Merchant Compliance: How to Gain Oversight of Your Merchant Portfolio

by Alex Baydin 0

Merchant compliance can mean different things to a lot of different enterprises. To some, it’s about checking your portfolio every now and again for bad actors. From an operational and oversight perspective, though, the approach should be much broader.

In practical terms, do you know how your entire merchant portfolio is performing from a compliance perspective? How do you know, and how can you tell quickly? With more and more merchants coming online and ecommerce growing rapidly, a comprehensive and more frequent study of the businesses you process for is essential.

Assuming you have deep insight into nuances of merchant’s transactional risk, you can take the same approach to the compliance side – and especially in the e-commerce realm. This starts with segmentation and categorization of your portfolio.

To do this, use systems that are flexible enough to pivot to mirror your other internal systems. For example, if your shop primarily uses MCC (Merchant Category Code) as the primary dimension to segment transactions, make sure your compliance system can parse and reflect results at the category code level so that your dimensions mesh and are unified. This segmentation is important because you then want to layer all of the results of activity coming from your portfolio, not just the points of failure. This allows what we call a “relative” view of activity which lets you tell a different and more comprehensive story to internal and external auditors and regulators.

When you do find something that you need to address, how do you treat it? What do you do? Your answer should be to automate alerts to relevant parties based on criteria you specify. This allows your team to focus on strategic concerns instead of being mired in finding and sorting through false positives. Either way, when you arrive at something you need to fix, this is the most streamlined way to track all of the touchpoints, close the loop on the item, and report on the item.

100% coverage of a portfolio allows you to balance and explain the positive activity and overall risk rating relative to the points of failure. This affords you a better benchmark and performance tool through time. This type of approach demonstrates comprehensive control and allows your department to function as an enabler of the business instead of something that obstructs, prevents, and stifles the growth of the firm.

At the forefront of solving for common merchant onboarding problems are RegTech companies, which use technologies to solve for issues of flexibility, segmentation, and automation. In fact, according to a survey by SWIFT and Dow Jones Risk & Compliance, “54% of the 500-plus respondents are planning to increase their investment in RegTech in the next three to five years, as 59% say technology has improved their company’s ability to tackle AML and KYC.”

If you are interested in learning more about RegTech and Compliance in payments, consider attending COMPLY2017, June 7 & 8 in NYC. Regulators, compliance professionals, and RegTech thought-leaders will discuss the latest trends in compliance for the consumer finance industry, including payments. For more information, visit

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