Digital Transactions - June 2016 - (Page 16)
June 2016 digitaltransactions
Courting and retaining high-risk merchants can yield high returns.
But it's a lot of work.
t's no simple task, but one that can
yield enviable returns.
Finding the profit in high-risk
merchants requires diligence, a knack
for customer service, and a commitment to thoroughness. It also requires
deep knowledge of chargeback ratios,
the card-brand rules, and how the banking system works, an understanding of
the merchant category, familiarity with
merchant billing and shipping policies,
an awareness of criminal use of the
payment processing system, and careful attention to government regulation.
Even with that hefty list of requirements, many independent sales organizations and acquirers still pursue
"There's always the satisfaction
of serving someone who can't be
served some place else," says Dennis DeLaRosa, president of International Processing Solution Inc., a
Valencia, Calif.-based ISO. Working
with high-risk merchants is not about
helping bad actors, DeLaRosa says,
but about helping those associated
with a social stigma.
Indeed, high-risk merchants generally fall into one of two categories, says Adil Moussa, principal at
Adil Consulting LLC, an Omaha,
* digitaltransactions * June 2016
Neb.-based acquiring consultancy.
There are merchants whose products are morally frowned upon, such
as adult entertainment, online gambling, and multilevel-marketing programs, Moussa says. The other group
includes those who create custommade products or provide paid-inadvance merchandise or services,
such as furniture, airfare, or travel.
"The reasons these last ones are
considered high-risk is due to the fact
that between the time they collect
the money and the time the customer
enjoys the product, there is a risk they
can go bankrupt, and if they do, the
acquirer is the one that needs to reimburse all the people who paid for the
service," Moussa says via an email to
ISOs and acquirers courting highrisk merchants have many ways to
find them. Referrals from existing
merchant clients, banks, and other
third parties is one avenue.
Another, favored by Instabill, a
Portsmouth, N.H.-based payments provider, comes from continually updated
content on its Web site, says Wendy
Jacques, Instabill sales manager. That
requires diligence to ensure the subject
is relevant and the ISO's content has
the best chance of landing on the first
page of a search engine's results.
DeLaRosa likes the referral technique. A recommendation by a merchant that already has a relationship
with International Processing goes a
long way, he says. Having a trusted
source provide the referral can alleviate
many concerns about bad actors signing up for electronic payments, he says.
Attending trade shows that focus
on a particular merchant vertical also
is a favored prospecting tool.
While the card brands long have
offered chargeback-monitoring programs, anti-fraud measuring services,
blacklists of prohibited merchantaccount owners, and other tools to
limit the payment card system's exposure to risk, much of the actual data
collection and monitoring is handled
by the acquirer.
Now, acquirers have to contend
with increased government scrutiny, as
agencies such as the Consumer Financial Protection Bureau and the Federal
Trade Commission show increased
interest in electronic payments.
One change that DeLaRosa has
witnessed is more attention to antimoney-laundering efforts, which
amped up post-9/11 to quell the ability of terrorists and criminals to move
funds electronically. Now, however,
that focus seems to have intensified.
"What we're seeing more now
is money-laundering compliance,"
he says. "We saw it change around
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