As shopping habits continue to shift online, companies are struggling to distinguish legitimate card-not-present transactions from fraudulent ones. Ecommerce fraud isn’t just bad for business. It’s bad for an organization’s reputation as well. Simply put, when fraud rates are high, companies lose money and customers.
Even so, in the fight against fraud, organizations face an even costlier threat than fraudulent transactions—false declines. Did you know merchants can lose up to 75 times more revenue to false declines than they do to fraud? According to Forbes, many online retailers simply don’t have enough data points to make informed decisions on the digital identity of the individuals conducting transactions.
This can result in overzealous fraud filters that function as a double-edged sword. You want to prevent as much fraud as possible, but you also don’t want to decline legitimate transactions or risk cart abandonment by creating too much friction in the checkout process. It’s not an easy line to walk, and it can frustrate merchants and consumers alike.
So, how do you prevent false credit card declines?
Four Solutions for Preventing False Declines
One of the most common causes of a decline is outdated card information. When a card is lost, stolen, or expired, the bank issues a replacement card. However, customers don’t always update their billing information manually. This can cause serious issues for merchants, especially those who rely on subscription services or other regularly recurring payments for the majority of their revenue.
An account updater service can prevent these lapses by ensuring a merchant’s stored card information is current. It typically works by tasking a service provider with contacting the card issuers on behalf of a merchant. Once the provider receives the updated cards, it will return them to the merchant for continued use.
This is how TokenEx’s Account Updater works. First, a merchant creates a batch file containing the card details and corresponding tokens to be sent to the card brands via TokenEx. Once TokenEx receives the response file from the card brands, we generate new tokens for the updated cards and return the tokenized response file to the client.
Another effective method for preventing false declines is to use network tokenization. Network tokenization is a type of tokenization that replaces primary account numbers (PANs) and other card details with a token issued by the card brand.
Although network tokenization is not supported by all issuers, it can be extremely valuable when available. According to Visa, network tokens on average can increase payment authorizations by 2.1 percent and reduce fraud by 26 percent.
Network tokenization also eliminates the need for merchants or third-party providers to expose themselves to the risk of handling the raw PAN and other sensitive cardholder data throughout the payment process. Further, because the tokens are generated by the card brands, they can be updated automatically to reflect any changes to card details.
Designed to authenticate a cardholder’s identity prior to a payment, 3-D Secure (3DS) provides an extra layer of protection to help prevent fraud and chargebacks in card-not-present scenarios. It can also help satisfy the strong customer authentication requirement of the European Union's Payment Services Directive (PSD).
The latest version of this protocol was introduced in 2015, and it promotes a less intrusive authentication process to reduce the cart abandonment that was occurring during the original 3DS—when users were redirected to the issuing bank’s website to authenticate transactions.
Now, merchants are required to send authentication data along with the payment card information to verify the authenticity of the transaction. This process occurs invisibly to the user and authenticates the payment—unless the issuer finds reason to question the legitimacy of the transaction.
If suspicious behavior or an unknown device causes the transaction to be flagged, the user can now receive a text message or confirmation code via an app to verify his or her identity—rather than being redirected to a bank’s website to enter the password associated with the card. The result is a much less disruptive experience for the user.
Fraud Prevention Platforms
Fraud prevention platforms use powerful analytics tools, artificial intelligence, and machine learning to review transactions for potential fraud. These logic engines are usually based on analyzing consumer behaviors and buying patterns to determine whether a transaction is within a certain threshold of acceptable risk. If it is, the transaction is approved. If it isn’t, the transaction is denied.
TokenEx offers this functionality through our partnership with Kount, an Equifax company. Kount’s platform is specifically designed for companies operating in card-not-present environments, which can help simplify fraud detection and minimize disruption to your existing business processes.
Our combined solution enables you to use Kount's platform and access its robust analytics without exposing your organization to the risk and scope of handling raw cardholder data.
Since 2010, TokenEx has partnered with our clients to protect and share their most sensitive data. Unlike other providers, we don’t hold it captive. Instead, our Token platform gives you more ways to use it safely. As a result, you can add value to your data and to your business. So, you can feel confident when your customers pay.