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Defining your Risk Factor

Understanding merchant risk and how to minimize it while accepting as many payments as possible is a balancing act, but not really that difficult once you understand the basics.  Online bill payment has a large recurring customer base for example, so the risk is really getting that new customer processing payments.  The risk isn’t really about payments not clearing; it’s more about the consumer entering their bank account information correctly.  SPS can detect an error and request the consumer re-enter the information in real time.

If a merchant is selling a product online, the risk equation changes greatly.  A utility or service provider can simply turn off a consumer’s access, but an online merchant not only suffers a loss for an uncollectable returned payment; they lose the product as well.  The Risk focus moves to validating the bank account on each purchase is open and in good standing.  A bank account with numerous unpaid returned payments is not going to be a good or repeat customer.

Online Risk versus Customer Present

Customer Present generally means an in person payment for a retail purchase or bill payment.  The risk factor is again the possibility of an uncollectable returned payment or fraud.  Anyone who writes a check in person understands it is scanned by the cash register and verified against mainly historical databases.  A known, good customer has a much better Risk factor than a new, unknown customer with an account that does not have any history.  SPS is connected to every national database monitoring bank account history.

Which database(s) does a merchant need for their Risk factor

SPS has a dedicated team of Risk Analysts that can advise a merchant on how to construct a Risk “Waterfall” that will balance accepting as many payments as possible with the least amount of risk. Early Warning Systems is owned and operated by the nation’s largest banks.  They provide real-time bank data that is extremely accurate.  TeleCheck data covers 95% of consumers writing checks for retail purchases.  MicroBilt concentrates on online biller and merchants.  SPS’s internal database represents a mix of the merchants, but is heavily weighted in government and online bill payment.  SPS analysts will monitor a merchant’s transactions and balance the Risk Equation.