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How can you track merchant services risk management metrics effectively?

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If you provide merchant services, such as payment processing, to businesses, you need to monitor and manage your risk exposure. Merchant services risk management involves assessing and mitigating the potential losses and liabilities that may arise from fraud, chargebacks, compliance issues, or operational failures. To track your merchant services risk management metrics effectively, you need to follow some best practices and use some tools that can help you measure and improve your performance. Here are some tips to get you started.

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Brian Rufaro Zendera

Business Analyst| Econet Wireless Zimbabwe| FMVA?| MSc Finance & Investments| CICM
OZCAN SEZER

Private Investigator
Elizabeth Thiaka, CIA?, CIAQA

Internal Controls | Risk Management | Internal Audit | Project Management.

1 Define your risk appetite

Your risk appetite is the level of risk that you are willing and able to accept in pursuit of your business objectives. It depends on your industry, market, customer base, and competitive strategy. You need to define your risk appetite clearly and communicate it to your staff, partners, and regulators. This will help you align your risk management policies and procedures with your business goals and expectations.

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Imran Ahmed Bhatti

Credit Controller - Gulf Eternit Industries / Future Pipe Industries. UAE
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Yes, you have to be very open in communicating your objectives and goals and what risks and challenges are involved to achieve those targe. This will help in defining the clear policies and regulations for the organization, acting upon will achieve the desired results.

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2 Choose relevant metrics

When tracking your merchant services risk management performance, you need to choose metrics that reflect your risk appetite, operational efficiency, customer satisfaction, and regulatory compliance. For example, the chargeback ratio is the percentage of transactions that are disputed by customers and reversed by card issuers; the fraud rate is the percentage of transactions that are fraudulent or unauthorized; the approval rate is the percentage of transactions that are approved by your payment processor; the decline rate is the percentage of transactions that are declined by your payment processor; and the compliance score is the degree to which you meet the standards and requirements of your payment network, such as PCI DSS, KYC, AML, etc. All of these metrics can provide valuable insights into how well you are managing risk.

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OZCAN SEZER

Private Investigator
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Do you really know your merchant? How much do you know? The more you know the more you understand his profile and risk. - Did you make any side visit? Or you did one ? How about later , regular visit ? - what the data indicates in your risk index? - Did you understand “ Economic Environment” that and it is impact to merchant/ card holders ? - Did you review and update the tracking tools/ rules, and take proactive actions accordingly Last but not least Could you have clear decision making process and team to take preventive actions when needed. If your answer is yes for all, you should be in a good path until the “ environment “ changed .

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3 Monitor and analyze your data

Once you have selected your metrics, you need to monitor and analyze them regularly and consistently. You need to collect and store your data securely and accurately, and use tools and techniques that can help you visualize and interpret your data. For example, you can use dashboards, reports, charts, graphs, or alerts to display and compare your metrics over time, across channels, or by segments. You can also use statistical methods, such as trend analysis, correlation analysis, or anomaly detection, to identify patterns, relationships, or outliers in your data.

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4 Implement corrective actions

Monitoring and analyzing your data is not enough if you do not act on the insights and feedback that you get from your metrics. You need to implement corrective actions to reduce risks, improve processes, and enhance customer experience. For instance, adjusting risk thresholds and parameters can optimize approval and decline rates, while fraud prevention and detection tools can help minimize fraud rate and chargeback ratio. Moreover, training your staff and customers on best practices and policies for payment security and compliance can be beneficial. It is also important to review and update your risk management plan regularly to reflect changing conditions and expectations.

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5 Seek external support

Managing merchant services risk management metrics can be a difficult and complex process, especially if you're dealing with multiple payment methods, platforms, currencies, or jurisdictions. You may need external assistance from experts or partners to help with data collection, analysis, reporting, or auditing. For instance, you could hire a consultant or service provider to provide advice on best practices and standards for risk management. Alternatively, you could partner with a payment processor or payment gateway to access advanced tools and features for risk management. Joining a trade association or network can also provide resources, guidance, and advocacy for risk management.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Brian Rufaro Zendera

Business Analyst| Econet Wireless Zimbabwe| FMVA?| MSc Finance & Investments| CICM
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I believe providing ongoing training and education to employees involved in merchant services operations to enhance their awareness and understanding of risk management principles and practices is important. Well-trained staff can contribute to better risk identification and mitigation efforts.

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Elizabeth Thiaka, CIA?, CIAQA

Internal Controls | Risk Management | Internal Audit | Project Management.
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Effectively tracking merchant services risk management metrics requires a combination of robust data analysis tools, proactive risk identification techniques, and comprehensive stakeholder engagement strategies. By leveraging technology tools and expertise in internal controls, compliance, and audit practices, organizations can ensure a holistic approach to monitoring and managing risks associated with merchant services. Implementing tailored risk management frameworks aligned with organizational objectives is essential, coupled with a keen eye for detail and a commitment to excellence. Continuous optimization of risk management processes drives sustainable growth and success in today's dynamic business landscape.

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How can you track merchant services risk management metrics effectively?

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1 Define your risk appetite

2 Choose relevant metrics

3 Monitor and analyze your data

4 Implement corrective actions

5 Seek external support

6 Here’s what else to consider

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