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Table of Contents

Lead Story

Proximity payments mash-up: NFC, QR, BLE, MST


Industry Update

Threat indices rise as 'fullz' rush in to IRS site

Ready or not, PCI 3.0 is here

Small change for small issuers in Target-MasterCard settlement

Second Sally Beauty breach a 'wake-up call'

Trade Association News: MWAA revisits heart of Chicago


NFC game changer for retailers and marketers

The Mobile Buzz: Six mobile engagement strategies


Insider's report on payments: Going cashless sounds like nonsense

Patti Murphy
Proscribes Inc.

Valuation impact of EMV on merchant acquiring assets

Scott Calliham and Janinne Dall'Orto
First Annapolis Consulting


Street SmartsSM:
Controversial questions and answers - Part 2

Jeffrey I. Shavitz
Affinity Solutions Inc.

EMV liability shift catching SMBs unaware

Chris O'Donnell
Instabill Corp.

Don't gamble with your business

Kevin Mendizabal
Frates Insurance and Risk Management

Using emotion to your advantage

Jeff Fortney
Clearent LLC

Infographic: 2015 U.S. EMV liability shift

Company Profile

Conformance Technologies


New Products

EMV merchant preparedness, prepackaged and just-in-time

EMV Marketing-in-a-Box for POS
Strategic Marketing LLC

Turnkey, white label hospitality platform

Residualfy Inc.


Mad men and women of business - Part 1


Readers Speak

Boost Your Biz: Who cares?

Resource Guide


A Bigger Thing

The Green Sheet Online Edition

June 08, 2015  •  Issue 15:06:01

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Don't gamble with your business

By Kevin Mendizabal

Given the financial interdependence of payment professionals, a negative event can trigger a domino effect. In addition to cyber-security risks, ever-increasing threats of oversight and scrutiny are coming from all directions. Technological solutions offer some protection, but can pitfalls be avoided or, at least, mitigated in further ways?

Part of my routine involves aligning contractual business requirements with appropriate lines of insurance coverage, in addition to placing companies that can't find a willing carrier simply because of the industries they are in. However, I rarely come across insurance proposals that cover exposure in the payments industry. Ones I have seen that could be construed as coverage exclude claims that would come about in payments. This would be like an ISO without a gateway boarding a card-not-present account and then charging an early termination fee once the merchant leaves because it's impossible to conduct business.

Three smart solutions

In such a contractually intensive environment, a few easy solutions can help avoid costly lawsuits that are occurring more frequently. First, seek good counsel – not just any counsel. Find somebody who knows your industry and isn't just quickly reviewing a piece of paper before you sign it. Industry expert counsel is an invaluable resource in reviewing ISO agreements, as well as for reviewing insurance contracts.

Second, cover your bases with whomever you do business with. I see sponsor banks and vendors that do not have any insurance requirements for their ISOs and value-added resellers. What this says is that they are comfortable footing the bill in a lawsuit. Even though they may not ultimately be deemed liable, an attorney will not provide litigation services pro bono.

For this reason, include a clause requiring that your partnering vendor or provider be named as an additional insured. Not too long ago, in a case involving counterfeiting of famous designers' goods, merchants and acquirers all the way up to the sponsoring banks were sued. Couple this with an ISO that has a self-funded guarantee program and you're really asking for trouble. I've had some good runs in my day at the craps table, but eventually everybody sevens out.

Third, ISOs can incorporate insurance requirements for their merchants, or review merchants' existing coverage to ensure it is adequate for their current business endeavors. Let's say an ISO knows a merchant is not only financially sound, but also adequately insured. Could this avoid a chain reaction leading to mass chargebacks? At the very least, ISOs should examine the measures their merchants have in place to cover any liability for the products or services they provide, and ask whether those measures are sufficient to keep them solvent should a harmful setback occur.

Kevin Mendizabal, Director at Frates Insurance and Risk Management, specializes in insurance for the electronic payments industry and serves on the Risk, Fraud and Security Council for the Electronic Transactions Association. Prior to joining Frates, he held underwriting and leadership roles in insurance and mortgage banking, including AIG and Bank of America. Kevin has a degree in computer science from Rutgers University. You can reach him at or at 405-290-5610.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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Spotlight Innovators:

USAePay | Impact Paysystems | Electronic Merchant Systems | Inovio | Board Studios, Inc.