false decline
Europe Insights Paytech

Brand Trust is “Seriously Damaged” Following a False Decline: 42% of Consumers Won’t Return

A whitepaper by Checkout.com, the global payments provider, has highlighted a correlation between payment acceptance rates, customer satisfaction and loyalty. The report finds poor payment performance to be a key factor in ensuring customers return, as nearly half (42 per cent) state a failed payment would lose the company their business.

The Checkout.com whitepaper, titled High-Performance Payments: The Hidden billion-dollar opportunity is supported by research from Oxford Economics. It finds that in 2022, a US business worth $1billion lost, on average, 2.1 per cent of global revenues due to poor payment performance. This was double the amount lost in 2019. While losses in the UK, France and Germany all increased from 2019, it was only by 0.5, 0.1 and 0.2 per cent respectively. A false decline plays a huge part in this loss.

False declines are where a legitimate transaction is mistakenly identified as fraud and rejected. According to the whitepaper, it resulted in 45 per cent of consumers not attempting a retry and abandoning the purchase.

The report identifies several factors that make the fight against false declines more challenging. Increased cross-border activity, new scheme rules and regulatory requirements all play a part.

Ben Skelton, lead econometrician at Oxford Economics, comments: “Our latest research shows that the value of sales lost by merchants due to false payment declines rose by 140 per cent when compared with 2019.

“Our calculations suggested that one-third of the growth could be accounted for by the overall growth in e-commerce. The fact that the majority of the increased losses could not be accounted for by market growth immediately suggested that some other forces were playing a significant role, and our conversations with industry experts at Checkout.com go a long way toward explaining the striking difference.”

The inability to activate local payment methods is a recipe for disaster

Checkout.com notes the importance of turning to local payment methods to improve acceptance rates. Not only does it cut costs, but theoretically, it should improve customer loyalty. After all, the more options a customer has to pay, the more likely they are to shop there again due to the flexibility. Providing there are no issues.

Eighty-three per cent of merchants agree that direct access to a local acquirer is crucial. Without it, they say it can negatively impact acceptance rates.

However, the report shows that having no issues may be easier said than done. It reveals that 50 per cent of merchants say that a failure to properly activate local payment methods in new marks has led to lower-than-expected sales.

Adjusting to strong customer authentication

One challenge particularly impacting the US market is strong customer authentication (SCA). SCA has transformed European markets for some time as they adjust to regulation that demands superior authentication of legitimate payers.

In the US, merchants report that despite not being required to do so by law, they are increasingly introducing SCA-style two-factor authentication in their domestic market to reduce chargeback fraud. By effectively addressing one problem, they are unwittingly exacerbating another. This is because US customers are encountering a huge spike in friction when they try to pay, importantly without the widespread consumer education seen in Europe.

The consequence is mass cart abandonment and a switch to competitor sites. In fact, the amount of money being lost to competitor brands in the US, following one false decline, has grown by 300 per cent since 2019.

Checkout.com’s product director of payment performance, Rami Josef, comments: “For European markets where strong customer authentication has been in effect since 2019, consumers are more widely educated on the process required to authenticate their transactions.

“However, in the US market, consumers have limited awareness of two-factor authentication. Therefore, they are more likely to abort a transaction. Inconsistencies per market, and rapid change over time, bring complexity. Especially when attempting to improve payment performance.”

Tech holds the key to increasing acceptance rates

Adapting to preferred local payment methods and adjusting to strong customer authentication are not the only two ways to improve payment acceptance. The whitepaper identifies that 50 per cent of merchants do not receive raw response codes on failed payments. Though this is an improvement from 2019 (65 per cent) there is still a long way to go.

A further 41 per cent said they do not receive a clear breakdown of their payment costs from providers. Though there is again a marginal improvement from 2019 (48 per cent), there is still room for improvement. The same can be said for the number of merchants claiming they did not receive any fraud or chargeback analytics. This has improved from 67 per cent in 2019 to 64 per cent.

However, 45 per cent of merchants say they do no receive any actionable insights from their payment providers. In 2019, only 41 per cent of merchants said this was the case.

Checkout.com’s Intelligent Acceptance is one solution to the payment acceptance problem. It lowers transaction fees, and reduces operational complexity. During beta testing, it has achieved meaningful results. It has enabled transactions that created c.$750million of new revenue. Additionally, it has also increased the acceptance rates by up to 9.5 percentage points for over 30 merchants.

These merchants include Klarna, Ant Group, NordVPN, Reach and Sunday.


  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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