PSP merchant monitoring to reduce chargeback risk
Merchant monitoring is one of the strategies payment service providers (PSPs) apply to reduce chargeback risk. In this blog, we dive deeper into the topic of chargeback risk, and the challenges merchant risk managers face while trying to monitor chargeback risk. Furthermore, we explore how Owlin can help merchant risk managers minimize chargeback risk and financial losses.
What is chargeback risk?
Chargeback risk refers to the potential financial loss that a Payment Service Provider (PSP) may face when a third-party client disputes a transaction and the merchant cannot fulfill its obligations, resulting in a chargeback. More specifically, the chargeback risk arises when the merchant risk manager fails to detect the signs of financial trouble in a merchant’s account, and the merchant defaults on their obligations. In such cases, the PSP is responsible for processing the chargeback requests and refunding the third-party clients, which can result in financial losses for the PSP or merchant.
For example, if a consumer purchases a plane ticket and the airline goes bankrupt, they receive a chargeback. While people may believe that the credit card company provides the chargeback, the reality is that the payment service provider covers it. To mitigate this chargeback risk, it is essential for the Merchant Risk Manager to continuously monitor the merchant’s activities and take necessary measures to minimize the potential for chargebacks.
Chargeback risk: signs of financial trouble to look out for
Payment Service Providers typically employ various strategies to monitor potential risks associated with merchants. One such approach involves assessing adverse media indicators, such as regulatory probes, financial difficulties or restructuring efforts to gauge the financial health of a merchant.
Payment Service Providers also track customer feedback and reviews to identify potential issues. Leading risk indicators such as negative product reviews, delayed order fulfillment and transaction disputes can alert a PSP to the possibility that all is not well with this merchant. By leveraging adverse media and customer feedback data, Payment Service Providers can proactively identify and mitigate potential risks to ensure a secure and reliable payment processing system.
PSP merchant monitoring: challenges merchant risk managers face
Merchant risk managers face various challenges in monitoring and mitigating risks associated with high-risk merchants. One of the main challenges is the sheer size and diversity of merchant portfolios, which can make it difficult to identify potential risks and vulnerabilities.
Risk managers often struggle to obtain a comprehensive understanding of a merchant’s history and activities, including information on fraudulent behavior and past bankruptcies. Compounding these issues, the global nature of Payment Service Providers means that risk managers may need to navigate information in foreign languages, which can be time-consuming and challenging.
Furthermore, retrieving information from non-standard media can be labor-intensive, adding complexity to the risk management process. Addressing these challenges requires risk managers to implement scalable and efficient monitoring processes, leveraging technology and specialized tools to streamline information gathering and analysis and ensuring they have the necessary language and cultural expertise to navigate diverse merchant portfolios effectively.
How Owlin helps merchant risk managers minimize chargeback risk
Owlin’s PSP clients leverage its AI-powered Merchant Risk Monitoring solution to detect relevant risk signals from a vast universe of information. Risk managers are alerted in real time of adverse media on one of their merchants, allowing them to de-risk and reduce their exposure, ultimately mitigating the risk of financial loss.
Owlin simplifies and automates the monitoring of large and geographically diverse Merchant portfolios, allowing PSPs to rest assured that they have their ear to the ground when it comes to getting ahead of risks within their portfolio.
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Owlin is an AI-driven platform that eases decision-making and provides risk intelligence. Owlin provides organizations with critical insights into counterparties, clients, vendors, suppliers, competitors, and prospects proactively, continuously, and in real-time.
By visualizing complex data in a simple and customizable interface, Owlin makes sure that you don’t get lost in the wealth of information. Owlin applies AI (Natural Language Processing) to provide valuable insights hidden in the data. This enables businesses to work faster, be better informed, reduce risks and stay on top of opportunities and trends.