The Metric That Defines Merchant Risk Today: Fraud
While chargebacks are commonly seen as the main risk factor in an acquirer’s portfolio, the true defining metric today is fraud, specifically fraud count.
Chargebacks are still a concern, but their weight has declined as tools exist in the industry to help resolve the disputes before they even reach the schemes. Fraud, on the other hand, is harder to manage as even small spikes in fraudulent transactions can draw immediate attention.
This marks a change in how scrutiny is applied. It is less about absolute volumes and more about the pace of movement. A handful of merchants can now shift an entire portfolio into escalation territory. What once might have been seen as natural growth or everyday portfolio movements can now be interpreted as a warning signal:
Refund patterns that accelerate unexpectedly
Cross-border activity that grows faster than anticipated
Fraud counts building in short bursts
Tolerance bands are tightening and timelines to respond to signals are shortening. It is no longer about demonstrating compliance at the end of a cycle. It is about being able to show stability as those movements happen.
This shift shows up in a few ways:
Stable : Ratios and signals are within tolerance thresholds. The book looks healthy and acquirers see no immediate risk. This is the zone where monitoring is routine, and no additional reporting or remediation is expected.
Warning : Early warning signs begin to surface. Refunds start clustering, sales spike in unexpected corridors, or cross-border traffic grows faster than planned. None of these alone may breach a rule, but the pattern triggers closer attention. At this stage, acquirers are expected to step in, documenting actions, tightening controls, and showing they have merchants under watch.
Immediate Escalation: Fraud tolerance (and then ratios) are breached. This is where schemes or regulators formally intervene. The acquirer is placed into a programme, remediation is monitored closely, and the cost of non-compliance rises quickly. Fines and sanctions are no longer theoretical, they become likely if stability isn’t restored fast.
In essence, the critical shift is that escalation timelines have collapsed. What once played out over quarters is now measured in weeks or even days.
Acquirers are reading signals. Your setup is one of them.
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