Card issuers could be losing an average of $160,000 a year in interchange revenue because legitimate customer transactions are being wrongly declined by outdated fraud detection systems, according to new analysis from payment technology provider BPC. 

The modelling highlights what BPC describes as a significant but often overlooked source of revenue leakage. While banks closely monitor fraud losses, the financial impact of falsely declined transactions is rarely measured, despite growing evidence that it now represents one of the payments industry's biggest hidden costs. 

According to Datos Insights, false declines are expected to cost the global payments industry $297 billion by 2029, based on research with card issuers and payment processors across North America, Latin America and Europe. The gap is driven by legacy authorisation platforms that rely on rigid, rules-based logic, flagging normal spending as suspicious rather than applying the real-time risk scoring used in modern systems. 

BPC's analysis models the annual cost of avoidable false declines across five markets. The calculations use a representative mid-sized issuer portfolio of 10 million attempted debit transactions per month. Even at a conservative 0.50 percentage point false decline rate - well below broader industry estimates - this equates to 50,000 legitimate transactions incorrectly blocked each month. Assuming an average transaction value of $30, that's roughly $1.5 million in lost approved spend each month, before interchange revenue is applied. Depending on local interchange rates, the annual revenue impact varies significantly.

The analysis shows that issuers operating in markets with higher interchange rates stand to lose the most, even when false decline rates remain relatively modest. Europe's lower estimated losses largely reflect regulatory interchange caps rather than fewer incorrectly declined transactions. 

The direct revenue loss is only part of the picture. BPC says issuers also risk losing long-term customer spending when legitimate transactions are declined, as consumers increasingly switch to an alternative payment card rather than retrying the transaction. Supporting this, Datos Insights found that 78% of financial institutions believe failed payments have a critical impact on customer experience, while one-third report losing 2%–5% of customers because of payment failures. 

Khurram Ahmed, Senior Product Consultant – Fraud Solutions BPC, said: 

"Most banks have a clear view of fraud losses, but very few measure what false declines are really costing them. Every legitimate transaction that's incorrectly blocked represents lost interchange revenue today and potentially lost customer loyalty tomorrow. As payment expectations become increasingly real-time, legacy authorisation systems are creating a hidden source of revenue leakage that many issuers simply aren't tracking. Modern authorisation platforms using real-time decisioning can significantly reduce false declines, helping banks recover revenue that is currently being left on the table every month." 

The findings are published in BPC's new guide, Modernisation Without Disruption, which explores how banks can modernise legacy payment infrastructure while minimising operational risk. The guide outlines four migration strategies - Big Bang, Conservative Pilot Run, Parallel Run and Phased Box Migration - and includes real-world case studies of large-scale card migration projects completed using BPC's SmartVista platform.