- 5 minute read
We set out to be the most responsive, transparent, and compliant payment facilitator in the space. All through the past 17 years, we conducted our business according to these core values”
In the USA, Cathy Beardsley doesn’t need any introduction. This year, American Banker nominated her as one of the Most Influential Women in Payments. Cathy founded Segpay back in 2005. Almost two decades later, Segpay is one of a handful of companies approved by Visa to securely process high-risk payments and offers a growing variety of payment services to over 600 global merchants.
Q: Hi Cathy, thank you for your time. Could you tell your European audience a little bit more about the foundation of Segpay?
Cathy: When I founded Segpay in 2005, it was on the premise that we would earn the respect of our clients, of acquirers, and card brands by doing things the correct way. We set out to be the most responsive, transparent, and compliant payment facilitator in our verticals. All through the past 17 years, we conducted our business according to these core values.
When we launched our payment services, we were the first payment facilitator to have all client funds held or “segregated” to settlement accounts, away from operational funds. In fact, our original tagline was “You Get Paid Before We Do.” Today, regulations require that all Payment Facilitators hold client funds in settlement accounts with licensed credit institutions. We were ahead of our time! We were also one of the first payment facilitators to earn our license as an Authorized Payment Institution (API) in the UK. Since Brexit, we are now licensed with the Central Bank of Ireland to service the European Economic Area (EEA) markets as an API.
As our payment facilitator business grew, we added gateway services to our merchant services. This allows Segpay to service any type of payment request that a client might have. It also gives our clients flexibility as their business grows. In addition to card payments, we offer merchants the possibility to receive transactions from PayPal, from Wallets and other, alternative payment methods. We strongly believe in team effort, and we like to take good care of our clients. All our system enhancements are driven by our clients’ need to improve conversions and increase their revenue. A lot of attention is given to network security, compliance and fraud protection as part of the risk management services that we offer our clients.
Q: Segpay operates in the USA, the UK and in the EEA. What are the main differences when it comes to processing payments in these three regions?
Cathy: The UK and EEA are more regulated markets than the US market. To act as a payment facilitator in the UK and EEA, Segpay must be licensed as a Payment Institution. In the US, we are guided by the Federal Trade Commission (FTC) and the Financial Crimes Enforcement Network (Fincen), but most of the regulatory requirements come from the international payments networks, like Visa and Mastercard. In the UK and the EEA, we need to comply with national and supra-national regulatory requirements, such as PSD2 (e.g.., Strong Customer Authentication), we must report on our business activities to the regulatory agencies in the countries where we are licensed, as well as to the payment networks. We adhere to very high standards for compliance and assurance, and we annually perform internal and external audits.
Regulations in the UK and under the PSD2 also require that banks are much more transparent with their merchants and partners. Interchange fees and markups must be clearly disclosed so that our customers can identify what they pay for and to whom There is a strong emphasis on competition in the UK and EEA markets. Importantly, the EU driven regulations starting with the original Payment Service Directive enabled Segpay to compete with the big acquiring banks in European markets.
In the US, we do not have the same transparency. Acquiring banks do not have to disclose the interchange cost and other mark-ups. Processing payments is substantially more expensive in the US. The US Senate currently has their eyes on the interchange fees that Visa and MasterCard charge retailers, and then pass on to the card issuers. They are drafting a piece of legislation to make card processing more transparent and competitive.
Q: Could you please explain to us why a payment processor, specialized in processing what the payments network call ‘high-risk merchants’, excels in Customer Due Diligence/AML and Fraud Risk prevention?
