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What are card declines, why do they happen and how do they affect your top line

What are card declines, why do they happen and how do they affect your top line

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It's no surprise that over 33% of the world’s population shops online, propelling e-commerce into a $6 trillion industry, with projections to reach $8 trillion by 2027. The opportunities are vast, but so are the pitfalls. While potential customers are busy adding items to their online carts, many businesses are still losing substantial revenue.

Most marketers are familiar with the alarming online shopping cart abandonment rate of 70%. Still, fewer are aware that many customers abandon their carts due to declined transactions rather than complicated checkout processes, unexpected shipping costs, or slow delivery times. In fact, 10% of checkout deals are declined, directly affecting your top line revenue with an average potential loss of 5%. However, not all is lost. You’d be surprised how many of these are false card declines (i.e. when payment systems mistakenly reject valid transactions). In this must-read post, we’ll explore why this happens and how you can prevent it from impacting your business.

What are card declines and why do they happen?

Card declines happen when customers cannot complete a payment due to failures in the authorization process. These issues can arise from problems with the card network, payment-processing platform, or credit card issuer. Today, every step of the processing flow declines a transaction. - the issuer, the network, and the gateway. When a charge fails, the merchant is given an error code to the business (and hundreds of error codes). 

Understanding the reasons behind card declines is crucial for eCommerce success.

There are several common causes:

  • Insufficient funds: The most straightforward reason for a card decline is that the customer’s account doesn’t have enough funds to cover the purchase. This is beyond the merchant's control but remains a significant cause of lost sales. 
  • Incorrect card information: Simple errors in entering card details—such as an incorrect number, expiration date, or CVV code—can lead to declines. These mistakes often occur during hurried or distracted checkout processes.
  • Expired cards: Customers sometimes forget to update their card information when their old cards expire. This leads to automatic declines when outdated card details are used.
  • Suspicious activity: Banks and card issuers may decline transactions that appear unusual or potentially fraudulent. This can be particularly common for international transactions or unusually large purchases. While these measures are intended to protect customers, they can also result in legitimate transactions being wrongly declined.
  • Technical glitches: System errors, either on the merchant's end or within the payment gateway, can cause transactions to fail. These issues might stem from server downtime, software bugs, or connectivity problems.
  • Outdated customer information: Changes in a customer's address or phone number that aren’t updated in the bank’s records can lead to mismatches during the verification process, resulting in declines.

Why it’s important to track your card decline rate

Despite the attention given to cart abandonment ratios, the importance of tracking card decline rates often goes overlooked. Some might look into payment acceptance rates that indicate the proportion of revenue captured compared to potential untapped revenue. However, they still can’t fully grasp the impact of such a decline on their business. 

By staying vigilant and proactive in monitoring decline rates, you can ensure a smoother payment process for your customers while maximizing your business's financial performance.  

Here’s why it’s crucial you track your card declines:

  • Revenue optimization: Monitoring decline rates helps identify and address issues in payment processes, optimizing flow to capture potential revenue loss.
    Just about every marketing KPI is affected by conversion fails including your top line Impact, cost of acquisition (CAC), reacquisition costs, LTV, and conversion-to-paid rate/monetization rate. 
  • Customer experience: High decline rates frustrate customers, leading to abandoned purchases and eroded trust. Tracking enables proactive issue resolution, enhancing satisfaction and loyalty. 
  • Fraud prevention: Sudden increases in decline rates may signal fraud. Tracking helps detect suspicious trends early, allowing for additional security measures.
  • Operational efficiency: High decline rates strain resources, increasing support inquiries and manual interventions. Tracking enables streamlining of operations and resource allocation.
  • Strategic decision-making: Decline data provides insights into payment behavior and preferences, informing decisions on methods, fraud prevention, and customer engagement for business growth.

Recovering more than 30% of your false card declines 

Though it seems like a clear win, it might come as a surprise that a customer's click on the "pay" button doesn't always guarantee a successful conversion. Within the realm of eCommerce, false card declines present a formidable obstacle for businesses, affecting acceptance rates and overall revenue, while also resulting in disappointed customers who may seek alternatives from competitors to complete their purchase.

Bounce empowers you to identify false card declines swiftly and efficiently, recovering more than 30% of them in real-time. This seamless process ensures that you not only maximize revenue potential but also minimize losses effectively.

It's no surprise that over 33% of the world’s population shops online, propelling e-commerce into a $6 trillion industry, with projections to reach $8 trillion by 2027. The opportunities are vast, but so are the pitfalls. While potential customers are busy adding items to their online carts, many businesses are still losing substantial revenue.

