Covid-19 was both a blessing and a curse for e-commerce businesses, depending on the vertical and on your perspective. Overall, however, online transactions surged, with most experts in agreement that the gains—at least most of them—will likely be permanent. Many of those transactions are being made by first-time users and, according to a new report, that presents a problem for merchants in the midst of new opportunity.
In recent years, merchants have been increasingly concerned about declining transactions from legitimate users because their fraud systems flag the purchases as suspicious—false positives. According to Forter’s Are New Shoppers Falling Out of Your Funnel Forever?, many of the new, unfamiliar users shopping online are being declined by fraud systems that don’t recognize them or their behavior.
According to the Forter research, new users are 5 to 7 times more likely than returning users to have their transaction falsely declined. And, 40 percent of those declined customers will leave your site, never to return.
Forter analyzed $200 billion in online transactions that crossed its network. The report quantified, in several verticals, how much each falsely declined new user cost a company annually (what it is calling New User Missed Opportunity, or NUMO):
- Apparel & Accessories: $930
- Home & Garden: $798
- Food & Beverage: $1,062
- Beauty & Health: $243
“NUMO is a stark reality that is costing e-tailers millions in lost opportunities and hundreds of millions more in lifetime value of each lost customer. NUMO is the fear of missing out manifested for e-tailers,” the report’s authors wrote. With the right approach to risk management, you hold the power to an e-commerce and customer lifetime value enabler.”