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Education

Reduce merchant industries too high-risk in order to “de-risk” an en-
tire vertical. For example, a provider may decide not
fraud while scaling up to pursue historically risky industries like online dat-
ing, digital media or gambling. Thus, they lose out on
business and growth opportunities in popular seg-
By Robert Ellenhorn ments of the online marketplace.
EverC • Not understanding industry risks: Providers who
cannot sufficiently review each merchant at on-
critical challenge for growing payment provid- boarding may take on risk without realizing it. For
ers is onboarding new merchants while miti- example, CBD transactions have different regula-
gating risk. Mounting online fraud, expand- tions between states. A legal transaction in Colorado
A ing numbers of merchants, and uneven risk may be illegal in Georgia. Providers need a thorough
distribution are significant hurdles. But automation can understanding of the industries in their portfolio
overcome these hurdles. and a strategy for addressing issues like government
compliance that differ from region to region.
Fraud exploded during the pandemic
• Uneven risk distribution: When onboarding high
The pandemic brought an explosion of new ecommerce volumes of merchants, your portfolio may skew to-
businesses as in-person interactions plummeted. As of ward high-risk industries. This can threaten your
March 2022, Americans had increased their online spend- brand's sustainability. Providers must be able to stra-
ing by 55 percent compared to the two years before CO- tegically plan their growth across sectors to evenly
VID-19 (see Forbes, https://bit.ly/3GoyebL).More merchants distribute risk in the long-term.
than ever opened digital storefronts—legitimate and ille- Automation empowers providers
gitimate. This meant a dramatic increase in the number of
ecommerce URLs and opportunities for fraudulent activ- Automation can help address these challenges. Provid-
ity: fraudulent sales reached $155 billion last year alone. ers can use automated tools that analyze merchant infor-
Common types of ecommerce mation at onboarding to uncover risks and remove risky
merchants from a portfolio. In many cases, automation
merchant-initiated fraud can provide insights to remediate a merchant, rather than
The online fraud landscape is ever-changing as bad actors reject them. For example, if a merchant sells only a few
constantly adapt. Here are some common types of mer- products outside of a payment provider’s risk tolerance
chant fraud: parameters, the merchant can remove those products to
retain the merchant account. In this case, automation can
• Look-alike URLs: Creating imitation domains for also provide ongoing monitoring to ensure a merchant re-
other websites to trick users into thinking they are mains compliant.
on a different site Automation allows providers to capitalize on business
• Counterfeit products: Selling imitations of branded opportunities, while ensuring that each merchant is
products properly assessed. Automated tools also provide critical
• Transaction laundering: Processing transactions for data to help providers grow sustainably by:
illegal goods through an online merchant that falsely • Understanding merchants: Gather data on the mer-
represents itself as a legitimate business, product or chants’ websites, products, customers, sales locations
service and more. Use the data to learn who is using your
• Collusion fraud: Buyer and seller collusion where platform.
ecommerce stores are used to launder funds. • Empowering staff: Provide specific, tailored mer-
• Stealing payment with no intention to sell a prod- chant data to internal analysts and risk managers to
uct: Taking customers’ credit card details without improve the manual review process for unique cases.
sending the product they purchased • Maintaining compliance: Meet the evolving require-
Providers must stay informed about fraud trends to pro- ments of regulators and avoid fines.
tect their users, merchants and brand. Ultimately, there is no one-size-fits-all solution to

The challenge of addressing fraud while scaling up determining the risk for every new merchant on a growing
platform. Providers should harness the adaptability
When payment providers launch, they often start with a of automated tools to ensure their risk management is
small pool of merchants and have the bandwidth to manu- tailored and thorough, while making the onboarding
ally review each merchant’s profile during onboarding. As process as efficient as possible.
they grow and scale, it becomes impossible to manually Robert Ellenhorn is payment risk specialist at EverC, the world’s first fully
evaluate thousands of new merchants daily. This presents automated, AI-driven cross-channel risk management platform that is
significant challenges, such as: transforming the internet into a safe and trusted place for ecommerce.
• Avoiding an entire industry: Unable to evaluate ev- Contact him via email at roberte@everc.com or LinkedIn at www.linke-
ery merchant manually, providers may deem entire din.com/in/robertellenhorn.
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