PYMNTS discussion: The Art of Risk Management
Rich Aberman, Chief Strategy Officer and co-founder of WePay, and John Canfield, VP of Product Risk, Compliance and Experience had a recent interview with Karen Webster of PYMNTS.com about risk management and how risk management has become such a complex, interconnected and vast field that payments service providers now need to look at risk management as an art that they have to work at continuously.
“On one level, risk itself has not fundamentally changed in the last few decades,” Aberman explained. “As a merchant service provider you need to verify if the merchant is who they say they are, are they in your acceptable use category, can you support their merchant codes, will they deliver as advertised and do you understand your credit risk exposure. Same as always.”
What has changed extremely rapidly over the last two decades, on the other hand, is the entire digital context in which commerce is unfolding.
Merchant service providers have the same vetting to do as always, but merchants in the modern environment don’t expect a lengthy application and vetting process. They expect a one-page application and to be able to turn on processing capacity like a light switch.
At the same time, Aberman said, merchant services has evolved into a longer-tailed tool.
“We are opening the floodgates to tiny merchants while having less data and time to make a decision. That precipitates the need to have new ways of look at risk management.”
Which, Canfield notes, requires a different and more integrated risk management perspective going forward. In the past, he noted, firms have had a very hard split between underwriting and risk management, where underwriting would evaluate the credit risk, compliance and know-your-customer (KYC) data to approve a merchant — at which time that merchant would be handed off into the risk management silo.
“To enable a modern onboarding experience, you can’t have that traditional model because you need to be able to continuously evaluate risk,” Canfield explained.Listen to “WePay On Why Context Is King For The Future Of Risk Management” on Spreaker.