Merchants’ Successful Black Friday Amidst Payment Failures

Black Friday, the annual shopping extravaganza, saw more than half of Americans making purchases this year, according to data from PYMNTS Intelligence. However, while the shopping frenzy brought in a surge of customers, not all online transactions concluded successfully. PYMNTS Intelligence data reveals that nearly 1 in 10 online transactions failed in the past year. This means that on this Black Friday, a significant number of online transactions didn’t reach completion, resulting in substantial missed sales.

The prevalence of failed payments, and their adverse effects on business volume and customer satisfaction, continue to baffle the majority of online merchants. An astounding 82% of them struggle to pinpoint the reasons behind these payment failures. Likewise, 67% face difficulties in re-engaging customers who have experienced payment mishaps, ultimately leading to customer churn.

These findings are part of the insights derived from a collaborative research effort titled «Fraud Management, False Declines, and Improved Profitability» by PYMNTS Intelligence and Nuvei. This research explores the intersection of fraud prevention and payment failures in the eCommerce landscape.

The study underscores a notable trend: 72% of businesses encountered higher rates of payment failures in cross-border sales compared to domestic transactions. This underscores the critical role of screening mechanisms that can identify fraud and correct typos, especially in international commerce. Visa Chief Risk Officer, Paul Fabara, emphasized this point in a recent interview with PYMNTS, stating, «Cross-border sales is an area in which it is worthy to have a journey that at the end of the day is going to provide additional protection to consumers. Opposite to an ACH transaction where consumers have absolutely no protection.»

However, alarmingly, only one-third of businesses are currently utilizing such screening mechanisms, highlighting a significant missed opportunity to reduce false declines and recover from payment failures. While most eCommerce companies acknowledge benefits in terms of customer satisfaction and cybersecurity, only a small fraction see improved profitability as a direct outcome.

The study also reveals that when implementing anti-fraud measures, the majority of businesses turn to third-party providers to find solutions for recovering failed payments. This is particularly evident when utilizing payment recovery software or payment collection solutions. Paul Fabara adds, «The best way to ensure safe payments is through collaboration between financial institutions, providers, consumers, and merchants, with the support of artificial intelligence (AI).»

Nevertheless, payment failures have far-reaching consequences, impacting sales, customer satisfaction, and operating costs. Six out of ten companies in the study reported an increased staff workload due to payment failures, ultimately affecting profitability.

In a promising outlook, Paul Fabara shares his optimism regarding the availability of better anti-fraud toolkits for companies, saying, «In 2024, we might expect a quick step with better tools, and accessibility to those tools at relatively low operating cost.» As long as these systems are perceived as viable solutions to retain sales and improve profitability, further adoption can be expected in the future.