Quite an event for an English literature major. But it was not what you merchant underwriters might think. The timing of this event coincided with a more remarkable event that has affected us all.
The launch of the Bankofamericacard, which became the first successful recognizably modern credit card generally accepted by a large number of merchants.
So, since my job preceded the existence of merchant underwriting, what was I doing? I was underwriting automobile insurance for a major insurance company. Traditionally, the term underwriter referred to the evaluation of risk for investors on a given venture, such as a sea voyage. Financial backers who would accept some of the risk would literally write their names under the risk information on a document to affirm their acceptance of the described risk of loss.
For automobile insurance the underwriter would consider driving record, type of vehicle (nothing sporty), property ownership, time at current job (no job hoppers) time at a residence (no shifting around) and life style. Yes, we would regularly send someone to interview the neighbors to inquire about drinking habits, disturbances and general reputation. We then evaluated the risk of loss based on our evaluation of such factors and accepted or declined the application.
My underwriting years were followed by a career in the FBI in which I utilized some of the same skills in evaluating potential criminal activity. After retirement I came into the credit card industry as a risk manager and subsequently the founder of a company that does……underwriting. Pre underwriting to be exact.
The point, if any, is this: The merchant account underwriter (and her/his) boss are virtually signing their name on the document evaluating the risk of loss to their ISO or processor. They do this having considered the merchant’s, product or service, processing history, financial strength, credit background, and available information about their reputation as a business person.
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