47% of Retailers Say False Declines Impact Consumer Satisfaction

Payment failures are a major challenge for merchants, especially as they expand globally. Consumers expect seamless transactions, and payment declines can lead to abandoned purchases, lost sales and damaged loyalty.

According to a PYMNTS Intelligence report, “How Open Payments Boost Performance,” in collaboration with Spreedly, open payments platforms help merchants improve conversion rates, track key performance metrics, and reduce involuntary churn, particularly for subscription businesses.

Increasing Customer Conversion

False declines — when a payment is incorrectly rejected — are a costly problem for merchants. According to the report, $157 billion in U.S. eCommerce sales were at risk due to false declines in 2023. Of this, $81 billion was projected to be permanently lost despite attempts to recover the payments.

Consider that 47% of retailers cited false declines as having a severely negative impact on customer satisfaction, and 58% of small and medium-sized businesses (SMBs) reported that these declines had a high impact on their operations. Additionally, 82% of online retailers expressed difficulty in identifying the causes of failed payments, further exacerbating the issue.

Open payments platforms mitigate these challenges by enabling intelligent routing of payments to the optimal gateway. This can prevent payments from being incorrectly declined by trying different payment routes, such as leveraging historical transaction data or selecting a gateway with lower fees. This recovers lost revenue and provides customers with a smoother, more seamless experience. For merchants, this leads to an increased likelihood of customer retention, driving future revenue growth.

Leveraging Payments Data

Merchants benefit from performance metrics, which offer insights into their payment processes. With open payments platforms, merchants gain centralized access to these critical metrics, empowering them to make more informed, data-driven decisions. According to the report, 61% of merchants consider payments a crucial area for competitive differentiation, particularly when they can leverage payment data to personalize customer experiences.

For example, data gathered from these platforms helps identify trends in authorization rates, decline reasons and transaction costs, enabling merchants to adjust their strategies accordingly. These platforms contribute to risk management by ensuring compliance with security regulations and protecting sensitive customer data.

For subscription-based businesses, payment failures can result in involuntary churn, where customers unknowingly lose access to their subscriptions due to failed payments. According to the report, 40% of subscription businesses saw a rise in involuntary churn over the past year, but 79% had not implemented any strategies to reduce this. This form of churn is especially damaging as customers often do not realize their subscriptions have been interrupted until it’s too late.

Open payments systems can counteract this issue by automatically retrying failed payments using alternative payment gateways. Although not all failed payments can be recovered, this functionality reduces the chances of losing subscribers.

By updating payment information and managing the lifecycle of customer subscriptions more efficiently, open payments help businesses maintain customer retention and sustain recurring revenue streams.