What is Automated Underwriting, and why should you care?

It’s not uncommon for new start-ups and established merchants alike to require loans, insurance and investments. Traditionally, this financial risk has been handled by institutions that have the ability to do underwriting, a term that was developed from the act of each risk taker writing their names on a piece of paper, under the amount they are willing to risk for the fee that they charge. 

In recent years, as merchants continued to need outside help in regards to risk, and the adoption of computers and digital technology, it should come as no surprise that there has been a growing shift towards automating this process.

Computer generated loan decisions are continuing to grow, and there doesn’t seem to be much stopping this trend.

So with that in mind, this is where Automated Underwriting steps in, and although it can have the benefits of faster processing times and less human error, it can come at a cost for merchants. 

In this article, we will go over the benefits of automated underwriting and it’s downsides for merchants, and why using a manually reviewed underwriter is probably your best option if you are a High-risk merchant.

Benefits or Automated Underwriting

Considering that the process of automated underwriting has on a continual basis been adopted by the financial industry, it’s clear that there is some use to this technology, or at least many within it think it does. 

Typically underwriting is riddled with inefficiencies, and these include managing submissions, documents and data efficiently, harnessing data to avoid risk, and setting up price packages and rates quick enough with rating and quoting solutions. Not to mention, there are issues with shifting customer needs and expectations during the pandemic, and managing and implementing findings from the growing access to customer data. 

Since the beginning automation was inevitable, and this is mainly because Automated Underwriting has many benefits and allows institutions to:

  • Have a faster turnaround time
  • Use resources more efficiently and have a better workflow
  • Monitor customer information and create data
  • Apply more consistency to their decision making process
  • Reduce human error because of AI and algorithms
  • Reduce paper waste

Also, because Automated Underwriting makes the process very efficient, it allows you to better assess whether the merchant has the 3 C’s: Credit, Capacity and Capital. 

Typically, it can be very time intensive to assess these factors, and this is why the industry has been shifting away from Manual underwriting more and more.

And with these increased efficiencies, some merchants may get some benefits.

At least initially… 

Downsides for High-risk Merchants

So we’ve established the benefits of automated underwriting, and the inefficiencies in regards to doing it manually. It’s clear that the industry has tapped into a method that could improve their business operations and reduce risk, and that’s great for Merchants, right? 

Not necessarily, and when it comes to High-risk merchants, this couldn’t be further from the truth. 

Merchants in general need to be careful when choosing an underwriter, and this is especially true depending on your industry, and whether or not it’s considered a risk. It’s not uncommon for Merchants to choose popular payment processors because of brand awareness and their ease of use, but this can be a trap. 

Oftentimes, popular payment processors like PayPal, Braintree (owned by PayPal) and Stripe use automated underwriting frequently to get users in the door and start collecting revenue from accounts. 

This isn’t really in the best interest of High-risk merchants, because once these payment processors notice high-chargebacks, and see that you are in a High-risk industry after human-verification, that’s when they’ll likely jump ship.

You’ll get dropped when they realize you are a High-risk merchant, and to make matters worse, they will often hold funds for up to 6 months, even if you have low chargebacks!

It’s also important to consider that the key technology behind Automated Underwriting, RPA (Robotic Process Automation), is often very rigid and inflexible. Institutions know that if-then statements can be broken, and this could lead to your acceptance as a merchant, even though you are the right fit for their amount of risk tolerance. 

This is a big waste of time! You need to find a better way…

Why you need Human Underwriting

As much as you notice the potential inefficiencies of manual underwriting, and realize the advances that have been made, you’re probably still at a roadblock. 

By this point you already recognize the potential benefits of automated underwriting, but you also understand that there are massive downsides for High-risk merchants. With this in mind, you should forget about automated underwriting moving forward, because there’s a better and more truly efficient way to ensure the underwriting process goes smoothly with your bank. 

This is where we step in. Luckily, Helios Payments has developed solutions with the needs of High-risk merchants in mind, and we can help you find optimal solutions to tough problems. 

Whether you’re in:

  • Nutraceuticals
  • Trial and Recurring Payments 
  • CBD products 
  • Multi-Level Marketing (MLM) 
  • Diet Programs 
  • High Volume and/or High Ticket Operations; 
  • Tech Support 
  • Software & E-books 
  • Electronic Cigarettes

We’ve got you covered. 

We’ll streamline the human underwriting process for you, and you can rest easy knowing that we only work with risk-tolerant banks. This starts with our 5 Minute Application and continues with the Helios Path, which is our proven process. 

