The fintech world has offered a plenty of convenient solutions for fast and easy online payments. This makes it perfect for everyone, from individuals who want to buy something small, to entire companies who want to maintain an extensive international supply network with just a few clicks of the mouse.
But no system is perfect, and using the wrong payment processor comes with some frustrating risks. For example, a sudden MID shutdown can easily bring a company’s entire supply chain to a halt, especially if it occurs at an inopportune time. Avoiding such issues and paying suppliers on time is crucial for any business. Below, you can look at five proven strategies to avoid MID shutdowns and keep your suppliers happy.
What is a MID Shutdown?
“MID” is an abbreviation for “Merchant Identification Number”. It is also known as “MID number”. A MID is a unique numeric code that is assigned to a merchant at an online payment service provider (PSP). It is important because it is effectively the merchant’s ID on this platform and allows them to use the platform to transfer money to and from their customers and other business partners.
Therefore, the blocking of a MID, i.e. h. “MID shutdown”, can be a major problem for any business as it means they will no longer be able to pay their suppliers and other logistics partners.
Top 5 Strategies to Avoid MID Shutdowns and Get Your Suppliers Paid on Time
1. Automate recurring transactions
One of the most common reasons for unexpected and seemingly unreasonable MID shutdowns at payment service providers is “account behavior anomalies”. This usually means a sudden and unusual increase in transaction volume, frequent changes to sensitive account information, or receipt of funds from “suspicious” sources.
Currently, most PSPs use various AI algorithms to detect anomalies in account behavior that actually pose or indicate a threat. However, even the best algorithms can produce the occasional “false positive”, which can lead to the shutdown of a MID simply because of a sudden increase in transaction volume.
A good way to avoid this is to automate recurring transactions as much as possible. Payments to suppliers and other logistics partners that must be made on a regular basis, weekly or monthly, are not considered “anomalies” because they can often be automated.
2. Use a good payment processor
As with anything else, it’s important to use the best tool for the job to avoid issues. There are a ton of different PSPs available today, but if you want to avoid MID shutdowns and pay your suppliers on time, it’s imperative to use a very good, secure, high-risk payment processing platform.
A good PSP will have minimal risk of “false positives due to account behavior anomalies”, better and more complex learning algorithms, stronger security and generally better overall functionality.
3. Efforts to Prevent Chargebacks
Chargebacks are a problem in themselves, as they can quickly drain funds from a business. However, an increase in the number of chargeback disputes, or other disputes with customers or partners, is often viewed as “unusual behavior” in itself by PSPs. It can also be seen as a sign of potential fraudulent activity. As such, many PSPs will temporarily block a merchant ID in such cases to stop potential fraudulent activity until all issues are resolved.
This can be especially frustrating for merchants, as a problem that is not your fault can quickly escalate into a major issue that cannot be technically resolved. It is therefore important to use the right methods to prevent chargebacks.
4. Make sure you comply with the PSP’s terms and conditions
Most people are used to skimming through a site’s terms and conditions, but if you run a business and all your payments to suppliers and partners depend on a particular PSP, you’d better look into its terms and conditions carefully. The terms and conditions of most payment service providers can be very confusing and contain many surprising clauses. This is often because companies (even if yours isn’t) operate globally and the company itself must comply with regulations in different countries and economies.
Violating the terms and conditions of your chosen PSP could quickly shut down your MID and prevent any payments to your suppliers and partners, so make sure you understand what those terms and conditions mean.
5. Treat high-risk transactions with caution
As a high-risk trader, you need to be aware of why the niche you operate in is considered “high risk”. Some sectors are simply at a much higher risk of fraud, scams, and general economic turmoil and uncertainty than others.
Many PSPs will immediately perform a MID shutdown if they suspect fraudulent activity, so we recommend taking every step to monitor all financial transactions.
As with chargeback prevention, we strongly recommend avoiding the risk of fraud, even if it is minor. Many PSPs’ algorithms may automatically close your merchant account due to suspicious activity.
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