Tomorrow’s merchants may not be who you think they are. As the face of commerce continues to evolve from physical to virtual, the reality of what constitutes a ‘merchant’ is changing every day.
As apps and wearables replace traditional payment mechanisms, anybody with a bank account and a smart device can become a merchant, so a sharp increase in the overall number of operating merchants is inevitable.
If you’re a merchant acquirer, this means you’re likely to see a significant rise in your merchant applications and therefore, the size of your portfolio. To put this potential growth into perspective, if you’re usually accustomed to 500 applications and a portfolio of 10,000 merchants, you could soon be looking at as many as 25,000 applications and a portfolio size of one or two million.
Of course, incredible growth can bring with it some very nice benefits, but with so many merchants to manage, you’re also faced with a much greater exposure to risk. Simply maintaining the same tools, processes and personnel that currently protect your portfolio may not be enough to withstand the rapid increase in merchant volume.
So how can you protect your business and reap the rewards?
Equipping the right tools
For many acquirers, risk management solutions are only given serious consideration after fraud and regulatory action have occurred. In the worst cases, these acquirers have already suffered damages, making the financial and operational impact of implementing a fraud combat strategy extremely inconvenient.
By implementing a holistic merchant solution before fraud strikes, you can avoid this difficult situation, drastically reduce the chances of fraud occurrence and greatly mitigate its effects. Not only is this a smart, preventative measure, but with a more secure portfolio of merchants, you will also enjoy a significant lift to both margins and ROI.
By investing in risk management early, you can expect to:
Reduce the cost of merchant on-boarding
With the right tools, you can streamline on-boarding checks for certain merchant categories, on the basis that the appropriate limits or ongoing monitoring checks are in place.
Expand your merchant base
You will have the confidence to take on merchants with new and innovative business models, knowing that you have the oversight and control required to do so safely.
Be in control of your risk exposure
Continuous monitoring of merchants’ web, social media and transactional behavior ensures that you’re quickly alerted of any changes to a merchant’s risk level. It allows for prompt implementation of mitigating action and protection from financial loss.
Increase profitability of merchant base
Monitor merchant behavior post on-boarding and gradually increase transaction limits if no high risk flags are detected. Limits can be managed at a merchant, outlet or terminal level, allowing for differentiated limits depending on location or type. Seasonal limit increases can also be applied to accounts for spikes in holiday season sales.
To fully prepare for the merchants of tomorrow, acquirers must strongly consider how to manage an increased exposure to risk. By implementing an effective fraud combat solution early, you can enjoy the benefits of a large merchant portfolio whilst feeling confident that your business is protected.