Credit where credit’s due

The pace of business has increased rapidly, and the need for vigilant, yet speedy and accurate credit checks has kept up. Fiona Russell Horne looks at one option for merchants.

Builders’ merchants have long been thought of as the industry bankers. Customers open up credit accounts and take their goods with a promise to pay at the end of the month. So, opening credit accounts for new trade customers is essential for winning business.

Traditionally, when a new customer applies for a credit account, they complete a paper form in branch. This information is then manually entered into internal systems, and credit teams must verify the company details, check the business exists, confirm VAT registration, and perform credit checks.

It’s a process that can take hours or even days, particularly if details need to be verified across multiple systems. It also introduces potential errors when staff manually check company information and then key it in or copy it over from one screen to another.

According to Marc Bishop, senior business development manager at Red Flag Alert, delays in account set up can risk the customer already having gone elsewhere to buy their materials. “All too often, the merchant branch has gone to all the effort of checking the customer out, getting them signed on the system, only for them to disappear and possibly not actually purchase anything,” he says.

The other risk, which Bishop says is increasing exponentially, is that of fraud, and companies that don’t actually exist, or sole traders that take the goods then disappear, having given false details.

As with everything else in life, automation can offer a better way. By digitising the credit application process and integrating real-time verification checks, builders’ merchants can approve legitimate customers in seconds while maintaining rigorous risk controls.

Biship explains that one of the options Red Flag Alert offers is a simple modern automated system which begins with a digital application form, accessed either through the merchant’s website, on an in-store tablet or iPad, or by staff completing the form on behalf of the customer in branch

He says: “Instead of staff entering company details manually, the system connects directly to business data providers to validate company information instantly. For example, when a customer enters their company name, the system verifies the business and automatically retrieves key details such as the registered company name, the VAT number, business address and contact details. This reduces manual input and ensures the information is accurate.”

The application form can be customised to each merchant’s requirements, capturing information from the requested credit limit and business description to full director details, bank account information and, if required, personal guarantee details. Once the customer submits the application, the system begins running a series of automated checks in the background.

Within seconds, the system performs multiple checks using integrated data sources and APIs.  Bishop says that these checks typically include: company validation to confirm the business exists, fraud screening, credit bureau checks, and address, identity and bank account verification. “Each application gets a digital case number and assessed against the merchant’s own credit policies and risk appetite. If the application passes all criteria, the account can be approved automatically. In many cases, this entire process takes less than a minute,” he says.

If a certain risk indicator is triggered, then the system flags the application for manual review by the credit team. This might be if the company website was created only days previously,  contact details appear suspicious or the credit history does not support the requested limit

Bishop says: “The credit team can then investigate the case and decide whether to approve the account, reduce the credit limit, or decline the application. This approach ensures that automation speeds up straightforward approvals while still allowing human oversight when needed.”

Integrating with merchant systems

Once an application is approved, the system can automatically create the customer account within the merchant’s back-office system.

Integration is possible with many merchant platforms and ERP systems. Any system with an API can typically be connected, enabling a seamless flow of data.

Alternatively, if a merchant prefers not to integrate directly, the results can simply be delivered to the credit team’s dashboard or work queue for review.

There are, of course, merchants who don’t want to go down the fully automation route straight away. Bishop says these merchants would have the option to run credit and fraud checks manually through a secure online platform. Staff can enter a customer’s details while they are in branch and instantly receive a risk assessment and recommended credit limit.

“This provides merchants with detailed business reports and insight into whether a customer represents a low or high credit risk,” he explains.

 Fraud prevention is increasingly important, particularly when dealing with new limited companies or sole traders. Modern systems can include biometric identity verification. In this process, the applicant receives a text message and completes a quick verification on their phone. They are asked to take a photo of their ID document (such as a driving licence), and then take a selfie or short video. The technology checks that the document is genuine and confirms the ID match using facial recognition., for an additional layer of protection against identity fraud.

If a customer fails a credit check but does not trigger a fraud risk, the merchant may still choose to offer a lower credit limit or request payment upfront.

Bishop says, however, that if a fraud indicator is detected, the safest approach is to decline the credit application entirely and only offer cash transactions.

“Automation helps merchants identify these risks early, protecting the business while still allowing legitimate customers to open accounts quickly. It means faster account approvals, reduced manual administration, improved fraud protection, consistent credit decisions and a better customer experience in branch,” Bishop says.

“Legitimate customers can be approved in under a minute, allowing them to start trading immediately, while high-risk applications are flagged for further investigation. For merchants operating in a competitive market, this combination of speed, security, and efficiency can provide a significant advantage.”

redflagalert.com