Data Validation for Retailers

In the fast-paced world of retail, accurate and reliable data is the cornerstone of success. Retailers deal with vast amounts of information, from inventory management to customer details and marketing analytics. Ensuring the integrity of this data is critical for making informed decisions and providing a seamless customer experience. This is where data validation comes into play.

10 Advantages of Data Validation

Let’s explore the 10 key benefits that data validation brings to retailers.

1. Accurate Inventory Management

One of the primary advantages of data validation in retail is accurate inventory management. Validating product quantities, SKUs, and other inventory-related data helps prevent overstock or stockouts. 

This, in turn, optimizes supply chain efficiency and ensures that customers find the products they need when they need them.

2. Improved Customer Experience

Data validation ensures the accuracy of customer information, including contact details and purchase history. This accuracy translates into improved communication and personalized experiences.

When retailers have reliable customer data, they can tailor their interactions, provide relevant recommendations, and build stronger, more lasting relationships with their clientele.

3. Reduced Errors in Orders

Validating order details, addresses, and payment information significantly reduces the likelihood of errors in order processing. 

Ensuring that the right products are shipped to the correct addresses with accurate payment details minimizes returns, customer dissatisfaction, and the associated costs.

4. Effective Marketing Campaigns

Accurate customer demographic and segmentation data is vital for crafting targeted and effective marketing campaigns. Data validation ensures that marketing efforts reach the right audience, increasing the likelihood of engagement and conversion. 

This not only saves marketing costs but also enhances the return on investment (ROI) for promotional activities.

5. Enhanced Decision-Making

Reliable data is the foundation for sound decision-making. Data validation provides assurance that the information used for analysis and strategic planning is accurate. This empowers retailers to make informed decisions based on real insights, contributing to the overall success and growth of the business.

6. Compliance with Regulations

In an era where data protection and privacy regulations are becoming increasingly stringent, data validation is crucial for compliance.

Ensuring that customer data is accurate and up-to-date not only protects the privacy of individuals but also shields retailers from legal and financial consequences associated with regulatory non-compliance.

7. Cost Reduction

Data validation contributes to cost reduction in various ways. By minimizing errors in orders, returns, and customer support inquiries, retailers can cut down on operational expenses. Additionally, accurate data reduces the need for rework and correction, saving both time and money in the long run.

8. Prevention of Fraud

Validating customer information and payment details is a key component in the prevention of fraudulent activities. With accurate data, retailers can identify and flag suspicious transactions, reducing the risk of financial losses and protecting both the business and its customers.

9. Efficient Supply Chain Management

For retailers, a smooth and efficient supply chain is vital. Data validation ensures that supplier data, product specifications, and pricing information are accurate and up-to-date. This contributes to a streamlined supply chain, minimizing disruptions and ensuring the timely availability of products.

10. Improved Data Integration

In a technology-driven retail landscape, seamless data integration is essential. Data validation ensures data consistency and compatibility, making it easier for retailers to integrate their systems and platforms. This leads to improved operational efficiency and a more cohesive and interconnected retail ecosystem.


In conclusion, data validation is not just a technical process; it’s a strategic necessity for retailers. The benefits outlined above collectively contribute to a more efficient, customer-centric, and competitive retail environment. 

By investing in data validation practices, retailers can future-proof their operations and pave the way for sustained success in the dynamic world of retail.


Flaws in Knowledge-Based Authentication (KBA)

Knowledge-based authentication (KBA) has been the industry standard for over 20 years as a method of identity verification. KBA has been an outdated mode of verification for a long time. This is a flawed approach to verifying identities as it uses stagnant data. The same data has been breached and accessed by thousands of users worldwide. Personal data and knowledge-based question’s answers are readily available on the dark web. 

Fraudsters have become more proficient in answering all the credit-based questions than the people who have to rely on the quizzes. 

This flaw was first recognized in 2015 which led the National Institute of Standards and Technology (NIST) to limit the use of KBA in their latest version of Special Publication. The latest publication is the most widely used ID verification standard in the United States.

However, KBA is commonly used by state and local agencies to verify identities. The most common uses include motor vehicle registration, online portal access, and notarization. 

KBAs are considered to be the backup for manual identity verification. But it’s still not a good enough solution as KBA data has been breached multiple times. Personally identifiable information goes as low as $1 on the dark web.

Current Problem with KBAs

The biggest problem with KBAs is that the data is available with ease almost everywhere on the dark web. Once fraudsters have answers to questions, they’re easily able to bypass security measures and gain illegal access to user accounts. 

Fraudsters often find methods of least resistance to gain access to illegal access to systems. If businesses choose to use knowledge-based authentication to verify identities, they are only using a flawed method.

To properly identify identities and verify users with ease, businesses need to move forward from Knowledge-Based Authentication (KBA). Solutions like DIRO document verification tool, and other verification solutions can help businesses verify the identities of users ideally.

