By Anthony Ogden
Thanksgiving has come and gone. Turkeys are much safer now. However, with peak Christmas shopping in full swing, are your merchants sitting ducks? ISOs and merchant level salespeople (MLSs) compete intensely to onboard and retain merchants in their acquiring portfolios. Unfortunately, the best sales efforts of ISOs and MLSs sometimes result in merchants being declined or terminated due to a listing on the MATCH (Mastercard Alert to Control High-Risk Merchants) system, which was previously known as the Terminated Merchant File.
If merchants are declined or terminated and listed on MATCH erroneously, an important source of acquiring revenue is needlessly lost. Are your merchants vulnerable? Probably more than you realize. Is there anything you can do to prevent or reverse the loss of merchants to MATCH listing? Yes, but it depends on the circumstances.
Merchant acquiring viewed in a present-day context tells the story. When regulatory winds of change blow within the payments ecosystem, acquirers and card brands swiftly re-evaluate their merchant risk. When deceptive or criminal enterprises abuse a merchant category and generate negative news headlines, the entire merchant category is viewed with suspicion. When merchants operate in an area for which regulation becomes unclear, unsettled or confusing, acquirers and card brands re-examine their merchant risk. When acquirer mergers, acquisitions and merchant portfolio sales occur, acquirers re-examine their merchant risk.
Any of these occurrences can rapidly thrust merchants that were previously considered good and manageable-risk revenue producers into reclassification as excessively high-risk, untouchable merchants suitable only for account termination and possible MATCH listing. This causes unnecessary loss and is preventable or correctible.
After more than 23 years as a payments attorney, I can say that several things have changed very little. A terminated merchant listed on the MATCH system is enough to create great concern at even the largest merchant acquirers. Many acquirers perceive terminated merchants listed on MATCH as untouchable high-risk accounts that will taint their merchant portfolios, lead to potential economic loss and brand damage. It is highly unlikely merchants listed on MATCH will be able to obtain new merchant accounts, so all associated residuals will be lost.
Once your merchants are terminated and listed on MATCH, options for writing a new merchant account range from scarce, to ridiculously expensive, to outright scam options that avoid fully settling merchant sales funds to avoid paying agent residuals. It may still be possible for a merchant to get an account while MATCH listed. But U.S. acquirers will be extremely few, and foreign or offshore acquirers must be vetted with extreme caution.
The answer is both yes and no. Many (but not all) merchants listed on MATCH present the associated and significant risks of loss. Terminated merchants who acted in a fraudulent, unlawful or criminal manner must be listed on MATCH, brought to justice and taken out of commission. Moreover, terminated merchants in clear violation of card brand rules should likewise be placed on MATCH. The integrity of the electronic payments system depends on it.
However, the last 23 years have proven to me that there are a significant number of merchants who were placed on MATCH in error. Erroneous MATCH listings occur when well-intentioned acquirers attempt to maintain compliance in an electronic payments market with confusing and constantly changing card brand rules and governmental regulatory regimes (examples such as the now-defunct Operation Choke Point and a few Federal Trade Commission cases should come to mind).
Surprisingly, in many instances, there are terminated and MATCH-listed merchants who have not violated any laws, regulations or card brand rules despite initial appearances. This occurs far more often than one might think. When it does, everyone needlessly loses valuable merchant revenue and residuals.
The first step in protecting your merchant revenue and residuals is to reduce risks of MATCH listings. Begin by identifying the high-risk (or potentially high-risk) merchants in your portfolio. Risk can be associated with the merchant category code, merchant type, or products and services offered. Check to see if your merchants operate in a manner that appears risky, or have product or service types that are receiving increased risk – based on scrutiny from card brands, regulators and law enforcement.
News reports and press releases may aid this evaluation. In instances like money laundering, the risk may be hidden behind what initially appears to be a low-risk merchant type (so search for those "low risk" merchants that look too good to be true).
Also ask whether your merchants are at risk of appearing to be, or becoming, questionable merchants in a merchant category that will be quickly swept away as excessively high risk when the regulatory or card brand winds of change start to blow.
Carefully review your merchants' current operations for compliance. Depending upon your structure, you can request merchants to update their operational information for your internal review, or you may outsource this function to a competent service provider.
Wherever risks are identified, operational changes should be quickly implemented to bring questionable merchants into compliance and reduce the risk of violating card brand rules, laws or regulations and potentially creating brand damage. Proactively reducing risks of MATCH listing may prevent the nightmare of losing your hard-earned merchant revenue and residuals. An ounce of prevention is worth 100 pounds of cure when your earnings are at stake.
Next, re-examine and delete erroneous MATCH listings. When your merchants are terminated and listed on MATCH, it is important to re-examine the basis for their MATCH listings to ensure that they were not the product of error. I have seen many cases of MATCH listings that resulted from error.
It is not hard to envision this when viewing the electronic payments sector from an acquirer's perspective. Merchant acquiring is a global market driven by intense competition, price compression, high-volume and low-profit margin revenue dynamics, and constantly changing types of risk with corresponding layers of changes in laws, rules and regulations. Under these circumstances, it is easy to see how even a well-intentioned acquirer can erroneously add merchants to MATCH. Handled correctly, merchants added to MATCH in error can also be removed from MATCH to create a mutually positive outcome. Your hard-earned merchant portfolio revenue, value and residual income can be restored. Moreover, the integrity of the electronic payments system and its efforts to combat fraud, crime and risk can be fortified by maintaining a more accurate MATCH database. Accurate information helps prevent valuable loss by effectively identifying true high risk and reducing the likelihood of unnecessarily loss of revenue due to false positive high-risk identifications.
Your merchant portfolio is your lifeblood. Protect your revenue and residuals by making sure your merchants are not sitting ducks for MATCH listing.
Anthony (Tony) L. Ogden is the founder and Principal Legal Counsel for BankCardLaw.com, where the mission is strengthening merchant credit card accounts. The website is www.BankCardLaw.com and Tony can be contacted by email at firstname.lastname@example.org and by telephone at 310-888-7746. The information in this article is solely for educational purposes; it is not legal advice and is not intended to be relied upon as legal advice.
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