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Risk Management
Learn about risk management information & techniques vital to your business


Paying Attention to Risk is Good


As a core component of any merchant account, risk management is an equilibrium between profitability and exposure to potential loss. The acquiring and issuing side of banking is limited by risk; however, Merchants often are not sufficiently educated on the purpose and importance of chargeback and risk management. This is unfortunate and has several negative ramifications on the profitability and sustainability of your business.

Knowledge of credit and debit card fraud ultimately will enable businesses to better understand underwriting and live risks to their bottom line. Below you will find definitions and explanations of the Terminated Merchant File and Member Alert to Control High-risk.  The TMF MATCH list has been created to allow processors to flag businesses and this information will help you if your business is actively involved in a risk investigation or credit card dispute with a processor's risk department.

What is underwriting?

Accurate completion of the merchant application is critical because it ultimately will serve as a legal contract upon approval of the business to accept credit cards. Average ticket, monthly volume, merchandise and/or service sold are extremely important, requiring precise attention. Underwriting approves a merchant based on the parameters indicated; if those parameters shift significantly, a merchant may be placed under review by the chargeback management department to avoid chargeback fraud.

The higher the average ticket, the greater the potential risk exposure to chargeback fraud. A chargeback of $2,000 is more likely not to clear a merchant's checking account than a $100 chargeback. It is not uncommon that a merchant with a high average ticket is asked to submit recent copies of recent checking account statements in addition to the application. The merchant should always have sufficient funds available for a lost credit card dispute or processing fees to clear.

What is the TMF MATCH List?

Although TMF is a word from the past and "MATCH" is the more diplomatic terminology, all the terminated merchant accounts remain documented. Visa and MasterCard members both contribute to the combined TMF MATCH list; however, MasterCard hosts and regulates the use and access of the system. Regulations state that only the member bank may administer and add/remove merchants from this system. MATCH has become the first line of defense for acquirers and processors.

The system works by manually entering or batching data through MasterCard's online system for inquiry. When a merchant is identified on the system, there is one of two replies: Exact Match or Partial Match.

    a. Exact Match: Business Name, Tax ID#, Phone Number, Owner Name, SS#.
    b. Partial Match: Business Address, Owner Address

It has become widely accepted that merchants will not be approved by the risk department if an Exact Match is the result, and merchants will be investigated for a Partial Match. Although member banks are not prohibited from approving merchants on the MATCH system, it is highly discouraged and regarded as an unnecessary risk.

The acquirer who places a merchant on the file has the sole ability to remove the merchant. This is uncommon yet happens more than one would expect. If a business gets placed on the TMF MATCH list, it may seem excessive in some circumstances, but it is mandated that a merchant be terminated for one of the reason codes listed below is placed on the MATCH file. If the acquirer fails to do so, and the merchant causes another member bank monetary losses, the original member can be liable for those damages.

Merchants can be added to MATCH for any one of the following reason codes:

* Excessive Counterfeit bill acceptance
* Unauthorized Cardholder Charges
* Laundering/Factoring
* Excessive Chargebacks
* Excessive Chargeback Fraud (8% violation rate)
* Violation of Merchant Agreement
* Fraud Conviction

Most reason codes are very specific; some leave room for interpretation. The possibility of a good business or otherwise not deserving merchant being placed on MATCH cannot be denied. The ratio still makes MATCH a necessary defense for the acquiring industry.

What are the Do's and Dont's of a Risk Department Investigation?

Being involved in a risk investigation can be a good thing. The bank or processor is requesting assistance to eliminate a potential loss and maintain the merchant account. In most instances an invoice, signed sales slip or imprint could resolve the issue. Risk managers do not intend to lose a merchant account; the concept is to eliminate the risk and maintain the relationship. Cooperating with risk management to accomplish that goal ensures a lower attrition rate.

Merchants should always be willing to work with risk and chargeback management. Although business owners may become frustrated, the primary reason signed sales slips and imprint cards are required is in the event the bank or processor should request them. Typically, once the requested paperwork is received, a validation from the issuing bank can resolve the situation entirely. Other variables can delay the process, including issuers who are extremely uncooperative with acquirers.

Never try to convert your processor while in the middle of a risk investigation. This will jeopardize your ability to process bankcards, with the recourse being a 180 delay on the settlement of funds being held. The risk manager has the responsibility to decrease the risk exposure and retain the merchant account. Interference may place the merchant on the MATCH file. Always make sure you have has satisfied obligations to the processor or bank before attempting to convert your processor.

Challenge Fraud-related Chargebacks

Challenging chargeback fraud using the detailed chargeback report you receive from Bank Associates Merchant Services is an effective and essential way of reducing the cost of lost business.  Research shows, on average, merchants win 40% of the fraud-related chargebacks they challenge, resulting in net recovery of 28% of all fraud-related chargebacks received. Undoubtedly, chargeback experience varies by merchant and by the type of goods that they sell, however, the opportunity is well worth investigating, both in your internal business relations and in your work with BAMS.

1. Click here to learn why "Better Signed Than Sorry"

2. Click here to learn what concerns there are when the "Card is Not There and You Need To Be Aware"

3. Click here for "Guidelines for Safely Taking Orders When the Card is Not Present"

4. Click here to learn how "Skimming is a Scam"

5. Click here to learn about "Warning Signs of Fraud"

6. Click her for an E-commerce Merchants' Guide to Risk Management