Most marketers are familiar with the alarming online shopping cart abandonment rate of 70%. Still, fewer are aware that many customers abandon their carts due to declined transactions rather than complicated checkout processes, unexpected shipping costs, or slow delivery times. In fact, 10% of checkout deals are declined, directly affecting your top line revenue with an average potential loss of 5%. However, not all is lost. You’d be surprised how many of these are false card declines (i.e. when payment systems mistakenly reject valid transactions). In this must-read post, we’ll explore why this happens and how you can prevent it from impacting your business.

What are card declines and why do they happen?

Card declines happen when customers cannot complete a payment due to failures in the authorization process. These issues can arise from problems with the card network, payment-processing platform, or credit card issuer. Today, every step of the processing flow declines a transaction. - the issuer, the network, and the gateway. When a charge fails, the merchant is given an error code to the business (and hundreds of error codes). 

Understanding the reasons behind card declines is crucial for eCommerce success.

There are several common causes:

  • Insufficient funds: The most straightforward reason for a card decline is that the customer’s account doesn’t have enough funds to cover the purchase. This is beyond the merchant's control but remains a significant cause of lost sales. 
  • Incorrect card information: Simple errors in entering card details—such as an incorrect number, expiration date, or CVV code—can lead to declines. These mistakes often occur during hurried or distracted checkout processes.
  • Expired cards: Customers sometimes forget to update their card information when their old cards expire. This leads to automatic declines when outdated card details are used.
  • Suspicious activity: Banks and card issuers may decline transactions that appear unusual or potentially fraudulent. This can be particularly common for international transactions or unusually large purchases. While these measures are intended to protect customers, they can also result in legitimate transactions being wrongly declined.
  • Technical glitches: System errors, either on the merchant's end or within the payment gateway, can cause transactions to fail. These issues might stem from server downtime, software bugs, or connectivity problems.
  • Outdated customer information: Changes in a customer's address or phone number that aren’t updated in the bank’s records can lead to mismatches during the verification process, resulting in declines.

Why it’s important to track your card decline rate

Despite the attention given to cart abandonment ratios, the importance of tracking card decline rates often goes overlooked. Some might look into payment acceptance rates that indicate the proportion of revenue captured compared to potential untapped revenue. However, they still can’t fully grasp the impact of such a decline on their business. 

By staying vigilant and proactive in monitoring decline rates, you can ensure a smoother payment process for your customers while maximizing your business's financial performance.  

Here’s why it’s crucial you track your card declines:

  • Revenue optimization: Monitoring decline rates helps identify and address issues in payment processes, optimizing flow to capture potential revenue loss.
    Just about every marketing KPI is affected by conversion fails including your top line Impact, cost of acquisition (CAC), reacquisition costs, LTV, and conversion-to-paid rate/monetization rate. 
  • Customer experience: High decline rates frustrate customers, leading to abandoned purchases and eroded trust. Tracking enables proactive issue resolution, enhancing satisfaction and loyalty. 
  • Fraud prevention: Sudden increases in decline rates may signal fraud. Tracking helps detect suspicious trends early, allowing for additional security measures.
  • Operational efficiency: High decline rates strain resources, increasing support inquiries and manual interventions. Tracking enables streamlining of operations and resource allocation.
  • Strategic decision-making: Decline data provides insights into payment behavior and preferences, informing decisions on methods, fraud prevention, and customer engagement for business growth.

Recovering more than 30% of your false card declines 

Though it seems like a clear win, it might come as a surprise that a customer's click on the "pay" button doesn't always guarantee a successful conversion. Within the realm of eCommerce, false card declines present a formidable obstacle for businesses, affecting acceptance rates and overall revenue, while also resulting in disappointed customers who may seek alternatives from competitors to complete their purchase.

Bounce empowers you to identify false card declines swiftly and efficiently, recovering more than 30% of them in real-time. This seamless process ensures that you not only maximize revenue potential but also minimize losses effectively.

Want to see how Bounce lifts your KPIs?

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Further reading

Growth Marketing
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How to reduce your retargeting costs and optimize your efforts

As Michael Jordan famously said, “I’ve never lost a game; I just ran out of time.” This mindset of quickly bouncing back after a setback is crucial in e-commerce, where retargeting serves as a strategy to recover from lost sales, especially following a failed transaction.

Reminding them of what they left behind

Retargeting is a powerful strategy to remind customers of what they left behind and bring them back to complete their purchase. Companies like AdRoll and Criteo excel in this, using cookies and tracking pixels to craft personalized ads based on users’ previous interactions, significantly boosting conversion rates and enhancing brand recall. Retargeting is a key strategy for converting “window shoppers” into buyers by leveraging their initial interest and keeping the brand top-of-mind.

