Reducing Merchant Fraud During Onboarding

Thorough vetting of merchants during the onboarding process isn’t only about filtering out bad merchants—it's about finding a way to keep the good ones. Many merchants are not bad actors and likely just have minor issues with the need for guidance on how to best resolve them. 

Balancing risk and growth  

New merchants are essential for business growth, so rejecting opportunities without further investigation isn’t a lucrative strategy. Overly rigid or aggressive risk management tools can leave payment providers turning away valuable business.

If you have the tools and information to proactively identify the risky elements of your merchants' products or business model, you can work with them to remediate potential problems or impose controls that protect your business from undue risk while growing your merchant portfolio. 

Here are 3 examples of merchants that were able to continue doing business once the right steps were taken:

Risk: Merchant sells a product containing CBD, which is regulated within a specific legal framework.

Solution: Ensure that the merchant is operating in a compliant manner in regard to regulation according to jurisdiction, THC level limits, etc.

Risk: Merchant sells melatonin on a global marketplace. Melatonin requires a prescription in the UK, but not in the US. 

Solution: Check to ensure the merchant is aware of this regulatory nuance and advise them regarding what they must do to operate in a compliant manner. 

Risk: Merchant sells a branded or copyrighted product 

Solution: Payment provider can request that merchant submits documentation confirming that they are an authorized reseller. 

The right tools are a key element in conducting effective risk assessment during onboarding, to protect your business (and the global financial network) from illicit merchant activity. Vetting merchants during onboarding can help you avoid the obvious bad actors. But having the ability to go deeper into the data lets you manage risk so you don’t lose out on worthwhile business opportunities. 

A solution for early and ongoing detection of merchant risk 

Don’t let a lack of information force you to de-risk an entire vertical or a valuable sector of merchants. MerchantView is a technology-driven solution that provides insights that enable you to onboard merchants without taking on undue risk, then continuously monitors and re-evaluates their activities to mitigate evolving risk. 

Learn more about reducing fraud during onboarding in our guide, Getting it Right from the Start: How payment providers can reduce merchant fraud during onboarding.