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Top 7 Challenges Payment Service Providers Are Facing

posted on: Tue Feb 14 2017

Payment Service Providers (PSPs) are facing unprecedented competitive
challenges. With thousands of PSPs already in the marketplace and hundreds of new entrants adding to the competitive pressure each year – it’s becoming more and more difficult to: 

  • Win new merchant business and retain existing accounts
  • Protect against the financial and regulatory risks of onboarding and underwriting merchants

Surprisingly, hidden within the 7 challenges outlined below is a golden opportunity to improve your competitive position:

  1. Competitive differentiation. Services and pricing are becoming commoditized, making it harder to stand out in the market. But what if you could help merchants successfully address emerging challenges—for example, the increasing rate of chargebacks and CNP fraud – which are projected to soar 80% by 2020?

New threats to your merchants represent new opportunities to differentiate your PSP operations. Providing a more comprehensive payment processing solution that includes enterprise-class fraud prevention integrated as a baseline service sets you apart from the cookie-cutter offerings out there.

  1. Margin compression. Cutting fees to win or retain accounts hurts margins. At the same time, increasing levels of CNP fraud could lead to you paying higher interchange fees. If you haven’t correctly priced merchant risk profiles, margins will suffer.

Offering a value-add service like built-in fraud prevention can minimize the need to discount. At the same time, being able to correctly price the risk profiles of merchants – for both new and existing ones – prevents unanticipated margin erosion.

  1. Many merchants neglect fraud prevention. Too many merchants don’t do enough to prevent CNP fraud. Yet if these vulnerable merchants get hit by a huge fraud attack that drives them out of business, their exposure can quickly become your problem.

Portfolio-wide fraud prevention not only protects merchants, but protects your profits as well. 

  1. Frictionless onboarding. Quickly approving merchants helps you win new business, but can increase your exposure to risk.

Implementing platform-wide fraud control with deep monitoring at the transaction level lets you bring on new merchants rapidly – increasing new business wins. Yet you won’t have to fear of being blindsided by an inability to detect past bad behavior or by unseen fraudulent activity once merchants are onboard.

  1. Regulatory compliance. Monitoring merchant activity can be costly, yet essential to avoiding legal issues such as AML, OFAC, KYC, etc.

The ability to monitor at the transaction level – easily and cost-effectively – provides an instant “tripwire” that alerts you before your operations get exposed to unwanted liability and harmful regulatory actions.  

  1. In-house fraud prevention. PSPs who develop and implement platform-wide anti-fraud systems on their own face substantial IT investments, operating costs, and risk.

An enterprise-class system for platform-wide fraud prevention by an expert provider helps you avoid these costs and risks. What’s more, many providers are able to capitalize on the network effect of Big Data – analyzing hundreds of data points per transaction from millions of transactions – that an individual PSP simply cannot match.  

  1. Word of mouth. Social media amplifies complaints, making it more important than ever to avoid merchant dissatisfaction.

The flip side is that positive word-of-mouth because of reduced chargebacks and fraud can enhance new account recruitment and existing account retention.

In summary, transforming a source of constant friction between you and your merchants – chargebacks, product losses, fraud costs, fees, etc. – can become a business-building opportunity:

  • Win more than your fair share of new business while reducing churn
  • Minimize the financial and regulatory risks of onboarding and underwriting merchants

Download the eBook “Protect Your Merchants. Protect Your Profits” and find out how you can turn the challenges faced by all Payment Service Providers into an unexpected sales opportunity.

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