So by working with us, not only will you have a partner that truly understands the challenges of the underwriting process, but you’ll also tap into our experience and the banking relationships we have within the High-risk space. And from there, we can get you the most optimal solutions you need to ensure proper and effective underwriting. 

Computers, automation, and now AI have all been game-changers in the payments industry, but it has come at a cost. You may get quicker approvals initially, but this will likely backfire on you. 

When they realize that you do not fit their appetite for risk, you’ll see things change in an instant. 

And when they pause your business operations, and hold your hard earned money, they won’t lose sleep over it either!

There is a better way, and getting started is easy…it takes just 5 minutes. Click here to learn more…

Chargeback Representment: What it is, and how to create a representment case – Part 2

How to create an effective chargeback representment case

So now that we’ve gone over why you should re-present, and how the process works, let’s go over the basics of creating an effective case. Yes there are several ways to go about this, but the steps you take matter when dealing with unwarranted chargebacks. 

The first thing you need to consider is that time is of the essence. 

If you don’t dispute quick enough, and the window of opportunity closes at the bank, the dispute is decided in favor of the customer, and you will lose the money.

If you do seize the opportunity quick enough, the next important step is to make sure that you have all the documentation and evidence clearly laid out. As mentioned earlier, be aware of the reason code, and also the card schemes involved, because this will give you a better sense of what will be required from you. 

To stack the odds in your favor, be sure to show as many details as possible to prove that you did your due diligence to make sure that transactions are carried out correctly, and that you delivered a good product and service. 

Some examples of evidence to include are, but not limited to:

  • Your return policy as a copy or link form
  • Photos and descriptions of the product, tracking information, receipts, and a confirmation that the customer received the item.
  • Proof that the cardholder’s preferred currency decision (CPC), otherwise known as DCC choice, was not made by the merchant, but rather the cardholder. 
  • Evidence that the billing address that the customer entered matches the address the credit card issuing bank has on their records. You can do this through verifying if their AVS (Address Verification System) and CVV (Credit Verification Value) match, and this is why it is important to run AVS and CVV on transactions, whenever possible. 
  • IP address data that can verify that the location matches the location of the cardholder. 
  • Proof that the customer used the same transaction information to purchase a product previously, but did not dispute. 
  • Customer service emails with the customer, and/or chat logs proving your case. 
  • Proof that the customer was still using your services or website even after the dispute, or transaction, to purchase more products or browse. 

These were just a few examples, so be sure to brainstorm any other evidence you can use…

So once you have the documents you need to make a compelling case, the next step is to create a chargeback representment letter that formally outlines the case. 

Known as a chargeback dispute letter, or chargeback rebuttal letter, this document is the summation of your entire case, and therefore should have all the necessary pieces you need. 

In essence, your end goal with this letter is to prove that the transaction was indeed validated by the customer, approved, and that the customer is actually the one who is in the wrong. 

If you can lay out the facts in a very clear, logical way and without ad hominem attacks on the customer or any other party involved, you will increase your chances of being taken seriously. 

Once these steps have been completed, you then need to submit it to your acquiring bank. 

Your acquirer, who is your credit or debit card processor, will then take the letter and proof that you have, and submit it to the issuing bank. From there, they will decide whether the charge was unwarranted or not. 

Remember, don’t overdo irrelevant details, but rather stick to the facts and explain them out as simply and logically as possible… 

Why Outsourcing is your best option…

So by this point, you’re probably thinking to yourself, “This seems like a lot of work and a big headache!” 

You’re right, it is…

And this is why in situations where there are one million and one details, room for massive errors, stress, and loss of revenues, you’re really better off choosing experts who know the chargeback representment process front to back, and can help you prevent and fight unnecessary loss of revenues. 

This is where Helios Payments steps in… 

Why outsourcing with us is the obvious choice:

  • We help merchants extend the longevity of their MIDs by helping them avoid getting shut down by payment processors because of high chargeback ratios and automated underwriting.
  • We use Ethoca and Verifi alerts, which helps you reduce chargebacks, and dramatically lowers the chances of your merchant account being terminated…
  • We give merchants the right intelligence and reporting capabilities to take the right actions, at the right time, to further reduce chargebacks in the future.

Not to mention, we didn’t even talk about chargeback fees!

Considering the digital nature of eCommerce, consumer’s today may engage in “friendly fraud” more often than in traditional brick and mortar retail settings, and this can leave you with a huge chargeback fee.

This is why we offer 3D Secure authentication to establish clear proof that a customer made a transaction, so there’s no guesswork, just clear evidence. 

Ready to stop “friendly fraud” and get back your hard earned revenue? 

