The latest Q1 data show that legacy anti-fraud systems are easily triggered, with only 13% of declined transactions as truly fraudulent. This alarming number is concerning, considering that 65% of declined transactions are triggered, by-first time customers.
Tel Aviv, Israel, May 10, 2022 – nSure.ai, the world’s first digital-goods-focused fully automated chargeback guarantee platform, announced new findings regarding online-retailer credit card processor behaviors and anti-fraud applications. Their analysts discovered that 87% of all declined transactions across gaming, gift cards, crypto, fintech, prepaid, and other industries were not fraudulent in nature.
The growing digital goods market space is expected to reach $5.4tn this year, partially due to the rise of crypto trading, online gaming, NFTs, digital gift cards, and other instantly redeemable purchases. This creates a challenge for sellers who are unable to retract or void a sale if fraud is discovered even seconds after the transaction is completed. Once the value is transferred to a digital good, it can be redeemed anonymously on varying platforms, such as eBay or cryptocurrency exchanges.
To address this problem, nSure.ai offers a chargeback guarantee by relying on a system developed in-house to identify fraudulent actors based on various cross-web behaviors, successfully reducing decline rates by 66% and approving 95% of transactions. This is in comparison to the staggering industry standard of declining 15%-20% of transactions. “Seeing such a high decline rate of legitimate transactions makes it near-impossible for businesses to scale, especially with its imbalanced impact on new customers,” said Alex Zeltcer, Co-founder & CEO of nSure.ai. “Payment fraud detection systems that are designed to protect the sale of digital goods are easily triggered since they were developed based on an outdated e-commerce goods framework. This new realm of digital goods is being held back by outdated security practices.”
nSure.ai’s analysts identified patterns that indicate online fraud detection is not spread evenly across industries. “E-gaming loses 12.8% of transactions while gift card purchases are declined 19.5% of the time. Even higher is the prepaid debit card sector, which declines just below 23% of all transactions,” said Noa Ehrenhalt, Data Analyst at nSure.ai. This means that retailers are leaving millions of dollars on the table, being forced by legacy anti-fraud platforms to either reject the purchase request or risk a chargeback where they must pay back the full transaction to the credit card issuer without any recourse.
A further consideration for online sellers is the lifetime value and negative sentiment that a customer takes with them once falsely declined. The feeling of being denied a platform increases the likelihood of going elsewhere with hesitation to return in the future.