DIRO’s document verification solution can quickly and accurately verify identities and prevent the risk of fraud while ensuring the integrity of user accounts.

Why Businesses Shouldn’t Rely on KBA

Hackers and fraudsters have exploited the breaches and data thefts to quickly bypass the login systems. Using solutions like DIRO document verification can help businesses with far more accurate verification and huge cost savings.

1. Flaws in KBA

The biggest flaw in KBA lies in its reliance on static and outdated information. Information like Social Security numbers, addresses, and personal details, are easily stolen.

Hackers and fraudsters have exploited these beaches regularly to collect necessary information. Moreover, the easy availability of personal data on the dark web and social media has significantly reduced the effectiveness of KBAs.

2. NIST Non-Approval of KBA

The NIST has made KBAs a non-approved technology in their latest version of Special Publication 800-63-3. This highlights a growing acknowledgment of KBA, which highlights how ineffective the knowledge-based authentication process is.

KBA’s deprecation signifies a need for more secure and sophisticated alternatives to make sure accounts are verified properly.

3. Risks of Relying on KBA

Businesses that solely rely on KBAs are at a serious risk of hurting their business. It makes sense that state agencies use KBA for verifying the identity of users as it’s easy to use and familiar.

With modern cybersecurity threats becoming increasingly sophisticated, businesses and governments need to use a more secure solution.

4. Adoption of Biometrics

Using biometric verification in the identity proofing process can enhance the security of the process. As biometric data is unique to each individual and cannot be easily replicated or stolen.

Technologies such as fingerprint recognition, facial recognition, or retinal recognition can provide a more robust and secure way of verifying identities.

5. Behavioral Analytics

Instead of using biometrics data, businesses can use behavioral analytics data to verify if a user account is hacked. By using a user’s behavior patterns, such as typing speed, mouse movements, or smartphone usage habits are unique to each user. 

Any sudden change in the patterns of a user can be an indicator of fraud.

Final Take

Relying on Knowledge-based authentication (KBAs) for identity proofing has been flawed for a long time. Relying on data that has been beached and stolen countless times to identify a user isn’t a great idea.

By using more secure options like the DIRO document verification solution, businesses can quickly and ideally identify user identities.


Vendor Fraud Practices and Prevention

Businesses often overlook fraud red flags. In the long run, this leads to monetary and reputational losses. Vendor fraud has become highly prevalent across several industries. When vendor fraud happens, the culprit could be someone from your own team or someone you trusted. It could also be a fake vendor that wasn’t verified properly. 

Every business needs to make robust and reliable partnerships with vendors to thrive. Fraudsters often take advantage of this reliance on vendors to trick businesses into making wrong payments. 

Here are some of the most common types of vendor fraud, and how you can prevent them:

Common Vendor Fraud Types

1. Phony Vendors

One of the most common methods of vendor fraud is fake vendors pretending to be legit. Fake vendors try to get businesses to make payments for fake services. It can take a long time before companies uncover the fraud.

In some cases, even employees pose as fake vendors to exploit known weaknesses in payment systems. Employees can set up fake vendors, and make fake invoices to get payments in their accounts.

Common red flags to uncovering fake vendor fraud include:

  • Photoshopped invoices
  • Photocopied invoices
  • Companies with no real-address
  • Sequentially numbered invoices
  • Companies with addresses of post offices

Companies should train their employees to check for red flags in invoices raised by vendors. If there’s a specific vendor that raises invoices just below the sum that needs approval from higher-ups.

2. Fake Invoices with Real Vendors

Sometimes an employee from your business and an employee from the vendor’s team can collaborate to come up with a scam. Both members of the team can collude to trick the business into making wrongful payments. 

A vendor may submit fake invoices, and an employee at the purchasing department will make payment for the amount. The payment is made to a personal account and split between the two. 

This type of fraud becomes common when the supplier and business teams are in close contact. To prevent this kind of fraud businesses must do due diligence before they hire their employees.

3. Kickbacks

If your business performs contract work, then kickbacks are another type of vendor fraud you need to be wary of. The person who approves the contracts could be receiving kickbacks from their vendors. Common red flags for this kind of fraud include:

  • Fewer bids than expected/needed.
  • Widely ranging bids on the same project.
  • Sudden and unexplained deadline changes. 

Kickbacks also happen when you’re paying higher prices for low-quality products. Making cash payments to your employees is the hardest to detect as there’s no record of these payments in company books. But they are reflected in higher pricing from vendors. Even fraudulent vendors need to cover their costs. 

To minimize losses, companies should always look for consistent shortages, communications that happen informally between vendors and staff, and poor record keeping.

How to Effectively Identify Vendor Fraud?