Getting started is easy and takes just 2 minutes. Click here to learn more…

Chargeback Representment: What it is, and how to create a representment case – Part 1

Chargebacks as many merchants know, is simply something that’s par for the course within the business world. 

There may be situations where there are legitimate reasons for a customer to do a chargeback, and in those cases, the obvious right thing to do would be to accept it. 

But what do you do if a chargeback seems a bit fishy? 

This is where chargeback representment plays a key role.

What is chargeback representment? It’s simply a process that you can use to respond to a chargeback that you feel is unwarranted. 

During this process, if you can provide evidence that you properly processed a transaction and that the cardholder is in the wrong, you’ll see yourself regaining lost revenue and protecting your profitability. 

Most of the time customers mean well, but there can be issues from time to time especially in the day and age of eCommerce. 

So in this article, we will discuss the reasons you should re-present, how the representment process works, how to create a case, and why after all this headache outsourcing may be your best option… 

Reasons you should re-present

By now you have at least a general idea of what chargeback representment is, and that’s a good thing; you’re one step closer to regaining lost revenue. So let’s now go over in more detail why you should do it in the first place. 

As mentioned earlier, regaining lost revenue is a key motivator for doing representment, but it’s not the only one. Yes if you never dispute a chargeback, you will lose money, and some chargeback’s could be malicious, but you also need to consider another important key point… 

How risky you will look to your bank.

When you have a bunch of chargebacks, a bank will already flag you as a risky merchant, and potentially drop you. Not to mention, this is regardless of the fact that these chargebacks are legitimate or not. This is why it is crucial to take the extra step and dispute any situations that seem to be unwarranted. 

“Friendly fraud” is another important reason you should re-present, and this is an often overlooked concept. 

You may think to yourself that if an item doesn’t cost that much, it isn’t a real reason to dispute a chargeback, and that may or may not be true depending on how you feel about the situation. 

This is why it is important to spot trends, and if you notice it happening often, or a specific customer continues to do it, doing a dispute can help protect your revenue and your reputation by sending a clear message that you won’t take this sitting down…

The chargeback representment process

So how does the chargeback representment process typically work?

Oftentimes it starts with a dispute from a customer or the bank noticing transaction issues, which often leads to the issuing bank verifying the dispute and returning the money without much hesitation to keep the customer satisfied temporarily. 

From there, the bank will contact the merchant and notify them of the chargeback, and will also be charged certain fees that are based on their chargeback ratio and volume. Also, a reason code will be attributed to the chargeback, which ultimately is used to specify more details as to why the chargeback occurred and what is considered valid evidence for its dispute. 

Then, if the merchant decides to move forward with the dispute, they must prepare the evidence needed to dispute the chargeback within several days, including receipts and other evidence that shows that the customer received and was satisfied with the product. 

Once done, the merchant will then send this information to their acquiring bank, which will then submit this to the issuing bank. 

At this point, they will then review the case and decide whether or not there was any wrongdoing on your part or the customer in terms of the purchase. 

Bottomline, the bank plays a key role when it comes down to filing a dispute or not… 

And considering the steps involved with this, and the amount of parties involved, it should come as no surprise that many merchants struggle with the representment process, and oftentimes don’t even try at all because of this… 

Find out how to create an effective chargeback representment case and understand your options for chargeback representment in Chargeback Representment: What it is, and how to create a representment case – Part 2.

High Risk Merchant Accounts: What are they, and should you get one? Part 2

Why you should get a high risk merchant account

Considering that you’ve read this far, it’s very likely that you think your business is indeed 

a high risk merchant, and that you probably need a high risk account to go with it.

Now that we know a bit more about this type of account, and what it entails, let’s briefly go over why you should get one. 

The fundamental reason you should get a high risk merchant account from a high risk processor, is because they will accept you, while others won’t. 

You may be thinking to yourself, “But why not just use the typical processors like Stripe, Square and Braintree? They seem to accept high risk processors often.”

Actually, this statement is only true up to a certain point, and can be dangerous for your business. They may approve your high risk account initially, because they use automated underwriting, but they’ll eventually terminate it within 1 to 3 months. 

Then, to add insult to injury, they will probably hold your funds for up to 6 months, and this is even if you have low chargebacks!

Defining this process as pointless is an understatement. 

The problems are evident, and the benefits are clear. If you want to receive a higher level of fraud protection and more security, having a high risk account can give you and your bank reassurance. 

Knowing that you are high risk will allow the payment provider to plan in advance by having stronger card authentication measures, and heavily monitor transactions for suspicious activity.   

