Digital Transactions Authoritative, insightful and timely information for payments professionals
By Kevin Woodward
@DTPaymentNews
Not thoroughly knowing merchants and submerchants harbors peril for payment facilitators, and that’s one risk the Electronic Transactions Association hopes to alleviate.
The ETA, a Washington-based trade group representing the merchant-acquiring industry, expects to release a set of underwriting guidelines for payment facilitators soon. According to Visa Inc., a payment facilitator is a third-party agent that may sign a merchant agreement on behalf of an acquirer and receive settlement funds on behalf of a sponsored merchant. Facilitators enable large numbers of small merchants to quickly begin accepting payment cards via an expedited boarding process.
The risk is that a merchant may not always be truthful about its history or intent. Given the increasing interest in the payment-facilitator model and ongoing regulatory attention on the payments industry, the ETA intends to make the new guidelines available in coming weeks, says Amy Zirkle, ETA director of industry affairs. Regulators have targeted payments companies they see as conduits for fraudulent merchants.
“It’s a comprehensive document looking at the payment-facilitator model,” Zirkle tells Digital Transactions News.
The association updated its independent sales organization underwriting guidelines earlier this year. The payment-facilitator guidelines, as with the ISO guidelines, are being developed with an industry advisory group and consultants, Zirkle says.
The upcoming guidelines will include details about know-your-customer practices and how to ensure that due-diligence techniques are in place to prevent any bad actors from gaining access to a payment network, she says. “It will be a toolkit to help those who aren’t as familiar with the payments arena,” Zirkle says, noting that some payment facilitators may be software developers and other organizations without extensive payments backgrounds.
Examples include details about conducting background checks, how to look for inter-related companies, and verifying the true owners of a company, she says. The guidelines, she notes, are not a replacement for legal or regulatory requirements, or for requirements from the card networks.
Though payment facilitators want to make it easy for merchants to sign up for their services, that doesn’t mean it’s a simple process, says Todd Ablowitz, president of Double Diamond Group LLC, a Centennial, Colo.-based consulting firm that is helping the ETA draw up the guidelines. Regulators have said that payment facilitator must vet their merchants, he says.
“It starts with designing policies and procedures,” Ablowitz says. “That is, having a well-thought out, best practices-based policies and procedures that thoroughly vet merchants and submerchants using a risk-based approach.”
