Colt Passey (SVP of Business Development)
Nexio
2020 changed the way that customers shop. From buying in bulk to online shopping, COVID-19-related shifts in buying behavior translated into an additional $41.54 billion in digital revenue for November and December of 2020. As more customers turn to online shopping, many new users are experiencing false declines. Merchants are losing millions in missed revenue and loss of customer trust. Fraud prevention systems flag purchases as suspicious — false positives —- because the systems don’t recognize this new customer behavior. Businesses that would never turn away 40% of customers in a face-to-face setting are doing just that through e-commerce.
With twice the number of people shopping from home, new shoppers are five to seven times more likely to have their purchases declined than returning customers. These new shoppers are being denied the opportunity to become a customer. And with that false decline, shoppers are turning to competitor brands to complete the shopping experience. Customers do not like the hassle of card declines, especially if they do not know the reason, and will often find a comparable product on another site where the order is approved. 40% of those declined on the first visit will not try again on that merchant’s site.
What can be done to improve approval rates? The answer is to understand the main reasons ecommerce customers are lost. First, the fraud prevention tools may not have enough data to identify the customer, resulting in a decline. That data includes in-store behavior and purchase history, returns, coupons, loyalty programs and, finally, history with other e-commerce sites. Second, obstacles in the purchasing process, such as requiring more information than is required, may make the shopper feel nervous and lead to cart abandonment.
Focus on knowledge and insights that reduce friction in the checkout process. Sometimes, changes to risk management are needed. Explore best-in-class software that has real-time identity recognition to allow you to personalize your customer experiences to create a frictionless experience. Or, partner with a payment platform that offers upgraded fraud prevention tools as part of the package.
What obstacles are customers facing? Look at the type of declines received and dig into the data to determine patterns. Shoppers love mobile commerce. 79% of smartphone users have made a purchase online using their mobile device; however, mobile decline rates are high. Fully 33% of mobile users have reported a decline while shopping with their phone. With customers shopping more and more online, the phone has become the primary device for e-commerce. Combining new online shoppers using mobile devices with higher decline rates, merchants find themselves on a tightrope. Businesses need to create a simple checkout process but still balance security and fraud prevention. Asking for more “proof” from a real customer isn’t always a solution. 80% of consumers said they would likely not proceed with an order if the merchant asked for more personal information or copies of documents to confirm their order. 64% said they probably wouldn’t proceed if they were asked to call customer service to confirm their order.
Businesses need to establish identity trust at every stage of the customer journey. As more merchants focus on e-commerce and online consumer shopping, businesses will generate more revenue, retain more customers, and earn more value from those customers. Merchants must create a checkout experience knowing that consumers will want familiarity and security when placing orders. Understanding these customer trends in e-commerce will be critical to stopping profit loss as these trends continue.