If you have an e-commerce merchant account, you must know about the unsecured line of credit that it involves. There are several scenarios where there is a potential of significant risk involving business fraud, non-delivery and non-payment of charge backs. Online merchant acquisition is a volatile business with a special focus on speed and focus. Are you facing difficulties with your e-commerce merchant account? This is when the merchant portfolio manager comes to your rescue. E-commerce merchant services are a complicated affair. A merchant portfolio manager provides you with special services on merchant portfolio acquisitions.
How to Delineate the Risks of an E-Commerce Merchant Account?
During merchant portfolio acquisitions, acquirers face different challenges. Some of the most common difficulties that they face include:
A High-Value Chargeback Rate
Some dishonest merchants often decide not to deliver the goods in good condition once the payment has been made. This results in cardholder disputes and consumer claims. Luckily, credit card companies generally favor the consumers who suffer. They take strict actions against the liable merchants, who need to pay the fees associated with them.
A Huge Credit Risk
A huge credit risk is involved in e-commerce merchant services. At times, the merchant might become fiscally unstable or insolvent and decide to dissolve their business. They might shut their business down without issuing any former notice. This increases the risks of chargebacks.
The Risk of Reputation in the Business Market
The job of merchant acquirers includes monitoring the quality and the appropriateness of a merchant’s products and services. Involvement with illegal or illicit content has the power to cause a serious reputational risk.
It Involves Non-Delivery Risk as Well
Once the acquirer clears their payments and the transaction is complete, they get exposed to financial risks. If the goods are not delivered in proper condition, the acquirer is answerable to the end customer.
Merchant Fraud Can Be Involved
As we know, fraudulent activities can be in various forms. The most common types of merchant frauds are:
E-Commerce Transaction Laundering
Many unknown e-commerce transactions are often processed by using your legitimate merchant account that is provided in your portfolio. The acquirers need to monitor the situation when unidentified, including those who are successfully running an illegitimate business by funnelling transactions through the registered e-commerce merchant account.
Frauds by the First Party
A merchant might apply for and eventually open an account with no intention of operating a legitimate business. You must keep in mind that the losses will end up in your bottom line, as those fraud merchants often abandon the account before you get to know about it.
Huge Compliance Risk
Credit card companies indeed take potential legal actions and large fines, funded by the regulatory bodies for the merchant acquirers. However, the merchant acquirer needs to prove that all the necessary actions were taken to prevent fraudulent activities.
To Conclude
A merchant acquirer must understand, remediate and reduce the risks of working with unknown online merchants.
