Fraud prevention strategies can backfire, inadvertently hindering legitimate customers from completing transactions.
Banxa, a global leader in crypto infrastructure, had implemented payment declines to protect against fraud. However, when legitimate transactions are declined, that makes for bad customer experience.
When Banxa suspected that some of the declines designed to stop fraud were blocking legitimate payments, they worked with Primer to implement Fallbacks, targeting transactions with a high likelihood of authorization with an alternative processor.
The results were shocking: a 22% success rate for previously declined transactions, recovering over US$7.6 million in revenue it would have otherwise left on the table.
In this interview, Greg Rikkhachai, Head of Payments, Banxa, and Theo Spyrides, Head of Product, Primer, discussed how fraud prevention strategies can backfire, with advice on how businesses can design a dynamic fraud prevention strategy that protects customers without leaving money on the table.
How did Banxa discover that some of its customers’ payments were erroneously declined? What was the estimated loss in revenue resulting from these false positives?
Greg: The payment ecosystem is complex, akin to a spider web with numerous connections between players. With thousands of transactions being processed, some will inevitably be incorrectly declined.
There are many reasons why this might occur, notably suspected fraud, which is a challenge in the crypto industry.
Banxa could capture approvals that might otherwise be lost by being able to retry declined transactions, effectively reducing false positives and protecting against revenue loss. This retry mechanism was vital in identifying and addressing the erroneous declines.
By implementing Fallbacks, we achieved a 22% success rate for previously declined transactions, recovering over USD 7.6 million in revenue that would have otherwise been lost. While we suspected that some payments were being incorrectly declined, we had no idea the impact was this substantial.
What led Banxa to work with Primer to implement Fallbacks?
Greg: We operate in a high-risk and high-volume vertical, so reliability and anti-fraud measures are critical. However, we also work with many processors and payment methods, which makes it harder to catch legitimate transactions being declined.
We sought a partner who truly understands our business and is committed to solving the complex challenges we face. We believed Primer was the right choice because they offer the flexibility and solutions we needed, such as intelligent routing and Fallbacks.
Implementing Fallbacks in Primer’s Workflow was seamless, requiring just a few clicks. Primer’s dataset and decline code mapping then efficiently targeted transactions likely to succeed with an alternative processor.
Primer’s ability to adapt to our needs and provide a robust solution to optimize our payment processing made it an ideal partner for Banxa.
How does Primer (and Fallbacks) work?
Theo: Traditional payment service providers (PSPs) often promote a “full-stack” approach, offering a comprehensive suite of payment services. While this might seem convenient, it can limit merchants’ flexibility and control over their payment systems by locking them into a single PSP.
Merchants are increasingly recognizing the need to use multiple PSPs to optimize performance across different markets and payment methods. They seek options and the freedom to curate payment solutions tailored to their specific needs.
Primer addresses this issue by providing a Unified Payments Infrastructure (UPI), the first of its kind in the world. Unlike full-stack PSPs, Primer empowers merchants with flexibility and control. Merchants can seamlessly integrate multiple PSPs, optimize routing, and implement advanced payment strategies.
One of our standout features is Fallbacks — a mechanism that automatically routes payments to a backup processor if the primary processor fails, significantly enhancing transaction success rates. Merchants also have complete control over selecting their primary and fallback processors, ensuring optimal performance.
What tangible benefits did Fallbacks bring to Banxa?
Greg: We can now quickly identify and automate decline reasons to then implement fallback strategies for soft declines to increase the chance of a successful payment. Ensuring that each transaction is approved on the first attempt is crucial for our users and partners. A seamless transaction process enhances the user experience by preventing the frustration of restarting a purchase. This not only improves customer satisfaction but also has a direct positive impact on our financial outcomes. Users who have a smooth, hassle-free transaction experience are more likely to complete their purchases, leading to increased revenue for Banxa.
Since working with Primer, our conversion rates have increased, and our customers are noticing the difference — and they’re sending more volume our way.
Fraud prevention strategies – especially stringent fraud protection policies – can backfire. How should businesses balance fraud protection with customer convenience and merchant experience?
Theo: Overly aggressive fraud rules can lead to false declines, frustrating customers, and damaging revenue. Additionally, the cost of fraud prevention can be prohibitive, especially for businesses operating on thin margins. Specialized fraud prevention tools can be expensive, and even small fees can significantly impact profitability.
Moreover, the fragmented nature of modern payment systems makes effective fraud prevention challenging. Merchants often rely on a patchwork of payment processors, payment methods, and other services, making it difficult to gain a comprehensive view of their payment landscape.
Through our partnership with Banxa, we support them to tackle fraud and card scams through a number of tools. Examples can be automatically blocking transactions from certain country codes, or running KYC (know your customer) checks. Customer workflows can also be set up to flag suspicious activity directly to the merchant’s Slack channel. At the end of the day, it’s not just about having the right tools. It’s about being smart with them, knowing when to use them, and how to balance friction with fraud prevention.
A good example of this balance is 3DS, which each merchant has a unique perspective on how to use within their overall strategy. One Buy Now, Pay Later (BNPL) provider we support utilizes 3DS for initial transactions as a protective measure. But 3DS isn’t applied unless fraudulent activity is suspected for subsequent merchant-initiated transactions. Effectively managing fraud requires a balanced approach that prioritizes both security and customer experience.
