Merchants most often deny legitimate transactions for two reasons: issuer bank or payment gateway declines (such as incorrect card data, insufficient funds, unsupported card types, or technical outages) and overly aggressive fraud filter declines that flag valid orders as false positives. Declining valid orders is costly because it loses both profit and customers, which signals that a fraud prevention model is not working effectively. ClearSale recommends logging processor and gateway response codes for analysis and relying on a full-service fraud prevention solution instead of hard automatic declines.
Fraud remains a serious problem in the United States and across the world. But transactions that are wrongly declined for suspected fraud – also known as “false positives” – also represent a big threat to your business.
You likely already know the risks of denying a potentially legitimate transaction without being sure if it’s actually fraudulent. But this is what happens when you choose to automatically deny transactions based on a certain set of criteria.
What you may not know, however, are the reasons why you can have a transaction denied. Let’s explore some of these reasons.
In situations such as these, your fraud filters are usually too conservative and should be disabled when working with a full-service fraud protection company.
WE RECOMMEND THAT YOU LOG THE PROCESSOR AND PAYMENT GATEWAY RESPONSE CODES INTO YOUR SYSTEM SO YOU CAN AGGREGATE THOSE DECLINES AND RUN FURTHER ANALYSIS. THIS ALLOWS YOU TO VERIFY THE POSSIBILITY OF TURNING THE FRAUD FILTERS DOWN AND RELYING ON YOUR FRAUD PREVENTION SOLUTION INSTEAD.
You can also verify if you have any system or procedural issues that could reduce the declines mentioned above.
Every company provides different reason codes and descriptions, which is why it’s important to look for the explanation that corresponds to your specific payment gateway or processor. A few popular payment gateways include:
ASIDE FROM THE FRAUD FILTERS INCLUDED IN YOUR PAYMENT GATEWAY OR PROCESSOR, YOU CAN ALSO FIND THE SAME OR SIMILAR FRAUD FILTERS IN YOUR E-COMMERCE SHOP OR FRAUD PREVENTION SOLUTION. REMEMBER: WE’RE ONLY TALKING ABOUT HARD AUTOMATIC DECLINES FROM FRAUD FILTERS – ONES THAT SHOULDN’T BE INCLUDED EVEN WHEN WORKING WITH A FRAUD PROTECTION COMPANY.
In addition to the fraud filters listed above, some fraud filters that may trigger a false positive include:
DECLINING VALID ORDERS CAN BE COSTLY FOR YOUR BUSINESS. BY AUTOMATICALLY DENYING ANY GROUP OF TRANSACTIONS, IT’S A SIGN YOUR FRAUD PREVENTION MODEL ISN’T EFFECTIVE, WHICH CAN LEAD TO WORSE RESULTS FOR YOUR BUSINESS. ADDITIONALLY, YOUR BUSINESS WILL LOSE PROFITS – AND CUSTOMERS – IN THE PROCESS.
To learn more about the issues with automatically declining orders, visit our blog, Demystifying the Biggest Problems With Denying Customer Transactions Automatically.
WE ARE THE ONLY SOLUTION IN THE MARKET THAT DOESN’T REJECT ORDERS AUTOMATICALLY.
The two biggest reasons are issuer bank or payment gateway declines and fraud filter declines. Issuer and gateway declines happen when a bank, card issuer, or payment processor rejects a transaction on the merchant's behalf, while fraud filter declines occur when overly conservative fraud rules wrongly flag a valid order as suspicious.
A false positive is a legitimate transaction that is wrongly declined because it is suspected of being fraudulent. False positives are a significant threat to a business because they reject real, paying customers along with actual fraud, costing the merchant both profit and customer relationships.
A card can be declined for payment-related reasons such as an incorrect card number or expiration date, insufficient funds, prepaid or gift cards that are not accepted, technical outages or maintenance, cards restricted to domestic use, or reaching a merchant account processing limit. It can also be declined by fraud-related filters, for example when the bank uses aggressive fraud detection, requires a Card Verification Code, or requires Verified by Visa or Mastercard SecureCode.
Common fraud filters that can trigger false positives include Address Verification Service (AVS), card velocity thresholds, prior chargeback rules, prior fraud advice alerts, and IP geolocation checks. These filters automatically reject transactions based on preset criteria, which can capture valid orders along with fraudulent ones.
Automatically declining valid orders is costly: the business loses profits and loses customers in the process. It also signals that the fraud prevention model is not effective, which can lead to worse results for the business overall.
ClearSale recommends logging processor and payment gateway response codes into your system so you can aggregate declines and run further analysis, which helps verify whether fraud filters can be turned down. Merchants should also check for system or procedural issues and rely on a full-service fraud prevention solution rather than hard automatic declines, since ClearSale is the only solution in the market that does not reject orders automatically.