By Bob Kaufman
ConnexPay
At the time of this writing, it's hard to say whether the ramifications of the collapse of Silicon Valley Bank, First Republic and Credit Suisse are truly over. The rising interest rates that were blamed for the banks' failures are still present, and opinion is split on the causes of the collapses. Principally, the era of cheap loans that has underpinned much of the 21st century so far is ending.
Companies are increasingly worried that the banks that should provide a solid foundation for their business may either be structurally flawed or not working in their best interests. This concern is particularly acute across companies and industries that banks typically view as "high risk." They know that if their bank has problems, then they will be the first to suffer from higher fees or restrictions.
The truth is, although there are undercapitalized banks like SVB, the majority are conservative by nature, (see https://tinyurl.com/ye269fsz). The likelihood of any bank disappearing with their clients' money is low, and we have seen both recently and in 2008 that governments are willing to pay staggering amounts of money to bail out banks.
However, when there is unrest in the economy, banks become even more conservative to limit risk and thereby avert a scenario in which they are undercapitalized. So, what can companies do to protect themselves from banks turning against them during uncertain times?
Many sectors pay a premium for banking and card processing because they are either in legal gray areas or subject to higher-than-normal levels of fraud and chargebacks. However, high-risk designation isn't restricted to what is broadly referred to as "vice," and our own clients who deal with being deemed risky are from more mundane sectors. For example, the travel and tourism industry is also subject to high fees and stricter limits on chargebacks for reasons that airlines, travel agencies, tour operators and ticket comparison sites largely can't control.
Airline tickets and hotel reservations are high value, and since they are digital, they are easy to transfer anonymously. A fraud network can use stolen or synthetic identities to purchase tickets and sell them for very high profits, which will in turn cause a chargeback when the person whose identity was stolen discovers the unwanted charge on their card.
Travel fraud is big business: one fraud network alone made $1.2 million in illegal sales in the first nine months of 2021, and fraudulent websites cost the industry $1 billion per year. The airline industry reportedly saw a 530 percent rise in cybercrime incidents during the COVID-19 pandemic, and this has yet to abate (see https://tinyurl.com/5n784fms).
The travel industry is also subject to what is termed "future delivery risk," which is the risk that one party might not fulfill their side of an agreement once they have been paid. While in most industries a customer deals directly with the company that supplies the product they are buying, the travel industry has more middlemen, such as travel agencies, tour operators and flight comparison sites.
This means that if you were to buy a flight through an online travel agency and the flight was canceled, the travel agency would have to issue a refund. Because these intermediary companies don't have any control over exogenous events like flight cancellations, financial institutions are wary about them, leading to increased fees that they pass on to the merchant.
Also, it's no secret that banks have the power to shut a client off in a split second—or prevent them from issuing payments at all—as I've seen happen many times over the years. For example, just recently I know of a company in the broker space that was processing hundreds of millions of dollars per year through their bank.
However, this company's former bank recently shut them off from issuing virtual cards because this broker was functioning as a payments intermediary and not fulfilling the product or service directly. It pains me to see companies like this being treated so harshly by their banks.
Businesses working in perceived high-risk sectors by banks have to walk the line between accepting that they will always pay more than other merchants and doing what they can to ensure that they don't incur any further penalties. They need to show their banks and card schemes that they can be trusted and are not truly high risk.
How can companies solve these problems? By using a payments solution that handles both incoming and outgoing transactions, plus a fraud prevention solution for further protection—all inside a single platform—businesses can fundamentally de-risk the payment process that banks face with perceived "high risk" clients.
After removing risk from the transaction scenario for these companies, they can then enjoy lower merchant processing fees, saving businesses money and improving
their cash flow. 
Bob Kaufman is the founder and CEO of ConnexPay. He started ConnexPay with a passion to remove pain and friction, and a clear purpose to improve the customer experience of paying and getting paid. His strategic foresight and visionary leadership have built ConnexPay into a company that now serves a multitude of businesses spanning several industries globally. Prior to founding ConnexPay in 2017, Bob spent nearly 20 years at U.S. Bank, where his tenure included serving as CFO of the Payments Services division as well as senior vice president, leading innovation projects across the bank's payments division. In addition, he served as the general manager of U.S. Bank's Virtual Pay division, where he led product, marketing, and supplier enablement for all virtual payment solutions, as well as a sales team focused on virtual payments. ConnexPay is the first and only company to bring together the two sides of the payment process — payments acceptance and virtual payments issuing — into a single platform with one contract and one reconciliation. Learn more at www.connexpay.com, and follow us on LinkedIn at www.linkedin.com/company/connexpay/.
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