Maximize Value Across the Entire Customer Lifecycle
WHY SIZE MATTERS IN
MERCHANT ONBOARDING
WHY SIZE MATTERS IN THE CONTEXT OF RISK AND COMPLIANCE
R I S K L E V E L
PROCESS STEPS
LARGE MERCHANTS
SME MERCHANTS
Large merchants tend to have audited financials, compliance department, public information Distressed smaller merchants with limited oversight are more susceptible to fraud than larger, Consumer fraud can less easily detected at larger merchants that have lots of transactions (transparency issue) The outstanding balances with large merchants are material and usually more concentrated, SME are run like a portfolio of risks, less risk management needed during the lifetime established players with governance structures
high
KYC/AML
low
Merchant Fraud
high
low
Consumer Fraud
low
high
Counterparty Credit Risk
low
high
THE COMPLEXITY OF THE MERCHANT ONBOARDING PROCESS
ONBOARDING NEW CUSTOMERS
CUSTOMER DATA VERIFICATION (KYC)
COUNTERPARTY CREDIT CHECK
ACTIVATION
• Collection of all necessary documents, supporting information (ID, corporate registration documents) • Verification static data such as address, location, account information • commercial history (how long in business • Merchant Industry (MIC) • Basic KYC checks (OFAC, PEP checks) • Ownership structure / ultimate beneficial ownership • Blacklist checks • In eCommerce: web crawler to detect negative traffic
• Capture of all data • Upload of supporting documents • Check if all data is complete, accurate • Does KYC and Counterparty credit check both point to approval? • Activation of customer, ready to accept and transact payments in cards
• Credit score (e.g. Fico, internal models) • Merchant Industry Code (determines risk of non-delivery exposure) such as travel, leisure and non-physical goods • Assessment of transactions volume, geographic footprint, FX risk • Risk based pricing • Commercial background of managers and corporations (how long in business, in industry)
2 CAPABILITIES TO LOOK FOR IN A SOLUTION
2
1
Simplified Data Integration
Operationalized Risk Models
Simplified Data Integration 1
Consider all the data sources needed to complete the verification requirements for just one merchant.
PROCESS STEP
INTEGRATION REQUIREMENTS
Customer data, commercial data, bank account information
Input in mainframe system (e.g. SAP BP), also connected to EMR system such as Salesforce.com
Address verification
Web services that offer addresses and ZIP codes (web interface)
Internet check (Negative entries about business, owners, managers)
System such as Webshield, external services via web interface
Supporting documents
Document Management System as part of mainframe or stand alone
Scheme blacklist check and Merchant Industry Code assignment
Schemes database via web, blacklist via Match or VMAS
KYC – Politically exposed persons
Government databases (BSA/OFAC in USA, AML Anti-Terrorism Directive) via 3 rd party provider such as Dow Jones, Experian Government databases (BSA/OFAC in USA, AML Anti-Terrorism Directive EU) via 3 rd party provider 3 rd party providers via web or batch that provides such information (D&B, Bisnode, BvD) and from boarding form
KYC – AML and Terrorist blacklist check KYC – Ultimate beneficial ownership information
This is by no means an exhaustive list of data that must be collected and processed. Once the customer verification process is done, the acquirer must tap FICO systems, internal or external risk models, fraud and treasury systems, MasterCard and Visa payments infrastructure, the acquirer’s payments processing platform and more to determine credit worthiness, activate the merchant and monitor the account.
THE BEST SOLUTIONS OFFER
• Pre-built adaptors built on industry standards • Visual integration interfaces that eliminate programming • Enabling both IT and business analysts to quickly configure the data elements needed from each system.
Operationalized Risk Models 2
Acquirers make sizeable investments in developing risk models or purchasing them.
Without a way to integrate these models into the onboarding process,
slowing down onboarding and increasing risk with manual, error-prone credit checks. THE RISK DECISIONING POINT BECOMES ANOTHER BOTTLENECK,
OPERATIONALIZE INDUSTRY STANDARD RISK MODELS SUCH AS SAS, EXCEL AND R MODELS IN MINUTES
A visual interface lets business users quickly establish the relationship between the risk model and the automated onboarding process.
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