Dynamic Risk Assessment for Smarter Merchant Monitoring

Let’s break down how dynamic risk assessment—available as an add-on to Feedzai’s Merchant Monitoring—protects acquirers from increased risk while giving merchants easier access to cash and liquidity.

The Cash Crunch for Merchants

Cash is critical for merchants, especially smaller businesses. Merchants need access to their funds to restock their supplies, secure partnerships with vendors and suppliers, manage their utility bills, and pay their employees. 

Yet, according to one study, many merchants—as many as three-quarters—frequently face delayed payouts. Without easy access to their revenues, these businesses can face a significant cash crunch that could threaten their livelihoods. 

To address these concerns and remain a valuable payment provider, some acquirers are shifting to same-day payouts for “good” merchants. In some markets, including Australia and Brazil, merchant payments can be paid intra-day or on-demand. Implementing these approaches comes with its own risk. Specifically, acquirers that offer speedy payouts may be financially exposed if the merchant turns out to be a higher risk than they thought.

Current Approaches to Minimize Merchant Risk

Several approaches exist to managing merchant risk while addressing merchant needs. Typically, acquirers will use one or a combination of the following strategies. Each approach has its pros and cons.

Greater Merchant Deposit Requirements

• Pros: Requiring merchants to carry greater reserves is a common method for acquirers to offset merchant liability risk. Mandating a steady balance helps acquirers avoid losses due to potential chargebacks.
• Cons: While acquirers are better protected by requiring more extensive merchant account deposits, this approach does not help merchants with their cash flow issues. It threatens to worsen them. By requiring merchants to make more significant deposits, these businesses will need help paying their bills, employees, vendors, and suppliers. 

Faster Settlements for ‘Good Standing’ Merchants

• Pros: Acquirers can reserve faster payouts to merchants, but only if they meet good standing requirements. This often means merchants need at least 12 months of history with the acquirer, during which they report few or no chargebacks.
• Cons: Requiring 12 months of history with an acquirer means many good-standing merchants will not qualify for the rapid settlement benefit. This unfairly excludes merchants who would otherwise be eligible for faster payouts but lack a year’s history to confirm their risk level.

Transaction Data Analysis

• Pros: Traditional risk assessment procedures involve reviewing transaction data. With these insights, acquiring banks can quickly identify risk signals that indicate high-risk behavior. 
• Cons: The transaction data review process is designed to review individual transaction risk, not an aggregated view of risk. As such, operational teams rely on highly manual procedures and can easily miss red flags due to human error. 

Feedzai’s Dynamic Risk Assessment

Dynamic Risk Assessment offers acquirers significant advantages in managing merchant risk. Using intraday and trigger-based evaluations, acquirers can quickly assess the merchants’ risk in their portfolio in near real time. This insight gives acquiring banks confidence in their rapid settlements.

Robust Merchant Risk Insights 

Insights from Feedzai’s Dynamic Risk Assessment can do more than enhance risk detection. By integrating with Feedzai’s Case Manager, they can also streamline analyst work. Analysts can aggregate more efficiently by accessing insights from a centralized platform, enabling them to focus their efforts where they matter most.

Merchant-centric Alerts and Integrated Transaction Data 

Merchant-level alerts are a vital feature of Dynamic Risk Assessments. These alerts include detailed risk assessments and link directly to the transaction that triggered it from a single screen. This level of insight enables analysts to make faster and more informed decisions. Merchant-based visualizations and metrics are updated multiple times a day instead of just once, enabling analysts with the latest data.

Alert Appending

The system appends the details to a single alert if multiple risk assessments are generated for the same merchant. Analysts do not have to cross-reference multiple alerts when new data emerges—all risk assessments, whether trigger-based or scheduled, are aggregated under one alert. Fraud analysts can see relevant information in the Activity Log console. This approach reduces redundancy and ensures that relevant details are captured in a single view, streamlining the alert view process.

Auditability

The systems’ Daily Activity Log includes full auditability. This feature records everything an analyst does, from reopening alerts to appending additional information into an existing alert. Acquirers can access a clear trail of alerts for all actions taken, ensuring accountability and transparency in their decision-making processes.

Why Consider Feedzai for Dynamic Risk Assessment?

With Dynamic Risk Assessments, acquirers can gain a significant advantage without exposing themselves to substantial risk. Here’s how Feedzai’s solution benefits acquirers.

Gain an Aggregated View of Risk

Acquirers benefit from a consolidated view of risk, whether for an individual merchant like a local flower shop or across their complete merchant portfolio. This real-time perspective allows acquirers to identify risks quickly and reward reliable merchants with faster payouts, even on the same day, giving them a competitive edge.

Near Real-Time Alerts

Detect risky behavior in their merchant portfolio as it happens. Immediate alerts enable proactive risk management. Potential issues are addressed before they escalate or force acquirers to incur risk themselves.

Increased Operational Efficiency

Features like alert appending enhance efficiency by providing additional context and consolidating multiple alerts into one. This ability, combined with a unified transaction fraud and merchant monitoring platform, simplifies investigations, streamlines reporting, and boosts overall competitiveness.

Weaving dynamic risk assessments into your risk management strategy is a decisive step for acquirers to get ahead of emerging threats and improve their operational efficiencies. By leveraging real-time insights and streamlining analyst workflows, acquirers can make faster, more informed decisions. 

Acquirers are not the only ones to benefit from dynamic risk assessments. Merchants gain faster access to cash and can enjoy increased financial stability. Business owners and their employees, vendors, suppliers, and partners enjoy smoother cash flow. These benefits make acquirers valuable partners who empower their customers to run successful businesses, a win-win for acquirers and merchants.