Na­tional Mer­chants As­so­ci­a­tion: High Risk, Done Right

ISO & Agent - - HIGH RISK MERCHANT - Heather Petersen, CEO, Na­tional Mer­chants As­so­ci­a­tion

Na­tional Mer­chants As­so­ci­a­tion is a global mer­chant ad­vo­cate and mer­chant ser­vices leader. We are ded­i­cated to help­ing our mer­chants and agent part­ners grow their busi­nesses by gen­er­at­ing sales op­por­tu­ni­ties and max­i­miz­ing prof­its. We work to elim­i­nate the un­nec­es­sary and un­rea­son­able fees as­so­ci­ated with ac­cept­ing elec­tronic trans­ac­tions, and pro­vide prod­ucts and ser­vices to help our part­ners suc­ceed.

What is a “high risk” ac­count, and why do some banks turn away “high risk” mer­chants?

“High risk” can have many dif­fer­ent def­i­ni­tions de­pend­ing on who’s defin­ing it. The Card Brands have their list of high risk SIC (Stan­dard In­dus­try Code) codes—which re­quire di­rect reg­is­tra­tion—yet the spon­sor banks, ac­quir­ers, and pro­ces­sors can all have an ad­di­tional list of SIC codes they deem to be of a higher risk. High risk is ul­ti­mately de­fined by the risk-tak­ing en­tity and fre­quently is much greater than the Card Brands’ list of high risk mer­chants. When mak­ing de­ci­sions on the type of risk that is ac­cept­able, the pro­ces­sor/ac­quirer/bank may con­sider rep­u­ta­tional risk, fi­nan­cial risk, or other li­a­bil­ity mea­sures to de­ter­mine what will be ac­cept­able within the credit pol­icy.

Be­cause there is al­ways a greater risk for card fraud, iden­tity theft, and charge­backs when cus­tomers make card-not-present trans­ac­tions, mer­chants in these cat­e­gories typ­i­cally face higher pro­cess­ing rates and are deemed high risk by most pro­ces­sors.

Many banks don’t un­der­stand to­day’s mod­ern busi­nesses, so they tend to lump all high risk busi­nesses to­gether. Na­tional Mer­chants As­so­ci­a­tion is first and fore­most a mer­chant ad­vo­cacy group and we work hard to not only get mer­chants of all types ap­proved, but also get them the best pro­cess­ing rates avail­able. We treat ev­ery mer­chant, in ev­ery in­dus­try, as an in­di­vid­ual.

What types of busi­ness do you ac­cept?

Na­tional Mer­chants As­so­ci­a­tion has dom­i­nated the high risk space for years and the rea­son is sim­ple… we don’t limit our­selves – we’re con­stantly build­ing new mar­kets and board­ing mer­chants in ver­ti­cals like ecom­merce, sub­scrip­tion box ser­vices, and more.

We also work with brick and mor­tar mer­chants. From restau­rants and bars to re­tail es­tab­lish­ments, we have al­ways worked to find our mer­chants the best rates avail­able, help­ing to re­duce the un­nec­es­sary fees as­so­ci­ated with ac­cept­ing credit card pay­ments. We work with mer­chants of all types, pro­vid­ing un­matched ser­vice and sup­port.

How long does it take to get ap­proved?

Get­ting mer­chants ap­proved and pro­cess­ing pay­ments as quickly as pos­si­ble is very im­por­tant to us.

For ap­pli­ca­tions that have been cor­rectly com­pleted and are sub­mit­ted with the ap­pro­pri­ate doc­u­men­ta­tion, agents and mer­chants can ex­pect a typ­i­cal turn around time for ap­proval of just a few hours. It’s not un­com­mon for us to re­ceive in­com­plete sub­mis­sions from agents and/or mer­chants, and this can def­i­nitely de­lay the process. It’s im­por­tant that mer­chants work closely with their agents to pro­vide com­plete and de­tailed ap­pli­ca­tion pack­ets, so we can ap­prove their ac­counts as quickly as pos­si­ble!

What is an un­der­writer look­ing for when re­view­ing a mer­chant ac­count ap­pli­ca­tion?

Be­low are the cri­te­ria that the un­der­writ­ers at Na­tional Mer­chants As­so­ci­a­tion are look­ing for when re­view­ing ap­pli­ca­tions: •Busi­ness For­ma­tion – iden­ti­fi­ca­tion of ben­e­fi­cial own­er­ship cross-ref­er­enc­ing with the sig­nor. •Busi­ness/prod­uct De­scrip­tion – a clear and com­plete un­der­stand­ing of what prod­ucts and/or ser­vices are be­ing sold. On­site in­spec­tion/ver­i­fi­ca­tion of busi­ness is also re­quired. • MATCH Listing – en­sur­ing the mer­chant is not listed in the Ter­mi­nated Mer­chant File (TMF). • OFAC Listing – en­sur­ing the mer­chant is not on listed on the Of­fice of For­eign As­sets Con­trol listing of tar­get in­di­vid­u­als. • Cred­it­wor­thi­ness – credit score pulled on all ac­counts and checked for li­a­bil­i­ties and trade lines. • In­di­vid­ual Iden­tity – ver­i­fy­ing the mer­chant’s iden­tity.

The cleaner and more com­plete an ap­pli­ca­tion is, the faster a mer­chant can start pro­cess­ing pay­ments with Na­tional Mer­chants As­so­ci­a­tion.

What is a charge­back? How can I re­duce charge­backs on my mer­chant ac­count?

