By Robert Ellenhorn
A critical challenge for growing payment providers is onboarding new merchants while mitigating risk. Mounting online fraud, expanding numbers of merchants, and uneven risk distribution are significant hurdles. But automation can overcome these hurdles.
The pandemic brought an explosion of new ecommerce businesses as in-person interactions plummeted. As of March 2022, Americans had increased their online spending by 55 percent compared to the two years before COVID-19 (see Forbes, bit.ly/3GoyebL).More merchants than ever opened digital storefronts—legitimate and illegitimate. This meant a dramatic increase in the number of ecommerce URLs and opportunities for fraudulent activity: fraudulent sales reached $155 billion last year alone.
The online fraud landscape is ever-changing as bad actors constantly adapt. Here are some common types of merchant fraud:
Providers must stay informed about fraud trends to protect their users, merchants and brand.
When payment providers launch, they often start with a small pool of merchants and have the bandwidth to manually review each merchant’s profile during onboarding. As they grow and scale, it becomes impossible to manually evaluate thousands of new merchants daily. This presents significant challenges, such as:
Automation can help address these challenges. Providers can use automated tools that analyze merchant information at onboarding to uncover risks and remove risky merchants from a portfolio. In many cases, automation can provide insights to remediate a merchant, rather than reject them. For example, if a merchant sells only a few products outside of a payment provider’s risk tolerance parameters, the merchant can remove those products to retain the merchant account. In this case, automation can also provide ongoing monitoring to ensure a merchant remains compliant.
Automation allows providers to capitalize on business opportunities, while ensuring that each merchant is properly assessed. Automated tools also provide critical data to help providers grow sustainably by:
Ultimately, there is no one-size-fits-all solution to determining the risk for every new merchant on a growing platform. Providers should harness the adaptability of automated tools to ensure their risk management is tailored and thorough, while making the onboarding process as efficient as possible.
Robert Ellenhorn is payment risk specialist at EverC, the world’s first fully automated, AI-driven cross-channel risk management platform that is transforming the internet into a safe and trusted place for ecommerce. Contact him via email at firstname.lastname@example.org>/a> or LinkedIn at www.linkedin.com/in/robertellenhorn.
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