Category: Underwriting

WePay on Chase Acquisition: “The Same, Only Better”

As WePay Chief Strategy Officer Rich Aberman sees it, there are two primary types of acquisition plays in the payments industry.

First, there’s the kind where one payments company buys another payments company and rolls it into an existing business, for the boost in revenue or transaction volume.

Then, there’s what Chase is doing with its plans to buy WePay.

Q&A: The Risks and Benefits of Frictionless Underwriting

The advent of frictionless underwriting turned the payments world on its head. The ability to onboard merchants quickly with a minimum of fuss has enabled small merchants to accept payments more easily, clearing the way for many more to enter the market.

But the practice does have its downside. Lowering barriers to entry into the payments system lowers them for everyone, not just the good guys. With that in mind, PaymentFacilitator.com is beginning a series on the perils and the benefits of frictionless underwriting.

A Payment Facilitator’s Guide to Staying Out of Regulatory Crosshairs

The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have increasingly targeted actors in the payments industry—including processors and independent sales organizations (ISOs)—for allowing “bad” merchants into, or to remain in, the payments ecosystem.

Indeed, when regulators identify significant consumer injury resulting from a merchant’s deceptive practices, it is not uncommon for the merchant’s payment processor and/or ISO to be named as a codefendant in an ensuing enforcement action—along with individuals at the processor or ISO who facilitated the merchant’s processing activity.

New CFPB Lawsuit Reminds PFs: Use Frictionless Underwriting for High-Risk Merchants at Your Peril

Last week (Sept.23), the Consumer Financial Protection Bureau filed a lawsuit against a credit repair company called Prime Marketing Holdings.

In a press release announcing the complaint, CFPB Director Richard Cordray said, “We are taking action against Prime Marketing Holdings for luring consumers with misleading claims about its ability to repair credit files and then charging illegal fees.”
This case is a reminder to PFs that, when you’re dealing with merchants in high-risk categories, frictionless onboarding is not the way to go.

When Treasury Speaks, PFs Should Listen

The U.S. Treasury clarified its anti money laundering regulations regarding foreign correspondent banks Aug. 30 and the attention it got was a reminder how weighty the Treasury’s words are to those in the payments world. Any time the Treasury speaks about AML PFs should listen, says Deana Rich, president of Rich Consulting.

Rich, a compliance expert, says KYC and AML and transaction monitoring are all practices that the technology companies who become payment facilitators are not used to overseeing, so attention to detail is highly recommended.

Fraud And Compliance And Rules, Oh My!

The pain of keeping all the rules and regulations straight for a payment facilitator is only exceeded by the pain of not keeping them straight. A PF has to protect itself from merchant problems with underwriting and monitoring, while adhering to the mandates from card brands and acquirers. It’s a lot now, but as everyone knows, there’s more coming.

As heard in this week’s edition of the PaymentFacilitator.com podcast, the best PFs can do to mitigate excessive regulation from without is to do more within, said Rich Consulting president Deana Rich, moderator of the session Emerging Threats Cage Match: Compliance v. Fraud at the second annual Payment Facilitator Day at Transact 16 in April.

Swing The Risk And Benefit From The Math

As an industry, we can immediately grasp the benefit and value of the Payment Facilitator model. We can examine, cipher and build the mathematical equations around the cost/benefit of expedited on-boarding, the value of aggregated funds, reduced cost of signing and supporting as well as the increased sales funnel due to expanded MCC’s.

What we are minimizing, or perhaps overlooking all together in the value chain formula, is the shift in the type of loss category experienced with traditional direct merchant portfolios as compared to a PayFac operating sub-merchant model. In traditional direct portfolios, loss categories that skew to the high end of the scale typically include bankruptcies or other financial interruptions, merchant/cardholder collusion/bust out schemes and cardholder fraud that results in Chargeback losses. The common theme of these loss categories – they are event driven and typically unpredictable.

The Struggles Of Social Media Authentication For PFs

On December 8, Facebook said that the number of active business Pages on Facebook has grown to 50 million, a 25 percent increase since 40 million in April. This casual announcement from Facebook is significant for a few reasons, not the least of which is that it confirms what payment facilitators have known for years: Social payment needs are soaring.

Specifically, FB’s stats illustrate the explosive, global growth in the number of small merchants while simultaneously reminding merchants how much they need to embrace social media as both a marketing and communications tool.

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