Sami Doyle, CEO and Founder of TMU Management, explains that acquirers today are operating in an imperfect market. They're trapped in a cycle of chasing volume, taking a big loss, pulling back and then chasing volume again. But there's a better way: acquirer insurance.
The way our industry manages chargeback risk is going through one of the most important structural shifts we've seen in decades, and it's worth paying attention to.
For years, acquirers have had a complicated relationship with delayed delivery merchants (DDM). Travel, subscriptions, furniture and events are fast-growing sectors, and they make for excellent merchants.
But the difficulty acquirers face is structural: with delayed delivery, there is a gap between the sale and service delivery, and in that gap sits every chargeback that hasn't happened yet. The way we have historically managed that exposure treats the symptom, not the cause.
Consider what acquirers actually do today. We securitise, and our toolkit typically involves:
On paper, this acquirer toolkit looks sensible. In practice, however, it asks merchants to set aside large sums of cash, leave it idle and then negotiate over how large the pile should be.
A rolling reserve holds back a percentage of a merchant's revenue, their working capital, in an account that earns nothing for anyone. The money goes in, no one benefits, and everyone argues about when it can come out.
The deeper issue is that the level of the reserve is almost always arbitrary. It's rarely based on rigorous actuarial analysis of a merchant's specific risk profile. More often, it reflects:
That is a negotiation, not a calculation, and negotiated figures rarely match actual exposure peaks. The result is capital locked away that may be too much or too little, but is almost certainly the wrong amount.
Delayed settlement has the same flaw. An acquirer processes a merchant's payments while holding on to their money for a while, just in case. This does little to create strong acquirer-merchant partnerships.
These conversations are also commercially painful. A deal is nearly closed, and the commercial team is celebrating. Then, the risk team adds one more condition: a 20% rolling reserve and a £100,000 fixed deposit.
The merchant's enthusiasm drops, the CFO calls, and the acquirer stops looking at a payments partner and starts looking like a bank that won't release much-needed funds. It creates unnecessary friction, damages relationships and in a competitive market, it can lose the deal outright.
The acquiring market for delayed delivery merchants is, to put it diplomatically, imperfect, and it tends to move in a cycle:
As acquirers scale, they tend to move through these predictable stages: win everything, absorb a loss and impose reserves, find the reserves are costing them merchants and reduce them to stay competitive, take another loss, and reach for reserves once more. The industry stays stuck in this never-ending loop. Why? Because it has never had the right tool to break out of it.
Insurance for chargebacks is not a new idea. Earlier attempts didn't work because insurance products designed for acquiring risk were designed by insurance people. They understood the insurance side inside out, but they didn't understand acquiring and the nuances of delayed delivery, chargeback mechanics, exposure windows, the relationship between processing volume and risk, or the specific triggers that actually cause losses in the acquirer space.
It wasn't their intention, but they built products with the wrong underwriting conditions, the wrong triggers and the wrong exclusions, and when it came time to claim, they produced the wrong outcomes. Acquirers found that coverage either failed to trigger or came with so many conditions that it was effectively useless.
What has changed is that the products now entering the market are built by people who understand both worlds. The underwriting is done by specialists who know what a delayed delivery merchant portfolio actually looks like, who recognise that a travel merchant in January carries a different risk profile from the same merchant in August, and who can build coverage around real transactional data rather than static annual assumptions.
Insurance for acquirers does several things that securitisation can't:
Insurance genuinely transfers risk off the balance sheet. A rolling reserve doesn't remove risk – it just sets aside some of the merchant's money in case things go wrong. If the loss exceeds the reserve, the acquirer is still exposed. Insurance backed by A-rated insurers transfers risk to a third party with a contractual obligation to pay. That is a fundamentally different proposition.
Premiums can be as low as 1 to 2 basis points on acquiring volume, against reserves that tie up 10, 15 or 20% of a merchant's turnover while earning nothing and not benefiting anybody. The premium approach is orders of magnitude more efficient.
I've also observed a more subtle benefit: Once securitisation is no longer the commercial battleground, it begins to normalise. When reserves are not the main risk tool, an acquirer can have a rational conversation about a modest, proportional level of security without it becoming the make-or-break negotiation point. Reserves stop being a major point of friction and become what they should have always been: a sensible, proportionate part of a broader risk framework. Taking securitisation out of the fight is what produces better outcomes.
Acquiring is not the first industry to face this problem, and it's worth looking at how others solved it. Construction has wrestled with a similar challenge for decades: how to manage counterparty risk in projects with long delivery timelines, significant prepayments, and the possibility that the party being paid might not actually deliver.
Its first instinct was the same as our industry. It tried bank guarantees, cash deposits and retention clauses – the same capital-inefficient, relationship-damaging tools acquirers use today. And then they discovered performance bonds and surety insurance, which converted the problem from a balance-sheet exercise to a premium exercise.
This changed the industry for the better, as risk was properly quantified, priced and transferred. Disputes over deposits gave way to professional risk assessment. I think anyone in the travel sector will agree that the parallels are uncanny.
Across the market, the loss experience for DDMs is manageable. Individual losses can be significant, and a single merchant insolvency can be eye-watering, but across a broad portfolio, the losses are controllable and predictable.
This is the principle behind all insurance. A house probably won't burn down, but the owner insures it anyway, because the cost of being wrong is catastrophic and the premium is a fraction of the risk.
Across a varied portfolio of DDMs, expected loss rates support premium levels that sit well within acquirer margins. It's not a prohibitive cost, either. It's a few basis points in exchange for what acquirers need most of all: certainty on the balance sheet.
We're entering a phase in our industry where there will be a clear divide between the haves and the have-nots. The acquirers who adopt insurance-led risk structures will be able to onboard DDMs with confidence and compete on service and pricing, rather than on who's willing to take the most risk with the least protection. They can sleep at night knowing their exposure is quantified, priced and transferred.
The acquirers who don't will continue to ride the cycle: chase volume, take a big loss, pull back and then chase volume again. They'll keep having painful conversations with merchants about large reserves, they'll keep losing merchants to competitors, and they'll be just one bad event away from pulling out of an entire sector altogether.
The tools now exist that break the cycle, and TMU Management is proof of that. Our insurance products are:
The question isn't whether insurance will become the standard approach to managing DDM chargeback risk – that's inevitable, in my opinion. The question is who's going to get there first.
Step away from the endless acquirer cycle. Contact TMU Management to discuss how our acquirer insurance solutions strengthen your resilience and allow you to expand your portfolio with confidence.
If you need insurance that reflects how your business really works, TMU Management is here to help. Our team will assess your challenges, understand your exposures and design a bespoke solution that fits your strategy.
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