The following case study demonstrates how G2 Web Services helped a U.S. payment service provider identify unauthorized transaction laundering within its merchant portfolio, ultimately reducing its risk and creating new business opportunities.
Transaction Laundering: Understanding the Problem
A U.S. payment service provider (PSP) had a portfolio with 2,168 known merchant websites that contained higher risk adult merchandise. This PSP was already enrolled in G2’s Persistent Merchant Monitoring to carefully monitor its merchants for website content compliance; however, the PSP was not monitoring for transaction laundering, leaving itself vulnerable to potential violations and financial loss.
Transaction laundering, also known as unauthorized merchant aggregation, is a rising concern for acquirers and payment processors as it is prevalent, difficult to identify, and puts acquirers at risk for fraud, brand damage, and assessments.
Being unaware of these aggregating sites, the PSP was facilitating the transactions of unknown and potentially illegal or brand-damaging goods and services, opening itself up to increased financial exposure. Upon learning more about the risks of transaction laundering, the PSP sought help from G2 to determine the full scope of their potential transaction laundering.
G2’s Solution: Aggregation Detection
The PSP set up G2’s Aggregation Detection. It drilled deep into the source of card not present (CNP) transactions and identified merchants who were aggregating both illegal and legal transactions. Results were returned via the G2 NetView Portal, allowing the PSP to quickly action the findings.
After a period of eight weeks, Aggregation Detection had uncovered that 7% of visits to the PSP payment page were due to unauthorized transaction laundering. After identifying these websites, G2 analysts reviewed each one to determine their compliance, and found 9 violations and 88 potential violations. These violations presented significant risk to both the PSP and its acquirer.
Using Aggregation Detection, the PSP was able to drop the average percentage of sites with transaction laundering to 0.2%. This meant a 97% reduction in unauthorized transaction laundering when reviewing findings weekly, and over $1.8 million in potential liability avoided from these otherwise hidden
Decreased Transaction Laundering While Gaining New Business Opportunities
By deploying Aggregation Detection, the PSP gained transparency into the unauthorized transaction laundering in their value chain. With the information available, the PSP could contact the aggregating websites, review them for compliance, and potentially open the door for new business opportunities. Not only was the PSP able to limit future risk by shutting off the unauthorized aggregation, but they were also able to grow their portfolio after accruing the information to target them.
To learn more about transaction laundering, read this blog post.