by Matt Rej
Nuvei has agreed to settle a $4.85 million FTC lawsuit alleging they were processing payments and maintaining merchant accounts for scammers.
The penalty is a drop in the bucket for Nuvei. But the settlement comes with additional rules attached that could prove to be far more costly for the processor over time.
Nuvei’s underwriting costs just got more expensive. And a stricter approval process could likely mean they’ll lose out on some high-margin volume from merchant accounts they can no longer support.
Low-risk merchants using Nuvei may ultimately be the ones burdened by this. As raising rates on those accounts is the easiest lever for Nuvei to pull.
And some merchants may not even realize they’re using Nuvei if they were onboarded through an ISO or platform that uses Nuvei on the backend. Those accounts could be impacted too.
Nuvei’s $4.85 Million FTC Settlement is the Small Part
To be clear, the $4.85 million part of the settlement is not the reason why I think Nuvei may start raising rates. This is nothing to a company of Nuvei’s size.
Back in June, Nuvei agreed to buy Payoneer for $2.75 billion in an all-cash offer. So five million is pocket change for them.
What’s more concerning for Nuvei is that the FTC settlement came with other stipulations. While Nuvei admitted to no wrongdoing, Nuvei agreed to:
- Stop providing payment services for tech support being sold via telemarketing or pop-up messages relating to security issues.
- Screen and monitor both current and prospective merchants with stricter standards, including certain categories like outbound telemarketing.
- Conduct enhanced screening and investigation on accounts with a chargeback rate that exceeds limits established in the FTC’s order.
- Not make any false or misleading statements to acquire merchant accounts.
- Not engage in any practices to circumvent fraud or risk monitoring from banks or card networks, which includes “load balancing.”
If Nuvei is actually going to comply with the settlement terms, it will genuinely change their operations for underwriting new accounts and monitoring existing ones.
It’s expensive at scale. And when you look closer at the details of what the FTC alleged, it seems clear that Nuvei was doing things they shouldn’t have to continue processing for those high-margin accounts. Despite those accounts being linked to fraudulent telemarketing and tech support scams.
Stricter Underwriting Costs Money Nuvei Didn’t Budget For
Underwriting merchant accounts is one of the most important processes for any payment processor. All of their financial risk management begins with this step.
They need to account for the individual risk profile of each account, while also considering the overall risk of their total portfolio.
By agreeing to apply stricter underwriting standards, Nuvei will likely need to increase their budget on staffing, tools, and reviewing accounts that are already set up at a higher frequency. Not just new applications.
This additional screening and monitoring costs money.
Can Nuvei afford it? Of course. But the point is they need to maintain high margins, and this is only the first tier of where their costs are going up.
Fewer Approvals, Less Processing Revenue
Nuvei doesn’t publicly disclose how many merchant accounts operate under its umbrella.
And despite the allegations against them, I’m hoping and assuming that only a small percentage of their merchant accounts were running scams.
That said, the stricter terms could mean two things:
- New applications that Nuvei used to approve may get declined now.
- Some existing accounts could get shut down after a review is triggered.
The fact that the FTC specifically prohibited load balancing under the order implies that it’s something Nuvei was doing systematically rather than a one-off.
This practice involves spreading a merchant’s volume across several merchant accounts or secondary acquirers to artificially keep chargeback ratios under the detection thresholds for the card networks.
While there could be some legitimate reasons for load balancing, these particular allegations paint a picture of risk evasion.
That’s now off the table. And while it’s unclear how widespread this was, the likely result is that Nuvei will lose some revenue.
High-Risk Merchants Paid Nuvei’s Best Margins
Even legitimate telemarketing merchants will always be flagged as high-risk accounts.
And while they come with higher potential risks for Nuvei, those accounts also pay the highest fees. So they are likely among the most lucrative in Nuvei’s entire merchant portfolio.
It’s obviously speculation but you can read between the lines here. That’s likely why Nuvei turned a blind eye to high-risk merchants who may have been running scams.
In the initial FTC complaint against Nuvei, the FTC cited internal correspondence where Nuvei employees flagged evidence that a merchant was running a tech support scam. Instead of taking action, Nuvei leadership pressured staff to approve more volume for that client.
This was an example of a high-risk account that processed $30 million in an offshore tech support scam over six years.
But when this type of direction is given from the top down, it’s hard to believe that it’s a one-off instance. $30 million is obviously real money but spread over six years, that probably didn’t even classify as a high-volume merchant from Nuvei’s perspective.
So I think it shows that Nuvei as a whole was willing to do these things for merchant accounts throughout its high-risk portfolio. It wouldn’t be worth it for them to take such a risk for just one account.
They likely wanted to just protect accounts that they could mark up by 400-600 bps or potentially even more, compared to a traditional merchant account where Nuvei’s base markup falls in the 2-30 bps range.
Where Nuvei is Likely to Make Up the Difference
Nuvei is owned by private equity and they have that big Payoneer acquisition expected to close in mid 2027. They don’t care about $4.85 million. But they do care about their margins that are likely going to be impacted as a result of the FTC order.
There’s no single component that really hurts Nuvei. But combined, the agreement can definitely lead to lower margins due to higher operational costs and potentially less revenue.
And industry-wide, every processor has historically used the same playbook whenever they need a margin increase:
- Rate increases on existing accounts
- Higher markups on new new accounts
- New risk or compliance fees
- Annual fees
- Value-added services
The point I’m trying to make is that Nuvei isn’t just going to eat the cost. Those costs are going to be passed down to merchants.
And separately, even legitimate merchants could get caught in the crossfire of Nuvei’s stricter standards.
A clean business running legitimate volume could suddenly trip an enhanced review if they have a bad month of chargebacks. Which could lead to document requests, funds on hold, and maybe even new fees.
Read More: Why Are So Many Nuvei Transactions Non-Qualified?
What Nuvei and Paya Merchants Should Watch For on Their Statements Ahead
If you’re using Nuvei or you were previously on Paya (which has been acquired by Nuvei), you need to keep a close eye on any processor correspondence in the coming months.
Read every notice sent to you or attached to your statement, as Nuvei should be notifying you if they’re adding new fees, increasing your rates, or making any changes to your account.
You should also be monitoring your statements for any new line items that weren’t there previously.
I’m not sounding the alarm and a lot of this is speculation. But I’ve seen this in the past with other processors and I’m expecting this situation to play out similarly with Nuvei.
The good news is that you have a say in all of this, and it doesn’t involve switching processors.
You can negotiate better rates with Nuvei right now, ahead of any potential rate increases. And if Nuvei does add new charges to your account, you can always push back against them and negotiate them too.
If you want to see if Nuvei is giving you a fair price, my team is happy to review your account for free. Then we’ll negotiate directly with Nuvei on your behalf to get you the best possible rate.