However, are you considering whether retargeting is always the most cost-effective solution after a failed transaction? This practice is particularly common, where businesses instinctively turn to retargeting to recover lost sales. While retargeting can be effective, it doesn’t address one of the root causes of lost sales: false credit card declines.

While retargeting can be effective, it doesn’t address one of the root causes of lost sales: false credit card declines.

False credit card declines continue to be a significant issue for merchants, costing billions in lost revenue. But is it really so significant? In 2019, merchants in the U.S., U.K., France, and Germany collectively lost $20.3 billion due to false credit and debit card declines, according to a study by Checkout.com and Oxford Economics. This figure represents a substantial increase compared to earlier estimates, underscoring the growing impact of this problem. For every dollar lost to actual fraud, around $25 in genuine transactions are falsely declined, which is a substantial burden on businesses. These false declines cause immediate revenue loss and necessitate increased spending on retargeting efforts to recover these lost sales. Instead of constantly solving the problem after it occurs with expensive retargeting, businesses can prevent it in the first place by addressing the root cause -false credit card declines.

What are false declines and why do they happen?

False declines occur when customers cannot complete a payment due to failures in the authorization process, which can involve the vendor, payment-processing platform, or credit card issuer. The issuer is responsible for approving or declining transactions and provides an error code when a charge fails. Common causes include insufficient funds, incorrect card information, expired cards, suspicious activity, technical glitches, outdated customer information, and overly stringent fraud prevention measures. These issues not only impact revenue by causing potential sales losses but also affect other marketing efforts and KPIs - Cost of Acquisition (CAC), LifeTime Value (LTV), conversion rates and retargeting efforts as well as customer experience, and operational efficiency. High decline rates frustrate customers, leading to abandoned purchases and eroded trust, while straining resources and increasing support inquiries. Additionally, monitoring decline rates helps optimize revenue, enhance customer satisfaction, detect fraud early, streamline operations, and contribute to informed strategic decisions.

How Bounce helps reduce retargeting costs 

Bounce offers a cutting-edge AI-based payment recovery solution designed to address the issue of false declines. By analyzing millions of data points in real-time, Bounce can distinguish between valid and invalid declines, recovering over 30% of transactions that would otherwise be lost. This not only helps retain revenue but also reduces the need for extensive retargeting campaigns, thereby cutting down on retargeting costs.

Your Gain

• Reduction in Retargeting Costs: By recovering falsely declined transactions, Bounce significantly minimizes the need for additional retargeting efforts. This leads to substantial savings in your marketing budgets, allowing you to allocate resources more efficiently.

• Improved Customer Retention: Ensuring a smoother checkout experience reduces customer frustration and improves loyalty. This enhances the lifetime value (LTV) of your customers, as satisfied customers are more likely to return and make repeat purchases. Our clients have seen a 15% decrease in churn due to the improved payment process.

• Higher Conversion Rates: Successfully recovered transactions boost overall conversion rates. This maximizes the return on investment (ROI) for your initial marketing efforts, turning more potential leads into actual sales and driving revenue growth. Our solution has been shown to increase conversion rates by up to 10%, significantly enhancing your marketing ROI.

• Enhanced Renewal Rates: Subscription renewals often face payment issues, with decline rates reaching up to 50%. Bounce identifies and resolves these issues, recovering up to 20% of almost lost renewal deals, directly boosting your subscription renewals and overall revenue. This results in a 5% increase in your top-line revenue and improves key metrics like CAC, LTV, and retention.

You can save millions annually

Retargeting is essential for e-commerce success, but it comes with significant costs, particularly when dealing with false credit card declines. Bounce’s AI-based payment solution offers a powerful way to reduce these costs by ensuring more transactions are successfully processed, improving customer satisfaction, and enhancing the overall efficiency of marketing campaigns. By addressing false declines, businesses can save millions annually, gain a higher return on their marketing efforts, and lift their top line by up to 5%.

Schedule a meeting with our experts and let’s see together how much you can save.

Use Cases
0
Bounce lifts your checkout top line

Checkout fail. It's a familiar pain for marketers.
After investing thousands of dollars in targeting and re-targeting, the excitement of a potential customer placing an order turns into frustration when they fail to convert into a paying customer.
And in many of those cases, it’s due to payment decline.

The hidden cost of checkout churn

Did you know? More than 10% of checkout purchases get thrown out of the funnel right at the conversion stage due to credit card declines. The user enters his credit card number, hits “purchase”, and receives a failed transaction notice.

Those failed transactions can translate into millions of $ lost for your business, not including the lost marketing costs.

Here's another nugget: 30% of failed checkouts can actually be recovered into a closed deal.
With Bounce’s AI-based payment solution, companies can save up to millions of dollars annually, gaining a higher return on their marketing efforts and lifting their top line by 5%!
The cumulative year-over-year impact of recovering lost checkouts is enormous.