The key to fighting vendor fraud is knowing where to look. If you don’t know where to look for it, you won’t be able to detect it. Here are some basic measures any company can take to prevent vendor fraud:

  • Check for the vendor’s pricing structure. If the prices look too good to be true, they’re probably scams. 
  • Don’t be lenient on any single invoice. Scrutinize every invoice submitted by the vendor or submitted on behalf of the vendor. If there are two same invoices with the same invoice numbers, it’s probably a fraud. 
  • Most companies follow their own invoice format. If the invoice was made using Microsoft Excel, it’s a red flag.
  • A vendor that doesn’t have a verifiable taxpayer identification number is most likely to be a fake vendor.
  • Do vendor onboarding checks? Run Vendor KYB checks, and background checks to see if they’re legit or if they have a history of fraud.
  • Any vendor with a P.O. box address is likely a fraud.

Tips for Vendor Fraud Prevention

Knowing how to look for vendor fraud is one thing, but it’s not enough to identify vendor fraud. What’s important is to prevent vendor fraud from happening. 

  1. Manage Vendors Effectively

Fraudsters keep evolving their methods of conducting fraud. When you’re fighting vendors, you need to come up with an effective vendor fraud management system. 

With an ideal vendor fraud management system in place, it will become easier to manage vendor risk. Ideal strategies can significantly reduce the risk of fraud.

  1. Audit Vendors Regularly

Keeping a track of vendors is essential. Even a trusted vendor can suddenly start doing fraud. Frequent vendor auditing can help you protect your business against huge financial losses caused by fraudulent schemes. 

  1. Multi-Level Payment Approval Process

Vendor fraud happens the most at businesses where there are just one or two employees handling vendor invoices. 

To prevent making fraudulent payments, vendor invoices should go through multiple processes from different departments. 

  1. Use Invoice Matching Technique

Invoice matching is pretty basic but it can reduce vendor fraud significantly. 

As the name suggests you have to match invoices submitted by vendors against internal records such as purchase orders, payment receipts, inspection slips, etc.

To ensure you achieve the best possible results, you have to match the invoice against multiple documents. 

  1. Don’t Make a Single Employee Manager

Sometimes, several employees work with each other to commit fraud. This is why businesses go such a long time without detecting fraud. Usually, its employees in the procurement and payments department conduct these kinds of fraud. 

The best way to manage risks and prevent fraudulent vendor payments is to keep rotating employees and moving them across different departments. This can ensure that no one employee has too much power.

  1. Thoroughly Verify Vendors

Vendor verification is a crucial part of the process. During vendor onboarding, you should verify the vendor’s business information. This includes vendor proof of address verification, vendor KYB checks, and vendor bank account verification.

Running through these checks simply means that you’re using vendors you can trust.


Proof of Address Verification in Vendor Onboarding Guide

Onboarding a vendor without having proper guidelines in place can severely impact your business. Vendor onboarding fraud and the consequences that come along can be fatal for a business. So, how can you know the vendor you’re onboarding is the right is not a fraud?

Every business regardless of its nature of business needs to have a vendor onboarding checklist. To avoid instances of fraud that can harm your business, you need to follow the required due diligence.

One of the biggest parts of vendor onboarding is to make sure that you’re keeping up with all the changing laws, rules, and regulations.

What is Vendor Onboarding?

Vendor onboarding is the process of collecting all the crucial information that you need to approve a vendor for your organization. A vendor allows businesses to buy supplies without having to go through a long process. Vendors in turn issue invoices for businesses. Let’s say you onboarded a fraudulent vendor, they’ll end up issuing invoices for things you haven’t purchased. This is how most fraudulent vendors operate and earn money.

The vendor onboarding process needs to have an ideal checklist. By following the checklist, every business can make sure they’re onboarding the right vendor.

Importance of Vendor Onboarding Process

Vendor onboarding is the first step of the vendor management process. If a business doesn’t have a vendor onboarding process, it can become a part of fraud. When you follow a vendor onboarding checklist, you can reduce the risk of fraud, eliminate additional costs, and achieve a higher ROI. 

When you build a vendor onboarding process for your business, it becomes easy to avoid pitfalls that come along with bad vendor management. 

Not just customers, you also need to nurture relationships with your vendors. A well-thought-out vendor onboarding process can help you make your relationships with vendors strong. It also offers other benefits:

  • Reduce or eliminate risks
  • Streamlined process and increased level of efficiency
  • Ensure compliance with regulatory guidelines
  • Build a positive business reputation  in the industry
  • Boost ROI
  • Reduce redundancies and mistakes
  • Track business data and workflows
  • Automate basic tasks

How to Build Your Vendor Onboarding Process?

To start building your vendor onboarding process, you need to keep a couple of things in mind:

  1. Evaluation and Approval Process: Every business should have an evaluation and approval process while onboarding vendors.
  2. Setting Up Requirements and Expectations: Set up clear policies and expectations to make sure there’s no confusion between all the moving parts.
  3. Developing Process for Strategic Supplier Partnerships: Strategic partnerships hold a lot of value for businesses. You need to create a separate onboarding process for all your strategic partners.
  4. Establish a Communication System: Having a clear line of communication matters a lot. Knowing you can reach out to your vendors at any given time is helpful in eliminating redundancies, mistakes, and errors. Plus, it helps in building stronger relationships with customers.

