1. Your source for payments education
Fact or Friction – Industry Collaboration Now Tackling the New #1 Problem: False Declines Keith Briscoe, Chief Marketing & Product Officer, Ethoca Lyz Nesvold, Director of Risk Service Management, ClickBank Steve Furlong, Director OF Fraud Management, FNBO

2. False Declines occur when good transactions are wrongly rejected due to the suspicion of fraud. As a result, cardholders often elect to abandon a purchase, seek a different online store, or use an alternative payment card.

3. False declines hurt!
Lost sales / revenue
Poor customer experience
Encourages customers to use competitors
Brand damage

4. 13-1 Ratio Where should your focus lie?
$118B The value of transactions falsely rejected by U.S. card issuers in 2014.
Source: Javelin 2014
$9B The value of actual fraud measured by U.S. card issuers in
Source: Javelin 2014
versus

5. By the numbers: False declines
US issuers falsely declined an estimated $331 Billion in 2018 (CP + CNP). (Source: Aite)
33% of cardholders don’t retry a purchase after a false decline and move their card to the back of their wallets. (Source: Aite)
69% of businesses are concerned about the number of transactions that are falsely declined. (Source: Experian)
40% of declined payments are categorized as “do not honor”. This provides little insight as to the underlying reason for the decline. (Source: Vantiv)

6. Ethoca research
The average decline rate for physical goods merchants is 3 - 4% – compared to15%+ for digital goods.
The ratio of suspected fraud to actual fraud rejected by US issuers is 13-1.
Up to 52% of orders that merchants think are fraud, are in fact legitimate.
AVERAGE MERCHANT DECLINE RESULTS
44.4%
9.4%
20.6%
10.4%
15.2%
FRAUD
INSUFFICIENT
FUNDS
ERRORS
LOST /
STOLEN
OTHER

7. FRIENDLY FRAUD refers to fraud that is committed when an individual had knowledge of and/or was complicit with – and/or somehow benefited from – the transaction on their own account although the individual reported the transaction as unauthorized.

8. Friendly fraud covers a spectrum of activities from benign to hostile

9. Ethoca Survey – Friendly Fraud Rates by Industry: 2018

10. The negative effects of friendly fraud
Bad experience
Purchase friction
Card on file breakage
Card reissue
Bad customer experience
Lost revenue
Chargeback / representment cost
Decreased acceptance
Bad cardholder experience
Increased OPEX
Spend on card decreases
Rules engine noise
Card reissue

11. By the numbers: Friendly fraud
Friendly fraud grew from 7% to 15% of all fraud victims in (Source: Javelin) 37% of merchants feel unprepared to combat friendly fraud. (Source: WorldPay) Nearly half of the chargebacks experienced by in-app digital goods merchants are thought to be the result of friendly fraud. (Source: Javelin) Leading global digital goods merchants have reported friendly fraud rates as high as 60-90% (Source: Ethoca) 46% of merchants report friendly fraud is damaging revenues. (Source: WorldPay)

12. HOW DOES FRIENDLY FRAUD CONTRIBUTE TO FALSE DECLINES?
Good transactions are coded as fraud. Dynamic, self-learning fraud models get tuned incorrectly – ‘garbage in, garbage out’. Card issuers decline more Good customers are turned away.

13. Panel Discussion

14. Questions?

15. Thank you Don’t forget to submit your session evaluation!
Keith Briscoe, Chief Marketing & Product Officer (Ethoca)
Lyz Nesvold, Director of Risk Service Management (ClickBank)
Steve Furlong, Director OF Fraud Management (FNBO)