Fraud Mitigation a Top Priority

Cathy Beardsley

I’ve always had a holistic approach to our business. We all exist in a complicated business ecosystem with a lot of interdependencies that are not always readily apparent. Internet payment service providers (IPSP) are a critical part in the online high-risk adult industry ecosystem, linking banks, credit card companies, fraud detection systems and online merchants (just to name a few).

However, it’s not often discussed how intertwined all online adult merchants are through their IPSP of choice. With the tightening rules from VISA and MasterCard, the pressure is on the acquiring banks and the payment processors to stay compliant.

Webmasters should always check with their IPSP about compliance trends so they won’t be caught off guard by new regulations.

If one of the current acquiring banks were to stop handling high-risk transactions, the ripple effect could be felt across substantial portions of the industry. This is one of the reasons Segpay has developed such a sophisticated onboarding process and made fraud mitigation a top priority.

The changes in card association trends by both Visa and MasterCard highlight the increased focus on chargebacks, transaction laundering and payment facilitator reporting. Even Forbes recently reported on the lack of encryption found on adult sites. Merchants need to be taking steps to improve their security and understand that reduced chargebacks and fraudulent activity is a growing focus from the card schemes.

In what may seem, at first, like just big Wall Street news, Visa Inc. has acquired Visa EU. This will now allow VISA Inc. to control all of the Visa regions and revise standards so that all regions are operating by the same rules. Effective July 1, Visa EU’s more lenient policy of 2 percent and 200 chargebacks will be replaced by the more stringent 1 percent and 100 chargeback policy now used in North America.

Additionally, what may be related to the structure of the acquisition, Visa EU has rolled out an extensive list of fee increases that will go into effect April 1, 2016. Visa EU will also increasingly identify merchants with a majority of their customer volume outside of the E.U. for further investigation for suspicious activity. So what once might have encouraged merchants to set up in the E.U. when operationally they weren’t actually located in Europe, will be eliminated by these new regulations.

MasterCard is also incorporating new rules and regulations that focus on cutting back transaction laundering. Transaction laundering is when an unregistered website or merchant is processing transactions through an approved and compliant website or merchant.

All payment facilitators are being encouraged to use monitoring services from either G2 or Webshield to reduce the opportunity for bad merchants to run bad transactions. Significant fines may be placed on acquirers, payment facilitators, and/or merchants if laundering transactions are identified. Webmasters should talk with their IPSP to discuss what fraud detection capabilities can be provided to assist with monitoring for fraudulent activity.

One of the steps MasterCard has already taken is requiring payment facilitators to provide a variable in the transaction that will identify the sub-merchant.

Increased transparency and data being held by the credit card companies is a trend that is on the rise and I believe that over the next five year’s card schemes will become more stringent in these regulations. Webmasters should always check with their IPSP about compliance trends so they won’t be caught off guard by new regulations.

It took only three years for Cathy Beardsley to turn startup SegPay into a profitable company. As president and CEO, Beardsley oversees the day-to-day operations and long-term strategic planning for the company. SegPay is one of four companies approved by Visa USA to operate as a high-risk Internet payment service provider in the U.S. Since 2005, SegPay has offered online merchants a state-of-the-art billing platform that provides real-time payment processing around the globe.