It's been said that the last mile is always the hardest in a marathon, and ecommerce is no exception. Oftentimes, after basket conversion, checkout conversion and payment authorisation, the merchants are left with an aggregate decline rate of 12% or more. However, these declines include many false positives that both prevent immediate sales and dramatically decrease customer lifetime value. Oddly enough, many merchants underestimate the economic impact of these lost sales and lost customers and are often shocked when business intelligence reports quantify the magnitude of the declines problem.
Why does it matter? Because over USD 500 billion in sales are lost every year due to payment declines, increasing the merchants' Customer Acquisition Cost (CAC), while lowering LifeTime Value (LTV). In addition, these false positives bring about a subpar customer experience, resulting in less consumer satisfaction and merchant stickiness. For instance, in the US, upon receiving a decline message, up to 80% of consumers walk away from the checkout.
Currently, in payment processing and acquiring, pricing is table stakes and performance is the new battleground or the new differentiator between payment service providers. Consumer attitudes are continuously changing, with Millennials and Gen Z having high expectations from their ecommerce providers in terms of ease of use, seamless payments, etc.
The new generations in their 40s and well younger have been trained by the Apples and the Ubers of the world, with intuitive, friendly user experiences (UX), where the consumer can easily navigate through intuitive payment workflows. All of this essentially holds the industry, rightly so, to ever increasing UX standards.
However, it doesn’t come as a surprise that authorisation rate improvement is a hot topic in the payment space, with most payment companies constantly looking at ways to make incremental gains to their respective authorisation rates. There are also many vendors that claim to assist merchants in post-decline recovery but these efforts tend to be focused on specific reason codes such as making tweaks to fraud rules or building-in card updater services. Also, resolution is completed retrospectively. Subsequently, most in-market solutions are ubiquitous and offer limited results to this sizable problem.
FlexFactor is the only company that can cure declines in real-time and can do so across all decline reason codes. This includes the unaddressed categories of insufficient funds and do not honour, which make up for 60% of declines in the US – a huge, missed opportunity.
FlexFactor can solve this problem thanks to its proprietary AcceptIQ platform, a machine learning engine which augments original transactional messages with additional data points to spot and ‘accept’ false positive declines in real-time. The AcceptIQ platform leverages FlexFactor’s deep expertise in data science, artificial intelligence, risk management and embedded payments, and is the fruit of decades of research and field experience in the analysis of consumer credit and underwriting data to maximise approvals while minimizing losses.
Currently, FlexFactor is resolving 30% of auth declines during and not after the checkout experience, a significant improvement on the tools and tactics applied elsewhere in the market. This removes customer friction for FlexFactor merchants, improving experience, while the merchants see an increase in guaranteed sales, improving both customer acquisition costs and customer lifetime value. In summary, curing transaction declines constitutes a great opportunity to materially increase ecommerce performance. Learn how FlexFactor can help your business.
Daniel Kornitzer is a FlexFactor Board Advisor. Prior to this, he was Chief Business Development Officer for Paysafe, responsible for enterprise sales globally and for developing strategic partnerships. He was also a stakeholder in Paysafe’s M&A activities. In his 20+ years in technology management, he pioneered groundbreaking initiatives, from the world’s first over-the-phone speech recognition systems and the ISO/ITU standards for video coding, to FirePay’s digital wallet and industry-leading risk management processes, which resulted in his appointment to the NACHA Risk Management Task Force. He is a board advisor at Merchant Payments Ecosystem, Blockchain Founders Fund and Open Finance Network Canada.
FlexFactor is an AI-driven platform that partners with merchants and payment providers to instantly review and recover failed customer transactions at no risk to the merchant and at no cost to the consumer. The platform offers the widest coverage and least friction possible to a merchant. If Flex believes a customer will pay, they take the risk and pay the merchant – guaranteeing the transaction. The customer is subsequently charged at no additional cost. The company is based in the US with product and R&D in Israel.
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