Cashflows has recently helped a home improvement business to significantly reduce their acquirer security deposit related to card payments, allowing them to re-invest this working capital into sales, manufacturing and installation activities.
What is the merchant selling, to whom, how and where? These four seemingly simple questions go to the core of merchant underwriting. They certainly help us decide which merchants we sign and the terms we offer.
However, as with so much in payments, the devil’s in the detail. It takes time and experience to ask the right questions and understand the answers. It also takes time to develop a pragmatic approach to risk management and a robust risk model.
What makes Cashflows different?
At Cashflows, we’ve many years’ experience of working directly with merchants to underwrite risk. We evaluate prospective merchants thoroughly to understand and manage operational and credit-related risks.
Recent client feedback is that they’ve never had an acquirer delve into their businesses in so much detail. We take this as a compliment, as it demonstrates that by taking the time and effort we are able to understand their businesses within the context of the home improvements sector. This is the very opposite of the rigid policies and procedures-based approach that so many acquirers take.
How exactly do we acquaint ourselves with a business? We spend time understanding the customer’s order book, delivery and installation cycle. We meet the leadership team, talk to staff and take references, including from professional industry associations. Consequently, in many cases, we are able to propose a more dynamic approach to mitigating risk, which includes a lower cash reserve and pricing that factors future risk.
This approach delights clients. They have access to more working capital to grow their business. We also aim to minimize disruption to their businesses – for example by retaining a key relationship such as with their automated PCI-compliant telephony provider, which reduces the technical costs of change.
Computer says ‘no’
Traditional acquirers invariably rely on underwriting policies and procedures which often don’t take into account geographical or ownership differences; or policies that are set for face-to-face merchants and retro-fitted to the card-not-present channel – not an ideal scenario.
Decline and referral lists and centrally-devised policies are all well and good. They’re expedient for managing a geographically diverse client base and sales force. The flipside is that taking a blanket, computer says ‘no’ approach to merchant underwriting seldom ends well.
For merchants, it may lead to situations where they cannot find an acquirer. Or it costs them a lot to accept card payments in terms of increased service charges, collateral requirements or both. For acquirers, it may lead to situations where good business is left on the table, which just makes no sense. Or they are unable to support their client over the long-term, because they just don’t understand their business.
How Cashflows can help
Because we’re a FinTech acquirer that owns and operates our own technology, we’re not encumbered by legacy. That’s legacy technology and the accompanying legacy mindsets, especially around risk management.
We have a winning proposition for the home improvements sector with a dynamic and flexible approach to risk and costs that will put a smile on your face. To find out more, contact me at email@example.com