Onboarding Risk? How 1 Aggregator Fixed It

There's 1 thing I always tell people.

A victory calls for a celebration, yes.

But never rush any decisions when you're high on dopamine.

Especially if you're working in the Fintech sector.

Because when you make a rushed decision, you ignore the possibilities of risks.

Just recently, one of our clients, a payment aggregator, finally secured their RBI license.

And that's not easy to get. But it's an important step to launching the business.

For those unfamiliar, a payment aggregator aggregates a bunch of small payments received by merchants from their customers.

And then settles it with merchants, usually on T+1 periodicity. (Transaction day + 1 day)

With this license in hand, they were ready to start onboarding merchants and offering their payment aggregation services.

But before they could do that, they had some concerns.

Concerns they needed our help with.

Because 1 misstep in this space could lead to bad consequences.

So we did a call to understand everything.

And here's what their main concerns were:

(1) The RBI doesn’t play around. Their PA-PG Guidelines are strict, and for good reason.

If you’re not following them to the letter, you’re asking for trouble.

Our client needed to make sure their agreement was solid in terms of compliance.

Missing a single detail could lead to hefty fines, or worse, the loss of their hard-earned license.

(2) Not every merchant is a safe bet. Some deal in products or services that are high-risk.

Our client needed to ensure that their PA services were only used by low-risk merchants.

The last thing they wanted was to be caught in a mess because a merchant was selling something they shouldn’t have been.

(3) What happens when a merchant breaches the agreement?

Maybe they fail to meet security standards, or worse, they’re involved in something shady.

Our client needed strong recourse. Something that would allow them to take quick action, protect their business, and minimize damage.

When they approached us, they knew they needed more than just a template.

They needed a tailor-made solution.

Here’s how we delivered:

(1) Clarity in Scope of Services

We started by defining everyone’s role in the transaction process.

Who does what, when, and how? We laid it all out:

-> Our client is the PA.

-> The escrow account where the money sits temporarily.

-> The payment gateway that processes the payments.

-> The merchant’s bank account where the funds finally land.

We didn’t stop there.

We also created detailed guidelines for onboarding merchants and integrating their tech with our client’s systems.

This included Know Your Customer (KYC) procedures, ensuring that every merchant was thoroughly vetted before being brought on board.

Finally, we defined how payments would be processed, reconciled, and settled - down to the last detail, including the deduction of our client’s fee.

(2) Ensuring Low Risk for Our Client

Risk management was a top priority.

We made it clear which products and services were off-limits.

If a merchant was dealing in something risky, our client had the right to reject or block the transaction.

No questions asked.

We also added some security measures to ensure that every merchant followed the baseline controls set by the RBI.

This way, our client was protected from any potential security breaches that could cause serious harm.

(3) Proper Safeguards

Protection was non-negotiable.

We implemented a tiered approach to protect our client’s interests.

First, they could suspend services and freeze funds if a merchant breached the agreement.

This gave them immediate control in a crisis.

Second, we gave them the right to audit the merchant’s infrastructure, databases, and security systems to ensure ongoing compliance with RBI guidelines.

Finally, we secured extensive indemnity from the merchant.

If the merchant’s actions led to a breach of law or the agreement, the merchant would cover the costs.

This included any penalties the RBI might impose on our client.

With this agreement in place, our client could onboard new merchants with confidence AND safety.

Their contract touched upon 3 important points:

-> Every clause aligned with RBI’s strict guidelines, ensuring their license remained secure.

-> They were only dealing with low-risk merchants, minimizing exposure to potential issues.

-> If a merchant stepped out of line, they had the option to take swift, decisive action.

-> Indemnity clauses ensured that any legal or financial damages due to merchant breaches were covered by the merchant, not our client.

And now, moving forward, our client has the confidence that they can handle whatever comes their way.

In highly regulated industries, having a one-size-fits-all agreement won’t cut it.

So always make sure your contracts are customized to address specific risks or compliance requirements.

They also need to cover you in case of any potential breaches.

Basically, protect your business from all angles so you can focus on growth without constant worry.

What about the next step for you? Take a close look at your existing contracts.

Are they fully compliant with industry regulations?

Do they properly protect you from high-risk clients and potential breaches?

If not, it’s time to update them.

Consider my help in case you need any assistance with the update or draft of the agreement.

Just reply with "SOLUTION," and I'll send you details on how we can work together.

Talk to you soon.