GS interviews Michael Zavet, CEO at Shieldify

Merchants face more scrutiny and stricter underwriting these days, according to Verifi's 2024 Global Fraud and Payments Report, which found a sharp increase in fraud volumes and variety in North America. Shieldify CEO Michael Zavet discussed these trends with The Green Sheet, sharing advice on how to boost merchant approval rates and keep accounts in good standing.

What elements of a merchant application are most likely to be flagged by risk or underwriting and why?

In my experience, I can tell you that underwriters primarily flag applications for a few key reasons. High-risk industries like online gambling, subscriptions or nutraceuticals face close scrutiny due to chargeback risks, accounting for roughly 40 percent of all high-risk cases. New businesses with poor credit history or high projected processing volumes can be a red flag.

And of course, any history of excessive chargebacks will set off alarms. Underwriters are essentially looking for anything that suggests potential for fraudulent activity. They're protecting the processor's interests, so they err on the side of caution.

What types of businesses are most likely to be shut down by Stripe, Square and other big tech platforms and why?

Look, the businesses most likely to be shut down are those with high chargeback rates, often exceeding 1 percent of transactions. These platforms are extremely sensitive to chargeback issues due to their own risk exposure and relationships with card networks. New businesses experiencing rapid growth coupled with increasing chargebacks are also at risk.

Additionally, any business operating in prohibited industries or violating platform policies will likely face shutdown once detected. Ultimately, while these platforms value merchant volume, they prioritize risk management. It's frustrating for merchants, but it's the reality we're dealing with in this industry.

What recourse does a merchant have when declined or shut down by these platforms"?

It's a tough situation, but there are options. First, contact the platform's support team to understand the specific reasons for the decision. Depending on the situation, merchants can appeal the decision, provide additional documentation, or correct any flagged issues. We often help merchants find alternative processors who might be a better fit. In some cases, it might mean adjusting your business model to reduce perceived risk.

Why is ecommerce considered to be more high risk than other types of merchant accounts?

Primarily due to the nature of card not present (CNP) transactions, which are more susceptible to fraud compared to in person transactions. We see higher chargeback rates due to what we call "friendly fraud", customers who claim they never received an item when they actually did. Plus, ecommerce businesses can scale rapidly, sometimes faster than their risk management can keep up. It's a perfect storm of risk factors that makes processors nervous.

What can ecommerce merchants do to improve their chances of getting an approved merchant account?

It's all about presenting a solid, low risk profile. Strong credit scores are a must. We advise our clients to prepare detailed business plans and realistic financial projections. Implementing robust fraud prevention measures, such as Address Verification System (AVS), 3D Secure (3DS) and Card Verification Value (CVV), and maintaining a low chargeback ratio, will reassure underwriters of the business's risk management capabilities.

It's about proving you're a responsible merchant who understands the landscape.

How can ecommerce merchants qualify for the best possible rates?

This is where a track record really pays off. Consistently low chargeback ratios are golden; processors love to see predictable volumes; it suggests stability. Implementing strong security measures like 3DS and AVS goes a long way. Merchants can reduce their chargeback ratio using prevention strategies and additionally leverage their performance metrics to secure better rates. Over time, as you build a positive processing history, you'll be in a better position to negotiate.

If an ecommerce merchant has a unique business model that doesn't fit into regular merchant category codes, what information can that merchant provide to underwriting for a better chance at getting approved?

Provide a detailed explanation of your products, services, revenue model and transaction processes, drawing parallels to established businesses for context. Outline robust risk management strategies, especially for fraud prevention and dispute resolution. Include solid financial projections, growth plans, and insights into your target market. Don't forget to submit relevant licenses, compliance documentation, and any industry certifications or partnerships.

The key is demonstrating your business's legitimacy and ability to manage risks. Remember, transparency is crucial the more detailed information, the better equipped underwriters will be to potentially approve .

What is the most common misconceptions about chargebacks and why is it so critical to keep a low chargeback ratio?

That chargebacks are just a cost of doing business. This couldn't be further from the truth. Excessive chargebacks can get your account terminated or land you in costly monitoring programs. Keeping your chargeback ratio low is critical; it keeps your processing costs down by avoiding hefty fees. A low ratio improves your chances of better rates, and it keeps you off the radar of chargeback monitoring programs, which can be a real headache.

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

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