How Merchants Are Steadily Moving Towards Issuing

Mar 25, 2021

Following the devastating financial crisis, risk-averse banks responded by backing away from offering all forms of consumer lending, particularly to “mass-market” and budding middle-class customers. 

However, providing merchant credit, which involves lending to consumers via retailers is even more critical for financial institutions, retailers, and their customers. More importantly, both retailers and lenders have discovered that having robust credit capabilities embedded within their point of sale holds immense value for their customers as well as their bottom line. 

Retailers And Banking Partners As Leading Sources Of Credit

Historically, both retailers and banking partners were the primary founts of credit. This developed out of necessity since customers with flawed or limited credit histories needed credit in order to have access to the products they wanted.

If this option did not exist, customers would be forced to purchase lower quality products at lower prices. Ultimately, the product would offer less value to both the customer as well as the retailer.  

In order to mitigate the potential risk due to offering “mass-market merchant credit”, lenders have relied heavily on higher interest rates. Retailers offset their risk with the income generated from increased sales. 

Merchant Credit Undergoes Digital Transformation

Driven by digital technology, merchant credit is experiencing a transformation due to an ever-increasing quantity of data on the shopping habits and preferences of customers. There are also digital channels that promote customer engagement and it also allows the delivery of the latest credit offers for higher-priced products. 

Once consumers redeem these offers, more data is released, which leads to increased engagement and more spending. It greatly facilitates getting what the customer wants when they want it. 

Online retailers are inundated with enough data to determine their customers’ behavior and preferences. In order to convert this essential data into financial gain, the shopping behavior must be matched with the data from financial services. For example, when shopping data is linked to their bank account and past credit history, merchant-lenders are then able to approximate the customer’s income and their ability to repay the loan. 

Retailers and issuers can also combine consumer purchase information, along with social media and “non-traditional digital data sources” to determine credit risk. This greatly facilitates the ability to provide credit products that are customized. When this evaluation is carried out effectively, this data helps issuers and merchants to determine whether to offer “installment, private-label, or co-branded cards”, to these customers. 

When you combine fresh data sources and omnipresent connectivity, mostly through cell phones, it is no wonder that this has become a major driver of the digital transformation of merchant credit. 

Significant Implications Of Digital Transformation Of Merchant Credit

There are enormous opportunities in the digital transformation of merchant credit. When credit offers are digitally enabled, it boosts customer loyalty. There is also an increase in a retailer’s return on investment in “big data analytics” in digital technology as well as big data analytics.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.