The fintech world has given us plenty of convenient solutions for fast and simple online payments. This has been great for anyone from individuals looking to buy something small to entire businesses looking to maintain broad international supply networks with just a few button clicks.
Yet, no system is perfect, and using the wrong payment processor brings various frustrating risks. A sudden MID shutdown, for example, can easily bring the entire supply chain of your business to a halt, especially if it happens at an inopportune moment. Avoiding this type of issue and keeping your suppliers paid on time is key for any business. So, below we’ll go over 5 proven strategies to avoid MID shutdowns and keeping your suppliers happy.
What is an MID shutdown?
The abbreviation “MID” here refers to “Merchant identification number.” You can also often encounter it as a “MID number.” A MID is a unique numerical code given to a merchant on an online payment service provider (PSP). This is effectively the merchant’s ID on that platform, and it’s essential as it enables the use of the platform to transfer funds to and from customers and other business partners.
As such, having your MID blocked, i.e. a “MID shutdown,” can be a massive issue for any business as it prevents you from making payments to your suppliers and other logistical partners.
5 Proven strategies for avoiding an MID shutdown and keeping your suppliers paid on time
1. Automate your recurring transactions
One of the most common reasons for unexpected and seemingly unprovoked MID shutdowns on any payment service providers is the presence of “account behavior anomalies.” This usually refers to sudden and unusual increases in transaction volume, frequent changes of sensitive account information, or the receiving of funds from “suspicious” sources.
Most PSPs today use various AI algorithms to try and spot account behavior anomalies that genuinely represent or indicate threats. However, even the best algorithm can lead to “false positives” from time to time, which can result in an MID shutdown simply because you have suddenly increased your transaction volume.
A good way to avoid that is to automate as many of your recurring transactions as possible. Any payments to suppliers and other logistical partners that need to happen on a regular weekly or monthly basis can often be automated and therefore won’t be seen as “anomalies.”
2. Use a good payment processor
As with anything else, using the best tool for the job is key to avoiding issues. There are countless different PSPs out there today, but if you want to avoid MID shutdowns and keep your suppliers paid on time, using a truly good and secure high-risk payment processing platform is a must.
A good PSP will have a minimal risk of “account behavior anomalies false positives,” it will have a much better and more intricate learning algorithm, as well as stronger security and generally better all around features.
3. Work to prevent chargebacks
Chargebacks are problematic in and of themselves as they can bleed money out of your company pretty quickly. However, an increased number of chargeback disputes and other elevated dispute with clients and partners can often be seen as an “anomalous behavior” by PSPs in and of itself. It can also be seen as a sign of potential fraudulent behavior, which is why many PSPs will temporarily block Merchant IDs in such cases to put a stop to any potential fraud until all issues are resolved.
This can be especially frustrating for merchants as it means one problem that wasn’t their fault can quickly spiral into another larger problem that also technically isn’t their fault. So, employing good chargeback prevention methods is key.
4. Make sure you always comply with the Terms of Service of your PSP
Most people may be used to skipping over a site’s Terms of Service (ToS), but if you’re running a business and all your payments to your suppliers and partners depend on a particular PSP, you’d better make sure you know exactly what their ToS is. The Terms of Service of most payment service providers can be quite convoluted and include a lot of surprising provisions. That’s often because they operate globally (even if your business doesn’t) and they themselves need to comply with the regulations of various countries and economic blocks.
So, as violating the ToS of your chosen PSP can quickly lead to an MID shutdown and sabotage all payments going out to your suppliers and partners – make sure you’re well aware of what those ToS include.
5. Manage your high-risk operations carefully
As a high-risk merchant, you should be well aware why the niche(s) you operate in are deemed “high-risk.” Some sectors simply include a much higher risk of fraud, scams, as well as general economic turmoil and uncertainty than others.
Many PSPs will instantly employ an MID shutdown if they suspect fraudulent activity, so it’s advisable to take every measure to be on top of all financial transactions.
As with preventing chargebacks, avoiding any risk of falling victim to fraud, even minor fraudulent issues, is strongly advisable. Many PSPs’ algorithms are likely to automatically shut down your merchant account due to any suspicious activity.
