In the U.S. market alone, US$264 billion in card transactions were falsely declined due to suspicion of fraud in 2016.
False declines, which occur when a good transaction by the authorized cardholder is erroneously declined, happen far more often than issuers and merchants would like. False declines not only result in lost revenue opportunities but also create unhappy customers, which is bad business for both the merchant and the card-issuing bank.
This Impact Report examines the impact of false declines on consumers’ relationships with their Financial Institution. Based on quantitative consumer research, it looks at the likelihood that false declines at the POS will prompt consumers to leave their Financial Institution.
TABLE OF CONTENTS
- IMPACT POINTS
- THE MARKET DRIVERS
- FALSE DECLINES: THE CUSTOMER-EXPERIENCE KILLER
- ENGAGING THE CUSTOMER IN THE AUTHORIZATION DECISION
- RELATED AITE GROUP RESEARCH
- In this research effort, sponsored by iovation, Aite Group surveyed 1,095 U.S. consumers in January 2017 to better understand the impact of false declines on the customer experience. Based on quantitative consumer research, the report looks at the likelihood that false declines at the point of sale (POS) will prompt consumers to leave their financial institution (FI). The report also looks at technologies that can reduce false declines as well as consumers’ propensity to proactively engage with these technologies.
- The problem is significant; in the U.S. market alone, US$264 billion in card transactions were falsely declined due to suspicion of fraud in 2016.
- Millennials are far less forgiving of false declines than are older generations. Of the millennial cohort, 59% say that they would be very or somewhat likely to leave their FI due to a credit card false decline; in contrast, just 21% of seniors would be inclined to leave their issuer.
- Higher-income consumers display a greater propensity to leave their FI in the event of a false decline than do low-income cardholders. Forty-four percent of consumers with income over US$100,000 per year and 48% of consumers with income between US$75,000 and US$99,999 per year say they are very likely or somewhat likely to leave their FI due to a mistakenly declined credit card transaction.
- The majority of consumers across all age groups are open to an additional prompt for identity verification if there is suspicion of fraud. Sixty-five percent of seniors and boomers say it’s fine for their issuer to request proof of identity if there is suspicion of fraud; 59% of Gen Xers and 54% of millennials agree.