In short, these are just a few good reasons to get a high risk merchant account.

How to increase your chances of getting approved

Hopefully we’ve convinced you, and if you already are, the next crucial step to take after applying is getting approved. 

By now, you may be asking yourself, “How long does it take to set up a high risk merchant account?” This can be tricky, but like with every journey, it starts with a few first steps…

When submitting your application, you want to make sure that you include relevant details, a cover letter, and anything that can demonstrate your trustworthiness. This will separate you from other applications right from the get go, but it doesn’t end there. 

Remember, what you include in your application matters. 

Here’s what you should include: 

  • Processing history

This is the best piece of information that you can provide as evidence that you are worth their time. As they say “the proof is in the pudding”, and bottomline, underwriters want and need evidence that you run a tight ship. Show that you have a good chargeback history, and this could mean not many, or that you took steps to fix the problem and now have reduced the instances of it. 

  • Expertise

Show that you have expertise in your specific industry by mentioning years of experience, and any awards or good results you have achieved. 

  • Sales

Have a good, consistent sales volume. “Good” can vary depending on the underwriter’s standards, but you should consider weighing the risk and reward for the bank. If you typically bring in $100k/month, having slightly higher chargebacks could be fine, but low amounts of revenue per month could make your application riskier. 

  • Consistency

Make sure that when you do your application, you present a complete and consistent application package. Ensure that the application is fully filled out, and that you include corporate documents, bank statements and vendor agreements.

You should also include other details like addresses, phone numbers, and names of the owners which are shown consistently across all documents. You should also make sure that you add a link to your website, and that it is in compliance with bank regulations in your vertical. 

  • Awareness of risk

Within your cover letter, it is also vital that you demonstrate to the underwriter that you care about risk, and that you are doing something about it. Explain that you are using tools to prevent fraud and are monitoring vigilantly. 

In terms of chargebacks, which increases in likelihood if you have a long fulfillment duration, you should also mention that you have a vendor to respond to your chargebacks and that you are using Ethoca and Verifi alerts. 

In short, these components are crucial to improving your chances of getting approved, and if it seems complicated, you’re not wrong. 

It’s a tricky process riddled with missteps, and waiting in limbo… However, there is a better way. 

This is where Helios Payments steps in. 

We’re the simple and sound option you were looking for all along, and when you work with a high-risk agency like us, you can dramatically increase your chances, and get approved for a higher monthly sales volume. 

Not to mention, we’re an agency that truly understands the whole process, not just part of it…

So when it comes to banks, restrictions, and requirements, we’ve got you covered. 

Ready to take the next step? 

Click here to fast track your approval and grow your business…

High Risk Merchant Accounts: What are they, and should you get one? Part 1

As well as your business may be going, you’ll inevitably hit some roadblocks from time to time, and that’s okay…

One challenge that may arise is dealing with your merchant bank and your relationship with them. Depending on what type of industry you are in, and the types of customers you have, you may be at higher or lower risk of getting shipping delays and refunds.

And, if you notice these things happening to you, you may already be considered a high risk merchant account in the eyes of a bank. 

There are some things that you can do to help increase your chances of being approved, and approved on good terms, but bottomline, if your business is in a high risk vertical, your bank will still consider your account to be high risk, even if it gets accepted. 

So in order to ensure the best relationship between you and your bank, you need to consider several factors that determine what a high risk merchant account is. 

In this article, we’ll go over the key details on:

  • What determines a high risk merchant account
  • What are common examples of high risk verticals
  • Things to consider with high risk credit card processing
  • Why should get a high risk merchant account
  • How to increase your chances of getting approved

Also before reading on, ask yourself if your business has a high risk for:

  • Chargebacks
  • Fraud
  • Disputes
  • High amount of legal restrictions
  • Damage to a bank/payment processor’s reputation

If you answered yes to any of these questions, we may be getting closer to assessing how much of a risk you are as a merchant, and what solutions are available to you…

What is considered a high risk merchant account 

So as previously alluded to, a high risk merchant account is simply a merchant that is considered to be a liability to a bank or payment processor, and can threaten their profitability. 

What is high risk in the eyes of a bank?  

As mentioned earlier, if your business has a high chance of getting chargebacks, fraud, disputes, legal restrictions and liability, and poses a risk to a bank or payment processor’s reputation, you are, in all likelihood, a ‘high risk’ merchant. 

Congratulations, you win more scrutiny, higher processing fees, and a higher chance of getting dropped, thus threatening the sustainability of your business! 

