Nothing is scarier in business than losing your ability to process credit card payments overnight. What do you do when your payment service provider (PSP) says no soup for you? There are several steps you can take, some preventative and some after the event, to ease the pain.
For starters, don’t rely on a single PSP to process all of your payments. Have some planned redundancy built into your system so that you can switch PSPs when needed. Regardless of whether you get kicked off a PSP, it’s often advantageous to have more than one since different PSPs’ approval rates vary in different parts of the world.
Even if you don’t connect to another PSP, you should keep track of what PSPs and acquirers in the market serve high-risk merchants if you see your chargeback ratio or fraud ratio rising. This will save you precious time when reacting to a sudden service shutdown by your current PSP. It may be worth paying higher rates to a PSP that caters specifically to high-risk merchants to remove the looming threat of a shutdown.
If possible, you will also want to ensure you have other sources of short-term liquidity besides cash flow from credit card payments. Establishing a line of credit can be a good option, since you won’t have to pay interest on the funds unless it is utilized. This will ensure you have some sort of a cushion if all of a sudden your main source of income is cut off.
What can you do once your PSP has kicked you off? Well, don’t yell at your account rep there, you might still need them.
If there is a freeze placed on your funds to cover any remaining chargebacks that might occur, let everything run its course and provide any documentation your PSP asks you for as promptly as you can. You want your earned revenue returned to you as soon as possible, not weeks later. If your funds are frozen, you can use working capital loans to cover operating expenses in the meantime.
Ask if you are being placed in a terminated merchant file (TMF). The TMF lets other processors know that you had your previous account shut down and makes it harder to find a new PSP or acquirer. The TMF blacklist is managed by Mastercard, which calls it MATCH, for Member Alert to Control High-Risk Merchants. Your acquiring bank is responsible for putting you on the list and can do so for reasons as varied as excessive chargebacks, excessive fraud, money laundering and other activities.
If you get placed on the MATCH list, it will be much harder for you to find a new PSP. You will probably be forced to go to a processor that specializes in high-risk merchants and pay higher fees.
After they tell you they will be discontinuing their service to you, request from your PSP account manager that they provide you with 3-6 months of credit card processing information, including chargeback numbers and amounts. This is information you will want to provide to new potential PSPs when explaining your processing history and what happened with your previous PSP. You will need this information as official reports from your ex-PSP and not as a simple Excel file.
When you are placed in a chargeback or fraud monitoring program by a credit card association you are typically required to provide them with a written analysis of why you exceeded their limits and how you intend to fix the situation going forward. You should plan to do something similar when you are booted off your PSP.
Proactively look for anti-fraud or chargeback mitigation solutions that will show a potential replacement PSP that you won’t be the same kind of risky client to them as you were to your last PSP. For chargebacks in particular, you could begin using alert services that enable you to pre-empt chargebacks by issuing early refunds to customers before things get to the chargeback stage.
Whatever happens, remember that other merchants have survived being dropped by their payment processor. The key is to try to pre-empt it from happening and, if that fails, how you react when it happens. You should be ready to put your best foot forward and work with a payment processor that specializes in high-risk merchants if it comes down to it.