Cathy: First, I think it is important to qualify the term ‘high-risk’. This term and/or the term ‘high brand risk’ has traditionally denoted businesses whose businesses were associated with a high incidence of transaction fraud and consumer disputes/chargebacks. The term is today far wider in scope and covers regulated industries, reputational risk, and businesses that pose high credit risk. Segpay has never had elevated levels of fraud or consumer disputes and we do not support merchants in regulated segments, e.g., online gambling and internet pharmacies. We are, however, very vigilant to make sure that our controls work as we intend them to work. The best way to prevent deceptive merchants from getting onboard is to implement a very efficient and waterproof KYC (Know Your Client) and AML process at the onboarding stage Segpay applies enhanced due diligence and transaction monitoring of our merchants, which allows us to really understand their type of business and how it evolves over time. When we board new clients, our risk professionals analyze their commercial history, review their corporate structure and bank statements, and we continuously track changes in their corporate structure (Ie. UBO, Management Board, Corporate Directors). Our compliance experts assess all potential regulatory risks, including tax evasion. When we process payments for high-risk merchants, we must make sure that they are reliable and trustworthy. Those who do not comply with our high business standards will not pass our strict, enhanced due diligence process. If we prove to mitigate fraud and minimize chargebacks successfully for high-risk merchants, this means that low- and medium-risk merchants are safe with us. In the end of the day, high-risk is relative because we often see that merchant business that is considered high-risk from a reputational risk perspective often proves to be rather low risk from a (financial) chargeback risk perspective.
Q: What makes Segpay so good at minimizing Chargeback Risk?
Cathy: Solid Know-Your-Customer (KYC) procedures upfront and the implementation of the best tools available on the market to manage and prevent chargebacks. This includes 3D secure, digital fingerprinting, excellent customer support and a combination of powerful chargeback prevention tools from Visa, Verifi, MasterCard and Ethoca. These risk solutions trigger alerts when potential chargebacks are detected in real-time after which Segpay can refund the transaction to prevent the chargeback.
Q: Why are subscription- or recurring payments considered high-risk and how does Segpay mitigate this risk so efficiently?
Cathy: Subscription or recurring payments are considered high-risk because consumers either don’t understand that they signed up for a recurring program or this information hasn’t been properly disclosed. We manage the risk by ensuring the consumer is notified up front of the recurring membership, providing a proper receipt process, which confirms their subscription. Segpay’s 24/7 Customer Service Center is available for membership cancellation requests. Our merchants’ customers can reach Segpay through our self-help portal, via email, phone and chat tools.
Q: We live in an age where “Content is King”. Generations X, Y and Z; teenagers, the elderly, even toddlers spend hours a day online. Millions of people around the globe are viewing web content on social media, web shops and on video streaming sites. It becomes increasingly complex to moderate and monitor content to detect and prevent content violation. Could you explain to us how Segpay mitigates content violation risk?
Cathy: Age verification and content monitoring are important requirements for any merchant with user uploaded social media sites, fan or CAM platforms. Merchants must supply us with their policies and prove to us that they use age verification and content monitoring tools. Our compliance team will scrutinize their policies and their business during the CDD/KYC process before and after customer acceptance as part of enhanced, ongoing due diligence.
Q: Segpay manages the entire CDD process; from KYC to on-boarding. The importance of being able to offer merchants the best possible 24/7 Customer Service, after a merchant has been accepted, is often underestimated. Why do you think that is?
Cathy: Our success has been driven by providing the best client support we possibly can. Each merchant is assigned a sales support rep and a technical rep to help them with their processing. I think many of the big players are focused on the acquisition of the merchant vs. taking the approach of growing with their merchants by offering new features. Our clients are our strongest sales asset. Our great customer service encourages our clients to recommend Segpay to other merchants.
Q: With two decades of experience in online payments, what would you consider to be the most interesting current trends from an international PSP’s perspective?
Cathy: The implementation of cryptocurrency. At one time cryptocurrency was frowned upon. It was unregulated, and cryptocurrencies were being used for illegal items sold on the dark web or by hackers that were creating denial Distributed Denial-of-Service (DDoS) Attacks on Corporate servers, blackmailing corporations into paying ransom in cryptocurrency.
Now that regulators are focusing on the crypto market, we are seeing more regulation in both Europe, the UK and US. We see leading acquiring banks in Europe and the UK adding crypto to their payment methods and even as a potential settlement solution. I also think crypto is generational. One of the largest non-profits in the US, St Judes Children’s Research Hospital, just opened crypto up as a way for individuals to make donations. They ended up raising $1M dollars, primarily from GenZ donors. I believe younger consumers will be more open to digital currency and it is something we need to keep our eye on.