By Scott Dawson, CEO, DECTA
To keep fit and healthy, I train in Muay Thai at my local gym every Saturday morning. While Muay Thai and payments may seem worlds apart, they share a key principle: strategically managing pain. Some types of pain can be productive, pushing you to grow stronger without harming you in the long run. But there’s also the kind of pain that triggers alarm bells, signaling a problem that needs immediate attention. Mastering the ability to tell the two apart is crucial in martial arts and business.
The same thinking applies when working with new clients. Some merchants flagrantly disregard rules and regulations, making it essential to walk away from the partnership. On the flip side, businesses can sometimes abandon potential clients too soon, letting fear of risk or lack of proper due diligence prevent them from seizing valuable opportunities.
Many payment businesses implement strict policies to minimize risk, but this overly cautious strategy can hinder relationships with valuable merchants and restrict business growth opportunities. On the other hand, some companies, eager to make money quickly, cut corners and work with high-risk merchants, which can lead to disastrous consequences. Both extreme approaches lack endurance, so adopting a balanced strategy that carefully weighs potential risks is crucial.
Understanding Risk
Every transaction carries some level of risk, especially in today’s online payments landscape, where threats like fraud and chargebacks are common. A merchant’s vulnerability to these risks can vary based on factors such as their industry, geographic location, and even the time of year, with fraud and chargebacks often increasing during peak shopping season.
This is especially relevant for real-time payments, where the rapid nature of transactions offers minimal time to detect errors. As the real-time payments sector expands globally, businesses require partners that can guarantee both speed and security while maintaining a strong focus on compliance, regardless of the client’s size or risk level.
High-risk merchants, such as those involved in firearm sales, adult content, or gambling services, typically encounter higher transaction fees or may be excluded by certain payment providers altogether.
Risk, Sales and Compliance
Risk and compliance go hand in hand, but they serve two different functions. While compliance teams ensure prospective merchants meet applicable regulations, the risk team assesses the financial, operational and reputational risks of processing their transactions.
There’s also a significant distinction between high-risk and non-compliant merchants. Some high-risk merchants may meet compliance standards, while other low-risk merchants fail to do so. While legitimate payment service providers can work with any risk level permitted by their internal policies, they cannot service merchants who fail to comply with relevant regulations, as doing so could result in severe consequences.
In many payment companies, there’s often a disconnect between the sales team and the compliance department. The typical tension arises when the sales team prioritizes revenue growth by onboarding as many merchants as possible, sometimes without thorough vetting, while the compliance team minimizes risk by rejecting non-compliant clients. This misalignment can be detrimental and should be quickly addressed to ensure a balanced, cohesive approach.
To manage this, a sales team must have a concrete understanding of risk and compliance to avoid signing low-quality merchants or yielding to pressure from high-risk clients. At the same time, the compliance team should look for opportunities to say “yes” to new business whenever feasible, but with a strategic mindset. They should assess whether it’s possible to onboard a legitimate merchant with some challenges without elevating risk. Rarely is a client perfect or entirely unworkable—most fall somewhere in between. With proactive efforts, the compliance team can help foster successful partnerships with merchants, unlocking potential growth.
A Clever Approach to Mitigating Risk
Companies must prioritize communication to shift away from rigid thinking and adopt a smarter risk management strategy. Payments businesses must ensure that every employee is fully trained in relevant compliance requirements, creating a culture of awareness and accountability. At the same time, merchants should view initial business reviews not as a regulatory burden but as an opportunity to build long-term, mutually beneficial partnerships.
Although many companies now utilize automation systems to onboard new clients, human oversight must remain crucial to the operation. Automation can streamline tasks, but relying solely on it risks missing the personal touch that can solidify a strong working relationship with new merchants.
Effectively reducing payment risk requires a blend of strong compliance protocols and thoughtful, strategic decision-making. Companies that achieve this balance demonstrate how to manage risk while leveraging compliance as a tool for growth, not a roadblock. This mindset helps businesses discern between minor challenges and critical red flags.
PS: A special shoutout to Greg Collins at Fordes Gym for teaching me the value of recognizing different types of pain!
About the Author
Scott Dawson, CEO at DECTA, is a highly motivated and results-oriented leader with over 20 years of experience in the payments industry. He is committed to driving DECTA’s UK strategy forward, focusing on growth within the UK and supporting small to medium businesses with its broad range of payment solutions.
Previously, he served as Director of Operations at Pixxles, a UK-based acquirer, and Commercial Director at Neopay, the market leader in delivering compliance solutions to e-money and payments institutions. Scott has also held fraud management positions at PSI Holdings and Neteller before becoming Senior Fraud Manager and then Business Development Manager at ClickandBuy, which Deutsche Telekom acquired.
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