Vendor Onboarding Checklist

To make the process easier, you need to make sure that you’re not missing out on any crucial factors.

Here’s a vendor onboarding checklist you can use.

1. Evaluate Risk Level

Hiring a vendor that has a poor track record can be risky. You need to evaluate the level of risk a vendor brings along with them. Here’s how you can do so:

  • Check business product and service records.
  • Check creditworthiness.
  • Assess vendor compliance level with current regulations.
  • Ask the vendor to sign an ethical code of conduct. 
  • Make backup plans.

2. Collect Information About Products & Services Offered

  • Expected nature, volume, and how frequently you need the supplies. 
  • Ask for product and service specifications.
  • Ask for requirements for placing an order, and the format of order placement. 
  • Have a clear conversation about pricing and discounts. 
  • Clear out payment terms beforehand. 
  • Figure out the delivery process and logistics. 
  • Supplier training requirements or orientation sessions.

3. Collect Information About Vendors

  • Ask for the registered name, address, and contact details.
  • Ask for licenses, insurance, and other important documents. 
  • Vendor bank account verification for creditworthiness check.
  • Contact information of vendor representatives.

4. Make all Information Available for Internal Use

All the vendor information should be available for access by some teams, including:

  • Accounting teams
  • Purchasing teams
  • Warehousing and inventory control

5. Share Necessary Information for Vendors

Your vendors should have all the necessary information when they enter into a relationship with a business.

Here’s a list of what you should share with vendors:

  • Provide correct invoicing details.
  • A record of all the agreed terms and send them for confirmation.
  • Provide contact details for purchasing managers and logistics teams.
  • Provide training if needed.

Importance of Proof of Address Verification In Vendor Onboarding

Proof of address verification in vendor onboarding is a step that a lot of businesses ignore. Verifying where a business comes from plays an important role in figuring out if they’re genuine or not.

Let’s say there’s a location that’s famous for having risky vendors, or there’s a location that your business doesn’t serve. How would you know the vendor is not from the location?

That’s where online proof of address verification comes in. When you verify a vendor’s proof of address, you can make sure you’re not getting into a relationship with a fake vendor.

DIRO online proof of address verification can help you verify the address of your vendors by verifying the documents provided. DIRO provides 100% accurate results instantly, using proprietary technology.


Detecting and Preventing Fraud During Vendor Onboarding

As businesses globally are understanding the importance of employing additional fraud prevention methods, it has led to a dramatic fall in fraud rates. Handling the aftermath of fraud is becoming super expensive for businesses. This is why the adoption rate of new technologies and compliance rate is improving.

Unfortunately, even after several significant changes in the industry, vendor fraud is a major issue. Fraudsters who aren’t able to break into financial institutions and banks move on to vendor fraud. The reason why vendor fraud is one of the most growing categories is that businesses are highly vulnerable to attacks.

For businesses to identify and prevent vendor fraud, proper knowledge is needed. The more knowledge a business has, the better it can protect itself.

What is Vendor Fraud?

Vendor fraud is basically fraudsters manipulating a business’s payment system. This is done to steal goods and money. In almost all cases, vendor fraud is done with the intent of stealing money.

Any business can be a victim of vendor fraud, but it differs from business to business. Vendor fraud can happen through collisions with third parties. It can also happen because of untrained employees within the organization.

The most common examples of Vendor fraud include:

  • A hacker manipulates a business’s payment systems to generate fraudulent vendor payouts.
  • A vendor that fails to falsify receipts or documents slowly steals money from a business through its ongoing transactions.
  • A group of employees wants to steal money from the organization.
  • An employee steals company checks and deposits them into a personal account.

Which Businesses are at a Risk of Vendor Fraud?

Businesses that don’t have the right level of security and scrutiny are at the most risk of vendor fraud. Businesses that are small and mid-sized often fall prey to vendor onboarding fraud.

It makes a lot of sense for fraudsters to target small-scale businesses. More than often,  small businesses rely on small teams to handle a variety of tasks. This can easily lead to mistakes. A lack of robust checks and no adoption of technology can lead to vendor fraud.

As businesses scale up and comply according to laws and regulation, it helps in preventing fraud. Companies that follow all the compliance guidelines tend to be less open to fraudulent activities due to mistakes. To combat the sophisticated methods used by businesses, fraudsters are also developing new methods.

