22/03/21 The main difficulties for startups in risk management
Many companies at the very beginning of the development of the business in the field of payments either pay insufficient attention to the risks that arise or do not pay it at all. One of the most common schemes is an attempt to delegate these risks to related departments. Most often, the IT department acts as such a performer. However, subsequently, the company's management begins to face the first financial losses from fraud or chargebacks, problems of interaction with acquirers or audits from regulators or card schemes.
The second common pattern of behavior among young companies that sell their services through online payments is the lack of an anti-fraud system that can fully ensure the security of both client funds and the company's own money. Practice shows that creating an anti-fraud system architecture, as well as building all the necessary risk processes, is as effective as possible at an early stage. However, it is quite natural that business owners, especially at the start-up stage, have limited funds and try to spend them as economically and efficiently as possible. In this article, the Riskcentr team will give detailed advice to those companies that, for whatever reason, do not yet have anti-fraud specialists and AML employees on their staff. What difficulties and solutions do new participants expect?
Fraudulent transactions
First of all, it is worth noting fraudulent transactions made both using stolen cards on the side, and as a result of phishing your own customers who will try to use your services or products.
The main method of fighting is the use of an anti-fraud system, its own development or an external solution. Each option has its pros and cons, but if you implement an anti-fraud system on your own as a temporary initial solution, you must at least cover the following restrictions and limits:
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Perhaps this is the main minimum set that your anti-fraud system should have at the initial minimum stage of implementing payments in your business.
AML and regulation
In the second place, the most difficult points are found in the field of compliance with the rules of regulators and the requirements of card schemes. And if one specialist is needed to implement AML procedures, then an employee from another field is required to comply with the requirements of the card schemes. However, our recommendation will be as follows: at the initial stage, outsourcing services or non-full-time employees are quite suitable. As a rule, in the first six months of such measures are enough.
Chargebacks losses
In third place, the main financial threat is represented by chargebacks, which are an integral part of any payment using a bank card. We strongly recommend using only 3D Secure payments, otherwise, with a very high probability, chargebacks with codes associated with fraud will be lost. Also, a significant share will be occupied by disputes with customers' disagreement on the services provided or non-delivery of goods and services. It is necessary to pay great attention to the quality of the services provided and to record all agreements with the client, which, in the case of receiving chargebacks, can be provided as evidence to the acquiring bank.
There are other threats, depending on the type of your business, but the ones described above are the most common and unavoidable when starting any startup.
The Riskcentr team wishes you a successful start-up, development and safe business!
