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Trends in Underwriting

Many facets of business, including merchant services, are being impacted by COVID 19.   Acquiring banks and processors view their risk of credit card chargebacks as greater, particularly for businesses that expense their customers in advance of delivery of the service or product. During this pandemic, the risk is perceived higher due to increased likelihood for a customer to chargeback. This reason, combined with strained financials of the business to cover the chargeback costs, potentially leaves the acquiring bank on the hook to cover the costs.

Because of the concerns around increased risk exposure, processors are creating additional underwriting hurdles for businesses seeking to establish a new merchant account. Companies may be asked to provide detailed financial data, including bank statements, P&Ls, and sample invoices, etc. to get approved.  Processors are particularly leery of businesses considered to be in risky industries or those that run high ticket transactions. Businesses with high volume (hundreds of thousands or millions each month) or that process sales above $10,000 will be asked to provide more information. Processors are also re-evaluating the risk and exposure of existing merchant accounts, in some cases requiring businesses to increase their financial reserves to maintain account operation. Furthermore, it has become increasingly challenging for businesses that charge for products/services prior to delivery to get underwritten.

MSP Consulting is helping our existing merchant clients relieve the burden of these new requirements.  MSP Consulting remains processor independent and has the flexibility to work with multiple processors if needed to find a home for your clients. Additionally, MSP Consulting has the experience and relationships with the processors to properly position businesses that are setting up new merchant accounts for long term success.

We believe these trends will continue to occur over the course of the year, as many are uncertain what the future holds. If your customers are experiencing any of these issues, please remind them to contact MSP Consulting, so we can assist in negotiating the situation.

 

 

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