Types of Vendor Fraud

Vendor fraud is different for every organization. There are multiple categories, that include:

  • Billing Fraud: Billing fraud refers to payment-related fraud, it can be done in 2 ways by employees. Sometimes, fraudsters make up a fake vendor, or sometimes the employees make up duplicate payments by using actual vendor details.
  • Fictitious Vendor: An employee with adequate information about a vendor can make up a fake vendor. Or, they can register as a new vendor and get regular payments on this account.
  • Duplicate Payments: An employee can use actual vendor information to make fake information and generate fake payouts. The same payments and extra payments can be transferred to employees’ accounts.
  • Check Fraud: This vendor fraud involves an employee engaging in forging or modifying information available on the check of a vendor. They do this to get payments into their own accounts.
  • Accepting Bribes: There’s another type of vendor fraud that’s quite common. A vendor pays some kind of commission to employees for helping them get additional sales or benefits.
  • Excess Bills: Whenever vendors issue an invoice for bill payment, and if it’s more than the desired amount, it’s called over-billing. This is also considered a type of vendor fraud.
  • Price Fixing: This fraud happens when 2 or more vendors make a deal together and fix the price of a product at a higher value. The buyer has no option other than to pay higher prices to the vendors.
  • Cyber Fraud: This is the most complex type of fraud to detect. Hackers can act as a vendor even when they don’t have any relation to the company. They operate completely from the shadows and they are able to create a fake vendor profile. They try to trick businesses into making payouts for goods and services. Needless to say, all the records and bills are fake and fabricated. This is what makes it one of the most challenging types of fraud to detect.

Detecting and Preventing Vendor Fraud

There are some basic rules and regulations every business needs to put in place to prevent vendor fraud.

1. Vendor Controls

Businesses need to set up a checklist outlining all the guidelines for vendor onboarding. Here are some common things you can keep in mind:

  • Businesses need to follow all the due diligence procedures. There should be extra attention to verifying information provided by the vendors. Online document and online vendor bank account verification technologies can help in streamlining this process.
  • There should be a centralized vendor database with your preferences. There should also be a list of high-risk vendors.
  • Businesses need to conduct thorough checks of all the vendors. Using technologies to do so can save both time and cost.
  • Checking bills issued by vendors is a good practice to make sure you’re paying for things that you don’t have to.

2. Employee Measures

A lot of times employees help vendors orchestrate the fraud. To prevent this, businesses should have some guidelines for their employees:

  • Doing thorough background checks during employee onboarding can uncover hidden red flags.
  • Keeping financial information limited only to high-level employees. 
  • Larger businesses should separate the duties of employees for better accountability and control.
  • A person that’s in charge of handling vendor information should be different than those who approve these vendors into the organization. 
  • Smaller businesses should rotate the duties of employees in vendor/AP/purchase departments. Or to make processes easier, businesses can hire managers for different tasks.

3. Set up Due Diligence Processes

Before you onboard vendors, you need to have a proper due diligence checklist. Having a proper guideline can help newer employees onboard vendors that are legit. As a business, you need to conduct thorough vendor verification. You need to make sure that the mailing addresses are correct. Check if the bank account is legit. Verify if the information and document submitted by them are original and not tampered with.

Conclusion: Vendor Fraud Prevention Guidelines

Vendor fraud can impact your business in a lot of ways. Prevention of vendor fraud requires proper planning and sticking to the plan. Preventive measures should be a priority for most businesses, and they should also focus on technologies that can help make the process easier.


4 Best Ways to Protect Your Vendors’ from Being Attacked by a Cybercriminal

In the public landscape, vendor bank account fraud is growing at an alarming rate. A vendor contacts the accounts team to tell them they haven’t received the payment. The accounts team then checks the data and finds out that they’ve paid the invoices. So, when more due diligence is done, it is found out that the money wasn’t sent to the Vendor’s account but to some other account altogether. What happened was that a fraudster got into the systems and changed the Vendor’s bank account information.

This situation has happened a lot in recent times. Most recently it happened with Scott County Schools where they lost $3.7M. Eventually, they were able to recover the funds. And they decided to put some safeguards to prevent something like this from happening again.

Another similar situation happened in the “City of El Paso, TX” where they uncovered $2.9M, and $300K payments were sent to a fraudster. Unfortunately, they were only able to recover $1.6M and $292K from the payments. To prevent this from happening again, they decided to verify vendor information before every single payment.

Regardless of the fact your company has been in a similar situation or not, there are 4 basic steps you can follow to prevent fraudsters from changing banking information.

Prevent Vendor Bank Account Fraud

1. Build Custom Vendor Banking Forms

The first and foremost thing you should do is to build a banking form for all the vendors. The reason for doing so are:

  • Don’t accept banking information in an email body. An email with banking details doesn’t provide authentication so that’s why you build the form.
  • Change the form every year. This way your team can distinguish between fake and real forms. If they receive an old form, they can ask the vendor if there’s a mistake.
  • Add vendor authentication on the form. Existing vendors will have to add some kind of information that’s unique to them. No one except the vendor should have that information as it helps in reducing the risk of fraud
  • Your form should require a digital signature. Be careful while building a PDF form with a digital signature built into the form. To avoid emails and calls from vendors saying they’re facing errors, let the vendors use their own digital signature tool.

