or are something you may run into). In that case, you might wonder how to improve or select the right fraud solution and become a more differentiated payment provider for your merchants. This is where Forter’s solution for PSPs comes into play.
Forter uses its global network of identities to support payment service providers, with hundreds of thousands of merchants improving their approval rates (creating a more improved customer experience) and reducing fraud. All of these decisions happen instantly, making for a frictionless customer experience.
What’s better than that? Our customers love Forter’s ability to surface valuable insights and trends. This helps their support teams answer to merchants when they’re seeking assistance, and in-house fraud teams track down problematic merchants that can cause financial losses. PSPs who have chosen Forter are leveraging the solution to create a differentiated experience for their merchants, improving their overall value proposition.