Accepting payments is becoming increasingly simple for online businesses. With an array of acquirers and alternative payment methods to choose from, businesses can select providers on service quality and price. Nevertheless, processing payments is not risk-free, and things can go wrong. A strong control framework to mitigate these risks is vital for long-term success. Here are some of the top risks online businesses face when accepting payments, and what you can do about them.
Processor outages
No online business can promise to be available 100% of the time. The same is true of your payment providers. Technical challenges, whether in a provider’s internal systems or a third party’s, can cripple payment processing. Payments may be queued for later than planned, or you might see checkout issues that lower conversion. The disruption can be damaging financially and reputationally.
Increasingly, businesses accept payments through multiple providers to mitigate this: 57% of merchants work with multiple acquirers, according to a survey by ACI, with two to five acquirer relationships being the norm. A secondary or tertiary acquirer gives your business a failover if anything goes wrong during processing.
Settlement delays
The global financial ecosystem is complex. Factoring in every step of accepting a payment (gateway, processing, clearing, settlement and so on), an issue with any one can delay your settlement, in part or in full. In the worst case your business might not get paid for at least a day. If you have suppliers to pay or customers to distribute funds to, the impact can be severe.
The critical detective control here is payment reconciliation. At a basic level, check your bank accounts to confirm you are paid as frequently as you expect, and in the right currencies. For complex businesses with multiple providers, entities and bank accounts, this becomes highly manual and raises operational risk — which is exactly what an automated reconciliation platform removes.
Incorrect settlement
Delay is not the only thing that can go wrong. More often, you will not receive the amount you expected from your provider. How do you know what you should receive? Your internal records (data warehouse, ledger, trading system) are a good start. On top of that, you should receive transaction-level reports detailing the transactions, fees and other debits or credits that make up the settlement, an audit-friendly report, and the settlement into your bank account. There are a lot of moving parts, and it only gets more burdensome with multiple providers or thousands of payments a day. Top causes of reconciliation discrepancies include:
- Timing delays at any point in processing a payment
- Technical issues at one or more of the parties involved
A robust control framework is needed to ensure settlements are received in full, and effective payment reconciliation is vital. Equali streamlines payment reconciliation through automated report extraction, data cleansing, transformation and enrichment, so you can reconcile more frequently at lower time and financial cost.
Fraud
Fraud is an unfortunate part of accepting payments, and processing a large number of fraudulent transactions can have serious ramifications: you might struggle to find a provider to work with, or be forced to stop processing. Fortunately, a range of fraud detection engines is available, which makes reducing fraud risk straightforward. They review anything that does not look right before you end up with a high number of chargebacks.
How Equali helps
Equali streamlines your reconciliation process to reduce the impact of payment processing and settlement issues. To find out more, start a free trial or book a call with the team.