2. Verify Bank Information

This is a vital step in preventing vendor bank account fraud. As you confirm a vendor’s Legal Name and Tax ID to match IRS records, you should also confirm the bank account information to match them against your records. Moreover, you can use DIRO’s bank account verification service to make sure the documents provided by your vendor are true.

3. Contact Vendor to Confirm Information Change

Once you’ve received the updated form, and confirmed all the data against your records, it’s time to contact the vendor. Call the Vendor to verify the change if there are any. This may seem cumbersome to both parties at first, but the benefits outweigh the pain. There won’t be any payment delays, and you won’t have to try to recover lost money.

While verifying the information, keep in mind that the vendors may not respond right away, so you need to find a way to keep track. If the Vendors don’t respond in time, don’t process the payment.

4. Send Notification to Vendor After Information Change

If there are any changes in the vendor banking information, you should build a system that sends an automatic notification system. Whenever the information is changed, the vendor will receive a notification.

How to Make This Process Efficient?

Building and setting up this process takes up a lot of time. But the process is crucial as it helps vendors and yourself be safe from fraudsters. Implement a vendor self-registration portal for vendors to authenticate themselves and prevent fraud. On the portal, vendors can authenticate themselves and also update their banking information as per their preference.


Best Practices to Follow For Merchant Onboarding and Monitoring

Merchant onboarding is the key to growth for any kind of business, regardless of the fact if you’re a merchant acquirer, a payment service provider, or anyone else. As a business, you would want to have as many merchants to support more transactions. But, onboarding more merchants without proper due diligence can cause more losses than benefits. Businesses need to follow the best practices in merchant onboarding and monitoring practices.

As a business, how can you balance trade-offs, ensuring that you can quickly and seamlessly onboard merchants that can be trusted? While good merchants can improve your business operations, bad merchants can put you in heaps of trouble. 

The global payment market is growing rapidly and changing quickly as the sophistication of both technological and fraudulent attacks is advancing. There are numerous ways businesses can utilize to improve the risk assessment, monitoring, management, and onboarding of merchants. 

Before we jump into the methods of merchant onboarding, businesses need to be aware of risk management processes.

Risk Management for Merchants

The risk management approach for merchant onboarding is vital for learning how to onboard merchants:

  • What is the transaction level of the merchant and their network?
  • What is the industry type your business operates in?
  • What is the transaction amount and range?
  • What payment channels are they going to use?
  • What countries do the merchants operate in?
  • What resources are necessary to properly onboard and monitor the merchant?

As not all merchants are the same, the level of risk and the due diligence checks that you need to do are also different.

It’s true that there are different levels of due diligence for each merchant, but there is a standard that must be met across all the due diligence checks. There are some legal compliances that have to be followed, such as KYC & AML. There are some standard rules of the card networks, they demand that there are specific legal contracts with all merchants that control all the relationships. Other rules regarding credit underwriting, as the merchants have to be in effect by offering unsecured loans.

How does Merchant Onboarding work?

Onboarding the right merchant can be tough, but with the right steps you can successfully onboard a merchant:

  • Pre-screening
  • Merchant KYC procedure
  • Merchant history checks
  • Business and operational model analysis
  • Web content analysis
  • Information security compliance
  • Credit risk underwriting

One major factor for creating a more successful onboarding process is blending automation with human effort. Most of the industry runs around manual work such as data entry, which has to be done multiple times. Manual work takes up a lot of time and it has a lot of room for human error. This is why a blend of human error and automation is necessary for detecting and preventing merchant onboarding fraud. Combining human and machine efforts can be considered one of the best practices in merchant onboarding and monitoring.

Automation allows businesses to have a smoother integration between the merchant onboarding steps. With the right technologies, you can make the whole merchant onboarding process automated. Businesses need to understand the importance of best merchant onboarding practices.

What is Merchant Monitoring?

Payment service providers and other businesses shouldn’t stop their risk management after they’ve onboarded merchants. What happens when a merchant changes the nature of their business? A change in the risk criteria requires reevaluating the risk profile of the merchant. When a merchant changes their business model, they can be doing damage, so it’s better to reassess the merchant profile:

Here are some of the best merchant monitoring best practices:

  • Spikes in activities
  • Exceeding thresholds
  • Out of area or cross country transactions
  • Changing website products or links
  • Including people from the sanction lists
  • Adverse media mentions

For monitoring the merchants, automation has seen some efficiency. The industry is getting tougher to survive in. There’s a lot of competition, encouraging growth in high-risk segments and markets. There is a huge rise in CNP fraud, as counterfeit fraud becomes more difficult.


