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Insights and Expertise

Channel conflict in risk, regulatory action and legal risk. Processors and
acquirers need to establish channel policies such that
merchant acquiring conflicts are adjudicated in accordance with policies.

Multiple MIDs and legitimate use
and risk mitigation There are legitimate scenarios where a merchant may

maintain multiple MIDs with the same acquirer. For
example:
• A merchant using separate providers for a unique
vertical (for example, petroleum) and a fast casual
take-out or convenience store;
• Distinct business lines or processing environments
requiring differing solutions.
In these cases, multiple MIDs are appropriate, but they
must not operate in isolation.
Acquirers must:
• Link related MIDs at the merchant level;
• Maintain a holistic view of exposure;
• Ensure consistent application of controls
and adverse actions.
The critical failure point: inconsistent action

By Ken Musante A common breakdown occurs when adverse action is taken
Napa Payments and Consulting against one MID but not others tied to the same merchant.
For example, if a new beneficial owner is identified on
ompetitiveness in payments is inherent and one account and that individual is subsequently flagged
often measurable. Sales organizations operate through OFAC or other risk screening, failure to propagate
in a results-driven environment where per- that information across all related MIDs represents a
C formance is quantified. Operational teams are serious control gap.
evaluated more subjectively, often based on consistency,
control and risk mitigation. This dynamic becomes par- From a regulator’s perspective, the institution had the
ticularly important when channel conflict arises. information but failed to act on it comprehensively. This is
not a data issue. It is a governance failure.
Within a single organization, channel conflict is typically Residual ownership: a legal exposure
a matter of internal policy and compensation equity.
However, when multiple third parties, ISOs, ISVs, agents Channel conflict also creates uncertainty in residual
and fintech partners submit the same merchant through a allocation. When multiple parties submit the same
common processor or acquirer, the issue extends beyond merchant:
compensation. It presents legal, operational and regulatory
risk. • Which entity is entitled to compensation?
• What happens when compensation structures differ
Where channel conflict creates risk by channel?
Sales channel conflicts, when multiple parties are Approaches vary across the industry:
submitting through a common processor or acquirer, • First in” submission rules;
represent greater risk than when a single party is
submitting. A processor or acquirer may be subject to a • Merchant attestation of sales representation;
dispute if there is ambiguity as to the entity entitled to the • Blocking duplicate submissions;
residual. • No formal policy at all….all accounts accepted.
Additionally, if multiple entities are submitting the same The absence of a defined approach increases the likelihood
merchant through a single processor or acquirer and the of disputes and litigation.
merchant is allowed to set up multiple MIDs, there could
be a disconnect if adverse action is taken against one MID Selling into the existing portfolio
but not consistently applied to all MIDs.
Processors and acquirers need also establish policies for
This could result in brand damaging fines, reputational selling into their existing book of business. Sales entities
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