Ok, but all jokes aside, you at least have a crucial piece of knowledge to address the issue at hand. The unknown is now known, so what’s next? 

What else do we have to consider? 

High risk verticals 

Now that we have established what a high risk merchant account is, the next crucial piece of information to consider is the vertical you are located in, and whether it is high risk. 

Bottomline, you are typically considered a high risk merchant because of the market segment you have as customers, and the products that you sell. The who, what, where, when and why really matters here…

So what are some examples of high risk verticals? 

Some common examples include: 

  • Travel websites that accommodate airfare, hotels and give packages
  • Diet pills, supplements, non-prescription pills/liquids (Nutriceuticals)
  • Adult entertainment/dating/products 
  • Electronic cigarettes (Vapes)
  • Prepaid phone cards
  • CBD oils
  • MLM 

There are more, but these are the most common industry verticals that are known to be 

risky, and are typically considered a risk for banks and payment processors. 

If you are in any of these industries, it’s best that you know the terrain so you can eventually get the highest gains… 

What to consider with high risk credit card processing

Once you know that you are a high risk merchant, and that you are in all likelihood in a high risk vertical, the next component you’ll need to consider is the credit card processing side of things. 

In order to ensure the best outcomes, you should consider a couple things…

  • Being in a qualified vertical

Some of the previously mentioned examples qualify for high risk credit card processing, but it’s important that you do your research and verify the details to be certain. 

  • Your credit card provider’s risk tolerance

The truth is, what is considered high risk can vary between providers. If your payment       provider trusts that you will not bring fraud and reputational risk to them, they may be more open to working with you compared to someone else. 

  • Your billing model

How you bill matters, and some are riskier than others. Specifically, if you use a free trial or a time limited trial (i.e. $7.95 for a 14 day trial), at the end of the trial, the consumer will be auto-enrolled into your subscription. It can happen from time to time that consumers will forget about their trial, or cancel their subscription afterwards and demand a refund. This adds a lot of risk in the eyes of a bank as chargebacks and refunds may be frequent with you…

  • Underwriting guidelines

Are you worthy of their credit as a borrower? Typically, merchant banks want to see a credit score of at least 650+, so you may want to check up on your current score, and see if you meet it. With this in mind, depending on the terms that they set, their standards and their processing fees, you may find yourself having a higher or lower chance of getting approved. 

  • Offshore businesses

Being offshore can be perceived as risky, and this can depend specifically on where your customer is paying from, the applicable laws in their area, and the instances of fraud that happen there. 

Once you have considered these factors, you’ll have a better grasp of whether or not you’ll have a higher or lower chance of being accepted for high risk credit card processing. 

Stay tuned if you qualify as a High Risk Merchant Account for the next steps in getting your business rolling in the right direction. We can read all about this in the second part of this article.

Affiliate Summit East 2021 Wrap Up

After an 18 month hiatus,  Affiliate Summit is back in a big way. If you’re a direct response merchant and you haven’t been to an Affiliate Summit show, you are missing out.  There are bigger shows out there,  but none will compare to the focus and community at Affiliate Summit. Attendees and Exhibitors at Affiliate Summit are traditionally from the direct-to-consumer e-commerce space (and supporting industries). If you’re looking to increase website traffic, you’ll be spoiled for options with all the affiliate networks and traffic partners attending and exhibiting. Likewise, vendors from fulfillment houses, customer support teams, web dev, payment processing and other supporting industries are always there.

Josh Ewin Interview at Affiliate Summit East, 2021.

COVID Safety
As for COVID related safety precautions, the show organizers did a decent job of keeping attendees safe at the event. While there was no time limit for attendees, guests were required to scan in and out of the show floor. Masks were only required for unvaccinated guests. At Affiliate Summit West, masks will be required for both vaccinated and unvaccinated attendees.

Affiliate Summit West
Affiliate Summit traditionally runs two shows in the US each year – Affiliate Summit East in NYC in the summer and Affiliate Summit West in Las Vegas in January. This year, Affiliate Summit West will be in Las Vegas from November 2 – 4. You can view exhibitors and register to attend on their website.

Limited time offer from Helios Payments
We’re carrying over our Affiliate Summit East promotion into the month of August. Until Aug 31, save on processing, chargeback response and fraud prevention when you use all 3 services. Contact our team today for more details.

  • High Risk MIDs
    Save 50bps when you bundle
  • Chargeback Response
    No monthly minimum + $2 off alerts
  • 3DS Fraud Prevention
    Stop friendly-fraud and chargebacks
    $10 setup (normally $100) and $0.15/transaction with no monthly minimum.