SiGMA

Five markers for merchants to determine an efficient and reliable payment provider in 2022

Posted: Oct 25, 2022 16:24 Category: Industry Digest , Online , Payments , Posted by Katy

Words by Natalia Stetco, Business Development Director Humoney Platform

How do you find the right payment service provider and open a bank account in a market full of new fintech solutions, primarily if you work in high-risk industries?

Payments operated by a regulated payment service provider are at the heart of business continuity. Merchants can focus on expanding their services without worrying that payment channels can be frozen or suspended. 

Using the correct solution and ensuring the security of online payments can significantly minimize the vulnerability of customers and merchants. Technological innovation has made significant inroads into financial services, especially payments. But the benefits come with certain risks, including operational and cyber resilience, the protection of customer funds, data protection and privacy, digital exclusion, and market concentration. If not adequately managed, these risks could undermine financial inclusion outcomes.

There is another aspect of a situation. eCommerce business is growing, and the fraud and money laundering risks are increasing. Fighting this, banks are tightening the rules and getting stricter; laws are changing all the time, which means that requirements and security standards for payment processes are increasing. All of this affects the acceptance rate of merchants and bank account openings.

Conversely, it is difficult for merchants to keep up with constantly changing requirements. This circumstance is used by unscrupulous providers who attract merchants, offering them easy onboarding, less paperwork, and checks from a bank or payment provider.  

To clarify how to choose a reliable payment provider and to understand and measure the risks and costs when it comes to setting up an efficient payment process for the business, our team at Humoney Platform has put together a few indicative markers. I hope our recommendations will help you avoid frozen accounts and unexpected expenses and plan the payment strategy from all aspects to ensure all risks are considered. 

Marker 1 — Reliability and security of the payment provider

As a merchant, you need to do everything in your power to assure your customers that the transactions on your website are secure and protected and payment process works smoothly and continuously. Since the merchant is the decision maker when choosing a payment gate, all checks related to the payment provider must be done by the merchant accordingly.

There are several key features that a payment processor should have even to be considered secure.

1) PCI Compliance — Payment Card Industry Data Security Standards.

PCI certification is a topic that is not negotiable when processing payments. This set of rules is provided to help merchants secure their payment gateways to protect their customers. 

The merchant needs to comply with standards that protect businesses and their clients from breaches and potential lawsuits and fines in the future. Working with a certified PSP will save time for merchants attempting to obtain certification. Merchant has to ensure the payment processor is fully certified; relevant logos such as 3DSecure2, PSD2, PCI DSS must be displayed on the PSP website. The merchant can ask directly whether their company complies with the regulatory requirements. 

Working with less relatable providers might result in losing merchant accounts and the possibility of accepting payments. Losing access to a merchant account or not being able to settle funds from payment processors is a critical issue since businesses cannot afford to stop accepting payments, making it look suspicious and fraudulent and will create a bad reputation in the market. And it is unfair for a business with no bad intention to face this slap. 

So, to summarise is very important to know to whom the merchant trusts the payment processing and to whom they trust their money, sensitive client data, and payment information!

Also, an additional piece of advice, especially for startup companies, is to use alternative sources of information regarding the payment providers they plan to cooperate with, like professional forums or media resources, where representatives from different industries share their experiences. 

Marker 2 — Risk management tools

The Global Fraud And Payments Report 2022 says that one is spent fighting fraud out of every ten dollars earned in e-commerce. Nine out of ten merchants consider the fight against fraud a difficult challenge. Almost half believe that issuers often mistakenly label transactions as fraudulent or suspicious.

Antifraud checks are the task of all participants in the financial chain: user, merchant, provider, and bank.

Risk management tools can be a combination of manual and automatic checks and anti-fraud algorithms built to prevent fraudulent behavior, suspicious transactions, or any activity that might indicate a potential breach of anti-money laundry laws. These features are handy since they can help decrease the merchant’s chargeback rates and secure long-term cooperation with the payment provider and banks. Merchants can use this feature to analyze their setup, to understand the weakness of their operational processes, how they can adapt to the new requirements, and how well their internal policies obey the AML requirements.

A notification system sends information to the merchant whenever a client initiates a chargeback. This gives merchants a critical opportunity to act before the issuer bank decides on the problem and commences the chargeback procedure.

Chargebacks are one of the main dangers for any business because as the chargeback score grows, it ruins the company’s reputation in front of banks and payment processors. Remember,  for payment institutions, a merchant with high chargeback rates represents a potential business operational and compliance risk that they are unwilling to take, making them close the merchant’s account. The merchant is responsible for controlling clients’ behavior so that all services and terms and conditions are precise for clients and that all inquiries are handled correctly.

Marker 3 — Transparency and Flexibility

The price does matter for many businesses, especially for startup businesses that are on the first steps of the journey.

A combination of several factors determines the cost of payment gateways: your business volume and type, the types of payments you accept, and the target regions. Before you start looking for a payment provider, it is necessary to analyze the current situation with prices, how much money you accept on daily bases, what is missing in the current payment solution, why is needed to find a new payment solution, or why to chose from multiple offers. Putting all data together and making a strategic plan with clear expectations from the payment provider, getting a precise price formation model before starting the cooperation, and ensuring that all these fees are shown in transaction reports in the merchant account is necessary.

Make sure you are aware of all onboarding and monthly fees. Also, double-check if the payment provider might apply penalties for not reaching the initially indicated volumes! 

The above step will help to start negotiations on quotes and services, and It will make it easy to understand the maths and allow the merchant to detect unexpected expenses, which might increase the business expenses, and this will mean that the actual offer does not correspond to reality. 

A trustful payment provider will allow complete clarity throughout the payment operating process at any time.

Marker 4 — Conversion Rate

This straightforward metric tells you how many transactions, on the whole, were declined. If 80 out of 100 trades were successful, you have an 80% payment conversion rate. There are many  reasons transactions are declined — incorrect card information, insufficient funds, invalid card numbers, suspicion of fraud, etc.

It is essential to understand that in 2022 when we discuss conversion rates, we do not mean only credit cards payments anymore; different regions work with varying methods of payment; for example, if you target the Asian market to have a high conversion, the merchant has to think of choosing a payment platform which offers local payment solutions which are prevalent in that specific region, a combination of traditional methods and alternative solutions will increase conversion rates.

Choosing the right combinations of payment methods for customers may not sound like something extraordinary, but the statistics show that offering the correct payment methods increases conversions.

Marker 5 —Dedicated Customer support service

Communication with the processor shouldn’t end once you’ve signed the contract; it has to continue during the cooperation lifetime.

A good, trustworthy processor will have a dedicated support team for any questions, concerns, and assistance.

Communication with the processor shouldn’t end once you’ve signed the contract; it has to continue during the cooperation lifetime.

A good, trustworthy processor will have a dedicated support team for any questions, concerns, and assistance.

Even though the Fintech industry is actively implementing artificial intelligence algorithms that can replace customer support jobs, a payment provider needs to have human support, especially when dealing with less experienced users.

 

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