Modernising fraud detection reduces costly false declines for card issuers

BPC highlights the significant financial and operational impact of false declines on card issuers, advocating for real-time decisioning and adaptive models to cut costs and improve customer experience amid evolving payment landscapes.

Card issuers have long been diligent about counting fraud losses. What they have been far less consistent at measuring is the cost of legitimate payments their systems wrongly block.

BPC, the payments technology group, estimated on 6 August 2026 that false declines can cost a mid-sized issuer about $160,000 a year in lost interchange revenue, based on 10 million debit transactions a month and a deliberately cautious false decline rate of 0.5 percentage points. The company said the figure captures only part of the wider damage, which can also include customer frustration, diverted spending and extra operational work.

Khurram Ahmed, senior product consultant for fraud solutions at BPC, told The Fintech Times that the problem is partly structural. Fraud is usually tracked and reported transaction by transaction, he said, whereas declined legitimate payments often surface only as complaints or call-centre cases. That makes the losses harder to isolate and fold into financial reporting. His view is that banks need to measure approval accuracy as closely as fraud detection, with false decline rates broken down by product, channel and customer segment.

Ahmed said the gap is especially wide at legacy issuers still relying on rules-based systems. In his view, a typical mid-sized bank on that model may wrongly decline about 30 good transactions for every fraudulent one it catches. By contrast, issuers using real-time decisioning and adaptive models can keep false declines below 0.5 per cent, while static systems can push the rate above 5 per cent during busy periods or when customers are travelling.

The stakes are highest in markets where card interchange fees are still relatively rich. Ahmed pointed to South Africa and Ecuador as examples, noting that higher interchange means every declined legitimate purchase costs more. He said that in such markets the revenue leakage from false declines goes straight to the bottom line, making modern fraud platforms easier to justify and delays more expensive. In Europe, by contrast, fee caps are far lower, which limits the direct revenue hit even if the customer experience problem remains.

BPC’s analysis sits alongside a broader industry conversation about the hidden cost of manual fixes and operational friction. PYMNTS has reported that banks often fail to account for the work involved in reviewing declines and resolving customer issues, partly because those costs do not appear cleanly on monthly statements. BPC argues the answer is to move from static fraud rules to real-time, customer-level decisioning without ripping out core systems all at once.

That phased approach, according to BPC, can involve running legacy and new platforms in parallel, testing selected products or customer groups first and using a fraud layer to bridge the old and new environments. The company says its SmartVista platform is designed for that kind of migration, while also offering real-time monitoring, behavioural analytics and machine-learning-based fraud controls across payment channels. BPC says it has handled more than 400 legacy migrations in more than 100 countries.

Ahmed said tighter fraud controls and lower false declines are not mutually exclusive, but only if issuers treat fraud as a precision problem rather than a blunt-force one. He said banks that have moved to adaptive decisioning often report false decline reductions of 20 per cent to 40 per cent without increasing fraud losses. Datos Insights has estimated that false declines cost the industry $213 billion in 2025 and could rise to $297 billion by 2029, underscoring why issuers are under pressure to modernise sooner rather than later.