How to Enhance Supplier and Vendor Onboarding Process: Best Practices, Process, and Rules to Follow

Vendor onboarding, or supplier onboarding, is a tricky yet extremely meticulous process. Supplier relationship management is a systematic process that allows businesses and organizations to collect documentation and data to qualify, approve and contact vendors, purchase goods or services and make timely payments to supply partners. Vendor onboarding compliance is tough as numerous steps are involved.

A vendor or a supplier is an entity that sells any specific product or service to your business, either for your business to sell it or as part of an item that you resell. The vendor onboarding process for e-commerce or other businesses is pretty much similar to employee onboarding, in which new members of a business learn about a company’s practices, processes, compliance, expectations, etc. There’s a lot to understand about supplier and vendor onboarding, doing it wrong can open the business to countless frauds.

Vendor Onboarding Best Practices

A proper and flawless vendor onboarding checklist can help your business to avoid hefty mistakes. An improper vendor and supplier onboarding process can lead your organization to legal and compliance risks. There are some best practices that you can follow to bypass the vendor onboarding challenges.

  • Know Your Rules

Before onboarding a vendor, your business should list and understand all the local, and global legal and compliance issues that apply to your industry and business. This assists in better vendor onboarding compliances.

  • Educate Yourself

Read and understand all the technical challenges of supplier onboarding related to your business type. Education can lead to a better understanding of how to secure your business against supplier and vendor fraud.

  • Prequalifying Is Important

Reduce your chances of risk and fraud by pre-qualifying vendors. Prepare a list of vendors based on their track record, willingness, and ability to meet up your organizational needs. This way you won’t be blindsided while onboarding a vendor. Verification can be done using vendor onboarding documents and ID verification solutions.

  • Build Thorough Contracts

Each vendor and supplier needs to have different types of contracts. To successfully onboard a vendor, you may want to build additional governance for strategically important suppliers. The best vendor onboarding solutions can help you in verifying your vendors and assist in building contracts.

  • Secure Information

It is always a good choice to secure your financial information from vendors, suppliers, and other third-party suppliers. You should use the latest technology and other solutions to verify if the vendors are legit and won’t cause any future problems.

  • Think Strategically

Design your vendor onboarding process with global compliance rules in mind and a proper idea of business that aligns with your business needs. Your strategies need to benefit your business and support your financial goals. 

  • Track Data and Do Expense Analysis

Tracking data is always an important part of any onboarding process, be it employee onboarding or vendor onboarding. With constant data analysis, you can learn where to make improvements in your process.

  • Implement Internal Training

You need to make sure that every member of your team understands the steps of the onboarding process and the software that is used to verify vendor identities and documents.

  • Keep Team Members and Vendors Informed

Provide timelines and make sure your vendors follow through with them. Your team should be able to manage and deliver a plan. Your vendors should be aware of what you’re expecting of them, share this information with your vendors, and manage your expectations.

7 Mistakes to Avoid During Vendor Onboarding

Mistakes that are made during vendor onboarding are typically failures related to accountability, planning, compliance, and training. Now that you know what is vendor onboarding process is, the next step is to save organizations from risks. The best way to avoid mistakes is by following the best practices mentioned above and making sure to not make common mistakes. Avoiding vendor onboarding mistakes can offer great benefits to your company.

Here are all mistakes you need to avoid during the Vendor onboarding process for e-commerce and other industries.

  • Unable to Get Buy-in from Top Management: Any business vendor relationship success depends on the top to lower-level management support throughout the organization. Without that, a business supplier relationship is bound to fail.
  • Failure to Choose Ideal Team Members: Accountability on your business’s end is the key to success. If your business is accountable for the work, the vendor partners will follow through. 
  • Failure to Plan: A slow and tedious attitude will inevitably lead to performance issues between a business and vendors. You need to build your plans for the future for smooth operations. 
  • Failure to Train: Without the right training and knowledge, your employees and vendors won’t be able to work ideally side by side together. Businesses need to provide proper training internally and externally.
  • Failure of Proper Compliance: Failure to find proper potential vendors and lack of proper following of compliance can lead to friction full business relationship.
  • Failure To Communicate: Improper communication is never a good thing in a business relationship. Keeping the vendors and everyone in your business in the loop is something businesses need to follow through.
  • Failure to Build Flexibility: A business should have the ability to go with the flow, continuous improvement requires a willingness to refine the business operations based on changing trends. To improve the vendor onboarding process, businesses need to be flexible.

