Start Accepting Credit Cards


* Merchant Account Risk

* As credit card fraud gets more sophisticated, fraud-fighting technology and approaches also have to become savvier. There is a need for merchant acquirers also must start more aggressively protecting themselves and cooperating with each other.

Acquirers know that opening a merchant account is like granting an unlimited line of credit, without having the benefit of collateral. For many acquirers, merchant accounts are opened without the luxury of having loss reserves set aside. On many occasions, however, chargeback losses are revealed that have been rapidly building on a merchant account.

Somehow, acquirers seem to be sheltered from the idea of merchant risk, even while decreeing merchant sales quotas. The concept that today's deposits based on card numbers become tomorrow's cash withdrawals or wire transfers is sometimes overlooked in the pursuit of high-volume accounts, with high profit potential from discount, transaction and monthly management fees, perhaps accompanied by cash management services, loans and other non-interest income.

The sense of accomplishment that comes from booking a profitable account must be balanced by the realization that the risk must be closely managed and what if scenarios kept in mind at all times. What if the necessary documentation is not on file? What if all the transactions result in chargebacks?

Especially for merchant acquirers who want to take on merchants such as Internet startups, telephone and mail order shops, and other companies with a high risk of fraud and chargebacks, solid loss prevention and risk management strategies are a must.

While the acquiring side of the credit card business is different than the issuing side, the approach to loss prevention has many similarities. These include the need to review the merchant application carefully; to confirm the information furnished; to monitor account activity; to respond to questionable patterns; and to educate merchants about how to protect themselves.