It’s a risk of selling products online: Legitimate transactions can get caught in a merchant’s fraud filters and accidentally declined. These false declines are expensive for merchants, with losses reaching a whopping $118 billion per year — 13 times more than losses to the credit card fraud they’re trying to prevent. But the damage doesn’t end with lost transactions — false declines lower approval rates, reduce customer lifetime value, and negatively impact your return on investment (ROI).
Beyond the financial impact of lost orders, false declines also create unhappy customers.
False declines aren’t just momentary friction; they can permanently damage your relationship with customers and erode your ROI. From reduced repeat purchases to viral complaints, the consequences are both immediate and long-lasting.
Unhappy customers can be very vocal with their displeasure. All it takes is one bad review on social media, and a business’s reputation can be tarnished forever.
False declines are common — especially for businesses with automated or overly rigid fraud filters — but that doesn’t make them any easier for a customer to bear. In fact, cardholders who experienced a false decline felt the decline wasn’t just inconvenient — it was also embarrassing and aggravating.
For many customers who find themselves unable to complete a transaction for mysterious reasons, one of the first places they go to vent their frustrations is social media. And they don’t hold back.
When it comes to sharing their shopping experiences, customers are far more inclined to talk about their negative experiences as opposed to their positive ones. An American Express study, for example, found that consumers tell an average of nine people about their good experiences, but they tell 16 people about the bad.
And word of mouth is devastatingly powerful thanks to the “negativity effect,” in which negative ratings and feedback can be more credible and influential to consumers than positive information. As a result, many purchasers make their buying decisions based on the worst-case scenario – even when they also see positive reviews.
If a merchant doesn’t address customers’ concerns quickly and proactively, this can create lasting brand damage.
This is why monitoring your false decline rate is not just a fraud prevention issue — it’s also branding and ROI issues.
Because a merchant’s reputation is a critical part of a customer’s decision-making process, businesses must be aware of how their brand is portrayed online. A pattern of false declines will inevitably show up in customer feedback — and, if left unaddressed, can quickly reduce approval rates and weaken ROI.
To keep a pulse on their online reputation, businesses should periodically conduct an online search for their company and product names. What are the first 10 links that show up? If a merchant doesn’t own the top search results, they open the door for high-ranking results that misrepresent the brand. They also risk losing high-intent buyers — the ones with the greatest revenue potential — due to low trust fueled by bad reviews and poor approval rates.
But because social media conversations don’t show up in search engine results, merchants should also monitor other aspects of their online reputation by:
According to a recent ClearSale report, U.S. merchants lost an estimated $118 billion to false declines in a single year — over 13 times the cost of actual fraud. What’s more, 41% of consumers won’t return after a false decline, and 32% will share their frustration publicly, often on social media. These events directly affect approval rates and can erode long-term ROI.
Merchants with high false decline rates and resulting low approval rates who find themselves on the receiving end of criticism must establish a plan to quickly defuse the situation and protect their ROI. Consider taking these steps when responding to customer complaints:
Merchants should keep in mind that how they publicly respond to a complaint or negative review impacts not only the disgruntled customer, but also the unseen potential customers who may be watching this interaction and still considering their purchase decision. When merchants handle social media responses skillfully, they can instill trust that improves existing relationships and builds new ones.
While social media reviews – both good and bad – are an inevitable part of doing business online, high false decline rates don’t have to be.
Instead, merchants should consider implementing a fraud protection solution that includes a cross-functional team coupled with advanced artificial intelligence. This combination is designed to provide a frictionless experience for customers while minimizing the company’s likelihood of rejecting legitimate transactions — reducing false declines, improving approval rates, and safeguarding long-term ROI.
Every false decline carries a hidden cost — not just in lost revenue, but also in lost trust and long-term customer value. If you’re wondering how much these declines could be costing your business, use our ROI Calculator to find out. It’s a fast, data-driven way to assess the financial impact and take the first step toward higher approval rates and improved ROI.