In sim­ple terms, a charge­back is the act of re­vers­ing a sale, usu­ally due to a dis­pute from the card­holder.

Some­times this oc­curs be­cause the card­holder didn’t pur­chase the prod­uct in ques­tion (credit card fraud or iden­tity theft).

Other times, the card­holder ini­ti­ates a charge­back due to dis­sat­is­fac­tion with the prod­uct. To help re­duce this type of charge­back, it’s crit­i­cal that mer­chants pro­vide de­tailed prod­uct de­scrip­tions, and clear re­fund / re­turn poli­cies. Cus­tomer ser­vice con­tact in­for­ma­tion should be easy to find on a mer­chant’s web­site. Like­wise, cus­tomer ser­vice per­son­nel should re­spond quickly to any re­fund or ex­change re­quests.

Our pro­pri­etary Charge­back Con­trol Plat­form® (CCP) also helps re­duce charge­backs by pro­vid­ing au­to­matic, pro­ces­sor-level re­fund­ing of dis­puted trans­ac­tions where ap­pro­pri­ate. This en­sures that any dis­sat­is­fied cus­tomers are quickly pro­vided with a re­fund, be­fore their dis­pute be­comes a charge­back.

In ad­di­tion, many in­dus­tries suf­fer from so-called “friendly fraud” where cus­tomers in­ten­tion­ally buy a prod­uct and then charge it back. Pro­tect­ing mer­chants from this type of fraud re­quires deep ex­per­tise in high risk pro­cess­ing, and it’s some­thing our NMA team has spe­cial­ized in for many years.

Why does a pro­ces­sor care what a mer­chant’s charge­back ra­tio is?

Pay­ment pro­ces­sors are al­ways con­cerned about charge­back ra­tios. The higher the num­ber, the higher the risk for both the pro­ces­sor and the mer­chant. There are reg­u­la­tory and Card Brand rules re­gard­ing per­mis­si­ble lev­els of charge­backs, so mer­chants ex­ceed­ing these thresh­olds can be “ter­mi­nated” by their pro­ces­sor in or­der to pro­tect that pro­ces­sor from ad­di­tional li­a­bil­i­ties.

At NMA, we help our mer­chants keep their charge­back ra­tios low by tak­ing a per­sonal, proac­tive ap­proach through ed­u­ca­tion and best prac­tices, as well as thor­ough due dili­gence up front. That’s why mer­chant IDS (MIDS) at NMA typ­i­cally last over 50% longer than the in­dus­try av­er­age. Ac­count longevity leads to sig­nif­i­cantly higher rev­enues for the mer­chant and the agent.

What rates can you ex­pect as a high risk mer­chant?

High risk mer­chants un­for­tu­nately face higher rates due to the greater li­a­bil­ity borne by the pro­ces­sor. De­pend­ing on a mer­chant’s busi­ness model, the av­er­age high risk dis­count ranges be­tween 3% and 6% with fees rang­ing be­tween 15 and 25 cents per trans­ac­tion. By con­trast, brick and mor­tar es­tab­lish­ments can range from .10% to 3% and be­tween 5 cents and 15 cents per trans­ac­tion on av­er­age.

Some pop­u­lar self-ser­vice pro­ces­sors, of­ten also known as “ag­gre­ga­tors,” have a flat rate model where all busi­nesses pay the same rate for their pro­cess­ing. This may sound nice and sim­ple in prin­ci­ple, but the re­al­ity is that these pro­ces­sors have to price in the worst pos­si­ble level of risk – so es­sen­tially ev­ery busi­ness is be­ing treated as “high risk.”

At Na­tional Mer­chants As­so­ci­a­tion, we know that not all mer­chants are the same. Our mer­chants are as­sured of the low­est rates avail­able, and we re­view ev­ery ac­count on a quar­terly ba­sis to en­sure that mer­chant is still get­ting the best pos­si­ble pric­ing.

How do you get a higher pro­cess­ing vol­ume limit?

The higher the pro­cess­ing vol­ume limit, the greater the risk ex­po­sure to the pro­ces­sor. So, the key to a higher pro­cess­ing vol­ume limit is for a mer­chant to prove that they run a high qual­ity busi­ness and have a low charge­back ra­tio. Earn­ing a higher pro­cess­ing vol­ume limit is es­sen­tially a re­ward for op­er­at­ing a busi­ness in a re­spon­si­ble man­ner.

Mer­chants that re­quire higher pro­cess­ing vol­umes can make these re­quests based on their needs. Na­tional Mer­chants As­so­ci­a­tion’s in-house un­der­writ­ing and risk depart­ment ex­am­ines each re­quest and then makes a judg­ment based on the mer­chant’s dis­pute per­cent­age, re­fund per­cent­age, and whether that mer­chant has had at least three months of con­sis­tent pro­cess­ing vol­ume.

As high risk spe­cial­ists with mul­ti­ple bank­ing so­lu­tions, we have greater con­trol and flex­i­bil­ity than other pro­ces­sors, and we pass this value on to our mer­chants and agents.

Does NMA of­fer a pay­ment gate­way?

NMA of­fers its own gate­way, with ex­cep­tion­ally low pric­ing for mer­chants us­ing our pro­cess­ing ser­vices. Our gate­way pro­vides sub­scrip­tion re-billing, mo­bile pay­ments, Quick­books in­te­gra­tion, au­to­mated in­voic­ing via email, and much more. We also in­te­grate with all pop­u­lar third-party gate­ways.

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