Is Your Payment Processing at Risk?
According to the Consumer Financial Protection Bureau (CFPB), “payment processors provide access to the banking system and the means for businesses – including potentially unscrupulous ones – to extract money from consumers’ bank accounts. As gatekeepers to a system in which so much money changes hands, third-party processors as well as the banks they work with have responsibilities to monitor their transactions for suspicious activity and not enable fraud…”
When you rely on a third party payment processor for conducting electronic check, credit or debit transactions, your payment processing may be at risk depending on how your processor conducts business throughout its entire portfolio of clients. Consider conducting an annual vendor review, and ask your payment processor how the following types of issues are monitored and addressed:
- High consumer chargebacks and refund rates. How does your processor monitor return rates? Do any of their clients exceed published return rates, and what actions do they take when this occurs?
- Data discrepancies. What is your processor’s tolerance for errors, and what actions to they take when they discover excessive error rates?
- Customer and Consumer Group complaints. Review consumer complaint portals, including the CFPB and state regulatory complaint portals. If your processor or its other clients are named as the subject of complaints or investigations, how is your processor responding to those issues?
- Law enforcement or regulatory actions. Review recent legal or regulatory actions against your processor, or in which your processor is involved. How have these serious actions been resolved?
Your payment processing is in jeopardy if your processor does not adequately manage the risk associated with the business processed by its other clients. Understanding and documenting how your processor mitigates these risks will ensure a stable payment platform for your customer transactions.