Benefits of Proper Vendor Onboarding Compliance

Shifting your procurement and vendor relationships from old processes to a more strategic function offers benefits beyond competitiveness, it also helps improve efficiency, mitigating risks, better relationships, and a better brand reputation. Here are all the benefits that come along with a proper business onboarding process:

  1. Greater Competitiveness: Most firms in manufacturing tend to spend more than 40% of their every dollar of sale on materials and goods. To achieve business goals, vendor management and close attention to buying performance can be critical factors in a firm’s competitiveness.
  2. Improved Efficiency and Profitability: The right vendor can make or break your business. Whenever you streamline the current buying processes and make use of data collected by vendor performance. Right decisions can help you avoid income and productivity losses. A streamlined process leads to less waste, a higher productivity level, and reduced startup times.
  3. Reduced Risk: Whenever you comply with industry and government regulations, you need to keep an eye out for your internal policies, verify your vendor’s AML policies and educate them on certain factors. You can even reduce the risks by employing strategic tools like the DIRO’s online document verification tool vendor and business verification.
  4. Stronger Relationships: Vendor onboarding best practices lead to mutually beneficial partnerships which include training, proper flow of communication, and approval.
  5. Boosts Brand Reputation: If your business has a poor-performing vendor relationship, it can impact your brand negatively and cause brand reputation damage. As a business, you need to take charge of your vendor’s performance to improve your reputation with the customers. 

Automating the Vendor Onboarding Process for E-Commerce

Automation is always good, there are three main components that a business should consider for vendor onboarding:

  1. Easy integration with internal platforms and systems already available
  2. A self-service portal for vendors
  3. Security to guard against cyber-attacks and prevent the business from financial fraud.

Your cost for vendor onboarding depends on the size of your business operation and the number of vendors you are currently working with. If you already have good working relations with a variety of vendors then you will need a system that can handle your growing needs.

How DIRO Can Mitigate Vendor Onboarding Fraud?

During the pandemic, the number of onboarding frauds has grown exponentially. According to a report by Bnn Bloomberg, NASA incurred a loss of $700 million due to the supply of faulty aluminum products. To avoid this income and productivity loss, businesses need to use solutions that can help verify vendors during the onboarding process. Vendor onboarding documents and ID verification are crucial for mitigating fraud.

DIRO’s online verification solution can reduce fraud, improve business relations and improve productivity. DIRO’s solution can verify vendor documents in an instant and assist in complying with AML regulations. The output of the solution is a court-admissible document with forensic data and a digital hash that makes the documents immutable. Being able to differentiate between legit and fake vendors during the first part of the onboarding process is something that every business needs.


How to Verify Bank Accounts For Merchants?

The finance industry is full of fraud every step of the way, and merchants’ bank account verification and customers are important. Businesses use some common practices to collect and verify bank account details. The method for verification for merchants’ bank accounts differs from business to business. There are multiple ways to verify bank accounts for merchants, here’s how to verify bank accounts for merchants.

Verification of Merchants Bank Account

Banks & businesses go through countless transactions every day and being able to verify bank information instantly can mitigate the risk of fraud. Each method helps in the merchant funds verification. 

1. Manual Account Collection

One of the simplest methods to collect and complete merchants bank account verification

is to ask the customers or vendors for their bank account information. Without verifying bank information, you are putting your business at unnecessary risk.

You can work without verifying bank account information with trusted identities like law firms. If huge transactions are being made, the ideal choice would be to collect their account information and verify the information. 

2. Voided Checks

Before the rise of digital banking technologies and online services, banks used to verify account details by using a voided check. This method of verification for merchants bank accounts used to work in the old days, but not today. 

A check has all the information needed to make a payment, such as the “account number, the routing number, and the account holder’s name”. This method used to be very efficient in the old days, but with the rise of new technologies, it has become tedious. A merchant requires you to void a check and scan it. Although with sophisticated image doctoring technologies, the scanned image of the check can be changed. In comparison to that, using micro-deposits for bank verification is a much better solution. 

3. Micro Deposit Verification

Micro deposit verification is used by multiple banks and businesses to verify a merchant’s or customer’s bank account information. The process of Micro Deposit verification came into existence with the rise of digital banking. This process requires the bank or businesses to be on hold of a customer’s account information.

The businesses will tell the merchants that they’ll send two different transactions to the bank. The accounts will be verified if the merchant can tell the exact figure that was deposited in their accounts. The most common method is to send two different transactions from two different accounts to the merchant’s bank account for double-checking. Micro deposit is a well-known merchant fund verification method. 

4. Instant Account Verification

The newest and the smoothest process is instant account verification for merchants bank account verification. These solutions enable a direct link into the bank and collect and verify bank account ownership.

The benefit of this method of account verification is that it can be done instantly and offers better fraud detection and prevention. This solution is not widely available as the provider doesn’t offer full coverage across all the banks. While IAV is a better solution to verify merchant bank account information, it is not available everywhere and that’s why Micro Deposit verification is still available in the market. 

Merchants Bank Account Verification with DIRO

Merchant bank account verification is crucial to reducing financial fraud. Although not all the solutions offer fast, secure, and error-free bank account verification. With technological solutions like DIRO online document verification, verifying bank account holder information can be done in an instant. With secure and innovative technology, DIRO provides 100% proof of authentication that can be used as court-admissible documents with forensic data. Businesses can employ DIRO’s online document verification technology to make the workflow streamlined and eliminate the risk of fraud.