It also goes way beyond immediate top-line revenue.

The fuller picture: understanding company growth impact

Let's explore how failed checkouts  influence your business's growth and performance:

  • Top-line Impact: Lost deals directly dent total revenue, affecting company growth.
  • Customer Acquisition Cost (CAC): Each lost deal not only hampers revenue but also resets the clock on acquiring new customers and increasing your average CAC.
  • Retargeting Costs: A failed checkout experience is likely to prompt increased spending on retargeting campaigns to re-engage users and target new potential ones.
  • LTV and Repeat Customers: A declined transaction at checkout leads to a bad user experience, and by that, you risk losing your customer permanently, impacting both the lifetime value (LTV) and the rate of repeat business.
  • Conversion Rates:  Checkout failures directly affect checkout conversion rates and the success of the overall marketing funnel, with fewer leads and visitors that turn into customers and repeat customers.‍
  • Purchase Size: Customers facing declined transactions tend to abandon their purchase initiative entirely. Of the few that do retry, they will often revisit their cart and remove purchases, resulting in a lower overall purchase value.

Unlocking lost checkout revenue with Bounce

Bounce helps companies prevent revenue loss and all other negative impacts of declined payments.
Our payment recovery platform uses ML to analyze millions of data points, identifying which checkout declines are valid and which ones should not have been declined. Our solution recovers over 30% of payment declines, in real time. 

Bounce seamlessly integrates into your existing checkout process, providing the user with a positive and smooth experience when identified as valid. We’re so sure of our data that the service is risk-free. Your customers enjoy a better checkout experience, and you enjoy a higher return on your marketing efforts.

Here’s how our checkout recovery helps our customers recover tens of thousands of dollars in lost checkout revenue.

Success Stories
0
Scale turned millions $ in declined checkout and renewals into revenue

Scale is a California based, tech-driven company. They build next-generation health, wellness education, and products that address some of the world's most common health issues. They sell their products online as a subscription base or as a one off purchase and have a checkout process in place.

They knew they had challenges around checkout and subscription conversion and were hoping to find a solution to mitigate that.

We partnered with Hannah Blum, Head of Marketing Strategy, and Chris (Christapor) Arzoumanian, Senior growth product marketing manager, two industry experts.  

Diving into Scale’s processes

Scale offers various types of supplements, in 5 different brands, both one-time checkouts and subscription refills. When reviewing Scale’s system, we ran a comprehensive analysis of their payments, to see which failed payments could be saved. Through our ML system, we found that 20%-30% of their customers were being wrongly rejected at the time of subscription refill/ renewal (and could be saved), due to a variety of reasons totally out of Scale’s control. We got to work and implemented our solution.

Shortly after, by cutting out a portion of those card declines, we saw a stream of steady and increased revenue, overall raising their KPIs. 

As more deals were seamlessly approved in real-time, a number of things took place. Customer satisfaction levels grew, retention rate improved, and even the ticket size per transaction increased, thanks to frictionless payment experiences. 

“We grew our subscription retention rate by 2.4%.”
Author's Image Chris Arzoumanian | Senior Growth Product Marketing Manager | Scale

Bouncing up lost checkout deals

Renewals were just the beginning - while analyzing Scale Media’s checkout transactions, they realized how many of their customers were actually unable to complete their purchase - 10% (!) of their customers were being rejected at checkout, due to different reasons. 

We applied our proprietary machine-learning algorithms on Scale’s data, using millions of data points, and identifying which declined checkout transactions should be recovered. With our real-time ML model and zero-risk policy, we were able to recover a full 30% of Scale’s declined checkout transactions.  Bounce’s auto-recovered checkout deals lift Scale’s top line by almost 3%.

As Scale’s checkout experience improved, the average user purchase size and total number of purchases increased. Instead of losing potential users to failed checkout processes, Scale was now retaining its leads and customers at much higher rates.

“We work closely with bounce and see bounce’s team as partners. We constantly consult the team with any payment related decision”.
Author's Image Chris Arzoumanian | Senior Growth Product Marketing Manager | Scale

What it’s like to partner with Bounce

Every decision related to payments is a multifaceted process for any company. At Bounce, we thrive on collaboration to enhance your company's payment experiences. Our approach is to seamlessly integrate with your processes, providing valuable insights and guidance. 

The successful collaboration with Scale's talented team has driven the desired results – improved metrics and happy customers. Together, we were able to showcase the power of a collaborative approach in transforming payment experiences.

"As for the decision to work with Bounce, it was a pretty straightforward one. We took zero-risk and saw an uplift of 3-5% on our checkout generated revenue"
Hannah Blum Hannah Blum | Head of Marketing Strategy | Scale

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