The European False Declines Problem (And How To Fix It)

Ecommerce is a critical cog in the European economy, and growing in importance. In 2017, European online sales grew 11%, and in 2018 they will grow another 13%, resulting in an annual volume of $602 billion Euros.

But there’s evidence that this online market has the potential for even more robust growth. According to a 2017 study, fewer than 40% of European merchants sell via a digital channel. Moreover, 74% cater only to their own country, in their own language, meaning there is massive untapped potential in cross-border sales. Another major factor holding back growth in European eCommerce is one many merchants aren’t even aware of: the unusually high rates of false declines in this market.

False declines (the rejection of legitimate customers, usually over fear of fraud) have a holistic impact on the growth of a market. Beyond the loss of a good order, false declines tend to result in poor customer experience, damage to a merchant’s brand, and an effectively squandered customer acquisition cost. It’s clear that reducing the false declines rate will improve margins, and make the online shopping experience more pleasant.  

In this post we’ll look at the reasons many good European shoppers are declined (both by European merchants, and international sellers), and give tips for how to approve more of these legitimate orders.

Why are European orders more likely to get declined?

High rates of cross-border orders

It’s a sign of untapped potential that, despite only a quarter of European merchants having international sites set up, rates of cross-border shopping in Europe are robust. Both Western & Eastern Europe have cross-border shopping rates that are surpassed only by the Middle East, and 71% of Europeans have shopped cross-border.

The popularity of cross-border shopping in Europe is understandable. Relatively low shipping costs in close-by countries, makes it worthwhile to take advantage of international price differences, or to order specific brands not sold domestically. In some cases, it’s even worth it for shoppers to order to drop points in bordering countries just to save on taxes.

Unfortunately, cross-border orders are far more likely to result in false declines. Why? First, countries differ when it comes to legitimate & fraudulent order patterns. For instance, in France, it’s totally normal to enter name and address fields in all caps. But in most other countries, this looks like abnormal – and possibly fraudulent – behavior. Another complication is that payment methods preferences and trends vary from country to country. Germans like paying with wire transfers, but if they’re shopping at an Italian store they’ll have to dust off a credit card which they haven’t used in a while – which means there isn’t a lot of activity. That, in turn, means that the fraud solution will not have a lot to work with in terms of linking the transactions to previous ones – a process that can help increase the chance of approval.

It’s also worth noting that cross-border orders are far more likely to be payment declined. This means that they’re declined at the gateway level, or bank level, before merchants even have a chance to review them. You can read more about payment declines here.

European shoppers are more protective of their data

Another primary contributor to European false declines is customer behavior. European shoppers tend to be far more wary of giving away information online. This is probably a healthy practice, but also backfires: when merchants have less information about a legitimate order, they’re more likely to decline it.

For example, Europeans are relatively unenthusiastic about social media, and when they do sign up they tend to not use their full names (e.g: Steven Jones becomes Ste Ven). The same goes for emails – Europeans often create emails unrelated to their real names, making it harder to differentiate between good shoppers and the fraudsters who create disposable email addresses for their heists.

Wary Europeans are also more cognizant of the risk of identity theft than Americans. They are more likely than Americans to have separate credit cards used exclusively for shopping online, and to replace them often. Again, this is a great idea to protect your online identity. However, it results in merchants having less historic data about a card, which makes it harder to approve good orders.

How merchants can approve more European orders

Fortunately, there are ways for merchants–both European and global–to improve accuracy when reviewing European shoppers’ orders. Firstly, behavioral analytics. By observing shopper behavior on your site, including which link they clicked to arrive at your store, and which pages they visit during this shopping journey, you can learn a lot about the legitimacy of an order. For instance, good customers tend to visit an online store multiple times and browse around a lot before purchasing, while fraudsters go straight to checkout.

As mentioned above, the email name associated with a European order may not tell you much about the shopper, so don’t put too much stock whether it matches the billing name or not. Instead, check out the email age, and domain name. Fraudsters tend to open disposable email accounts to use for heists, since they’re both quick to set up, and totally anonymous. For digital orders, where the email is essentially the shipping address, you should weight these factors heavily. And if email account has existed for more than six months, and is on a domain you recognize (like gmail or yahoo), you should err on the side of approving the order.

Finally, embrace machine learning. Human analysts are often simply unable to discern big-picture, country-specific fraud patterns. They’re also prone to biases–for instance regarding orders from certain countries as risky, even though the statistics say otherwise. A machine learning fraud solution though, can learn to treat orders from different geographies differently. For example, machine learning may uncover that a shipping/billing mismatch is a significant sign of fraud in orders for sneakers placed with Albanian credit cards, but not particularly important in other cases. This is the sort of insight that is nearly impossible for a group of humans to uncover by reviewing orders one at a time, but can greatly boost order processing efficiency.

I hope this was a good overview of the European false declines issue. For a more in depth discussion, reach out to [email protected].