We recently saw a survey about high risk merchant services providers ranking factors related to merchant risk they were concerned about the most. It was top heavy, with card-not-present fraud leading the way at 38 percent, followed by underwriting and handling chargebacks each at 23 percent. Card present fraud and friendly fraud impact were each 8 percent, the latter, we thought, surprisingly low.
Merchant services, especially high risk, is a never-ending task of balancing the many factors of risk and compliance. In addition to that, high risk payment service providers have equally vital tasks such as remaining on the forefront of offering the latest technology and favored payment types and maintaining the best customer support possible while keeping operational costs affordable and competitive.
It’s a full plate — more and more so over the last 5-7 years.
We’re curious as to whether there is data detailing the increase in staffing for high risk merchant service providers over that period. We’d be remiss if we didn’t feel there was a significant increase.
Here is our take on the survey:
Card-not-present fraud: 38%
It’s no secret that card-not-present fraud continues to be on the rise, and has been for the last five years, even before the major credit card brands migrated to EMV chip credit cards in the U.S. But with recent developments in fraud prevention tools — namely artificial intelligence and custom machine learning — coupled with renewed interest in fighting fraud, merchants and PSPs are gaining ground on the fraudsters.
CNP fraud plays well into the next point.
Chargeback management: 23%
Chargebacks are always the (unfortunate) result of CNP fraud, but CNP fraud is only one of the drivers causing merchants and their PSPs to pay special attention to chargebacks. Back in late 2015, Visa announced it was halving its tolerance for chargebacks from 2 percent of sales or 200 per month to 1 percent or 100 per month.
That got e-commerce merchants’ collective attention. About a year later, Visa announced a pre-monitoring program for merchants dangerously close to the 1 percent/100 per month threshold. Recently, Visa announced more changes regarding chargebacks — reason codes replaced with dispute reasons and limits on response time — with the goal of more collaboration between merchants, PSPs, issuing banks and consumers.
Underwriting: 23%
Fraud prevention begins with robust underwriting. Identifying fraudulent merchants before they can inflict their craft is the key to having low fraud rates, low chargebacks and high revenue. Recently we blogged about the latest fraud trends merchants and high risk merchant service providers ought to take note of — such as friendly fraud and transaction laundering — both of which can be positively impacted with strict underwriting policies.
Card-present fraud: 8%
This is a (positive) sign of the times. As only 8 percent of PSPs considered card-present fraud their biggest worry, we feel it is the result of the migration to EMV credit cards, which are near impossible to duplicate. Brick and mortar merchants are now taking EMV a step further by no longer requiring a signature for purchases.
Impact of friendly fraud: 8%
At first, such a low percentage for a festering problem had us stumped. After further thought, however, we feel high risk merchant services providers don’t devalue the impact of friendly fraud, but are merely indirectly involved with it. It’s no secret that it is the merchant who suffers the most from friendly fraud, with the loss of revenue and suffering a chargeback. The merchant’s PSP, though one step removed, also misses out on revenue, but not as severely as the merchant.
Instabill — ranked among the best high risk merchant services providers
For many merchant service providers, the merchant-PSP relationship slows after the merchant has earned an approval. A good PSP will work alongside merchants in keeping friendly fraud and chargebacks to a minimum.
Upon approval with Instabill, the merchant-PSP relationship is merely the beginning. It’s why we’re regarded as one of the leading high risk merchant services providers in the business. Speak one-on-one with a merchant account expert today at 1-800-530-2444 to discuss the possibilities.
