Implementation of a risk transfer pricing mechanism in an acquiring bank

Details

Supervisors

Peirce, Robert

Faculty

Louvain School of Management

Degree label

Master [120] en Ingénieur de gestion

Abstract

As part of its activities, every acquiring bank provides services to merchants it has on boarded. Those banks assume the risk associated with the transactions they process on behalf of merchants. In this context, if a merchant would become insolvent and unable to fund a reversal, refund or chargeback, the acquiring bank must provide the funds to make every cardholder whole. In this thesis, a risk transfer pricing mechanism has been applied to the merchant portfolio of an acquiring bank. This mechanism aims at defining the risk premium that correctly reflects the risks the Bank takes on through its activities and at transferring it to merchants as a pricing.