The economic recovery could be reduced or delayed unless businesses plug an annual $20bn hole in online transactions, according to a new study by payments fintech Checkout.com.
Loss of sales caused by false declines, where legitimate transactions are flagged as fraudulent, cost online retailers at least $20bn in 2019 in the world’s biggest e-commerce markets.
At a time of unprecedented trading conditions, merchants are handing nearly $13bn to competitors as consumers take their falsely rejected business elsewhere. A further $7.6bn of consumer money is effectively written off the balance sheet of the digital economy as consumers give up online purchases altogether.
The US is worst hit, losing $15bn last year to false declines, followed by the UK ($2.3bn), Germany ($1.7bn) and France ($1.3bn). This is money businesses can’t afford to lose, with Covid-19 predicted to cause an average global downturn of 6%. These losses will increase unless action is taken, warns the study.
The volume of online payments is growing as consumer habits change due to the pandemic. Without making their payments more efficient, businesses will continue to lose part of this growth.
The research, the largest ever of its kind, conducted by Oxford Economics, is based on 5,000 consumers and 1,500 merchants across the US, UK, France and Germany.
“The worst thing is to lose a customer at the point of payment. The most expensive mistake you can make is to lose people at that stage, because you’ve spent so much on customer acquisition, and now you’re losing them for reasons that you might not even be aware of,” said Andrew Row, Managing Director of Uber Payments, who was interviewed for the report.
The research shows that more than two thirds (65%) of merchants don’t receive the data that tells them when, why and how customer payments have been declined, stopping them from even beginning to address their payment inefficiencies.
Failure to unlock the value tied up in payments is holding businesses back at a time when growth online has never been more important. Almost a third (31%) of merchants surveyed agreed that payments issues are preventing them from entering new markets.
“The crisis has only accelerated the shift of commerce to digital. Now more than ever, merchants must be empowered to create better customer experiences. Payments are a source of amazing hidden value that merchants can use to unleash growth,” said Bradley Riss, Chief Commercial Officer at Checkout.com.