It’s the age in which we live.
Merchants are sometimes so careful about fraudulent orders, they mistakenly turn away legitimate ones. As e-commerce merchants are increasingly targets for fraudsters and hackers, most merchants have their guard up – way up.
The result of suspected fraudulent purchases, the issue of false declines is a new problem heading into the holiday online shopping season. As e-commerce fraud worsens, so do false positives for suspected fraudulent orders.
It was a compelling topic in the seminar titled The State of the U.S. EMV Rollout: Online and Card Not Present, Oct. 25 at the Money 20/20 Conference and Tradeshow in Las Vegas, presided over by Tom Byrnes, CMO at Vesta; and Al Pascual, the SVP, Research Director and Head of Fraud at Javelin Research.
How Do False Declines Happen?
Declining suspected fraudulent transactions is usually the result of four common instances.
- Different (Sketchy) Countries: Orders from locales that are rife with fraud such as Eastern Europe, certain African countries and Asian countries are often subject to decline. Many merchants would rather play it safe and absorb the lost income than risk being defrauded.
- Bulk Purchases: Sudden purchases of items in bulk signal two things: First, the buyer wants to resell them on the black market. Second, a chargeback is more than likely going to follow.
- Discrepancies: Disparities in orders is the most common cause of false declines. When the consumer’s address on file with the credit card issuer does not match the shipping address, it is cause for a red flag. Ditto when the consumer’s IP address doesn’t match with the his/her mailing address.
- The Common Fraud Signs: Similar to No. 2, there are products that have a history of being charged back – particularly digital goods. Orders processed through proxy servers – servers that are not the buyer’s – also cause false positives for fraud.
4 Clues to Help Mitigate False Declines
False declines are a problem for two reasons. Not only is it lost revenue, but by declining an online purchase, the buyer will simply go to a competing merchant for the same product. “A lot of folks in the (card-not-present) space are in denial about this,” Mr. Byrnes said.
Along with his appearance at Money 20/20, Mr. Byrnes and Vesta recently released a short whitepaper on signs to look for to avoid false declines.
- Orders shipped to students: College and boarding school students are certain to have discrepancies between billing address, shipping address and Bank Information Number (BIN). A student may order online from an IP address on his campus and have the item shipped to his permanent home.
- Orders placed by military: An example of such is a soldier in Europe with a credit card issued in the U.S., using a computer with an IP address in a completely different country.
- Online shopping at work: Many consumers shop from their work terminals, in which the server is possibly located in a different country. In reference to the first bullet point above, many merchants see this as a red flag.
- Use of more than one shipping company: Consumers often use ‘reshippers’ to save on shipping costs (unfortunately, fraudsters do too) or to ship internationally. This causes a mismatch between billing and shipping addresses.
Have you ever been denied a transaction due to a false decline? We’d like to hear your story. Leave us a comment below.