Merchant onboarding is the series of steps a service provider takes to set up a new account with payment processing through an acquiring bank. It involves collecting a seller’s information in a merchant processing application (MPA) and passing those details to the approving authority for approval or denial.

While it may sound simple, onboarding has traditionally been a time-consuming and frustrating experience for independent sales organizations (ISOs) and other payment professionals.

In this article, we’ll explore the traditional merchant onboarding process that has dominated the industry, including some of its biggest pain points. We’ll also examine how today’s payments technology is changing the process and saving payments companies time and money.

What is Merchant Onboarding?

Onboarding is all about collecting key information about a business so a risk assessment can be performed. This helps determine the merchant’s rates and fees and whether they are safe to work with before approval. 

The risk team will analyze a merchant’s business history, financial and credit documents, personal information about the owners and more. In total, 100 or more data points could be required to vet a merchant, complete Know Your Customer (KYC) and Anti-Money Laundering (AML) checks and gain approval for a new merchant account.

Once collected, the ISO will pass the merchant’s information to a processor in one of two ways — the old, manual way, or the new, automated way. Which path a payment provider chooses is important because it impacts both the quality of due diligence and the quality of the merchant’s experience.

If onboarding is slow, it creates a bottleneck that draws out the time it takes to get a merchant approved and transacting, known as time-to-processing. For the service provider, that bottleneck bogs down staff, limits capacity to take on new merchants and delays revenue from transaction fees. For the merchant, it delays their ability to sell and earn a living — not a great way to start a new relationship. That makes a streamlined onboarding process one of the most important aspects of successfully selling merchant services 

The Manual Merchant Onboarding Process

Although it can be slow and error-prone, the traditional merchant onboarding process is still widely used. Manual onboarding involves three high-level steps: collecting application documentation from a prospective merchant, transferring the information into an onboarding system and final approval. 

Step 1: Collecting Documentation 

Until recently, paper applications were standard. They had to be physically collected, signed, stored and managed — a time-consuming process that increased the likelihood of misplacing necessary documentation. While many application forms have gone digital, they often still require wet signatures. This means that even if a merchant can fill out a form digitally, they still have to print it, sign it in ink and scan it back into the computer system for submission. Collecting wet signatures adds an unnecessary step to the application process, causing friction for sales teams and merchants.

Step 2: Manual Data Transfer Into a Processor Portal

Depending on the company, the onboarding team will either send MPA data to a processor for approval or review and approve it themselves. This is how that process generally looks:

  • Retail ISO: Retail ISOs will collect information from the merchant and send the application on to a wholesale ISO or processor for approval
  • Wholesale ISO: Wholesale or FSP ISOs will collect merchant information and then review and approve their application in-house

Regardless of whether you are approving an MPA yourself or sending it off for approval, all the information in a traditional application — potentially hundreds of fields — must be transferred, line-by-line, from the original document into aboarding portal. 

Manual data entry is exceptionally slow, often taking 60 minutes or more to board a single merchant. It’s also extremely susceptible to human error. Typos or missed fields could slow down approval, impact pricing or result in outright denial of an application.

Worse still, each large payment processor has its own onboarding system that requires a different portal which works a different way and requires training to use. That makes the onboarding process even more complex.

Step 3: Submitting and Hoping for the Best

Once a merchant’s information is received, an application is submitted to the processor. If no mistakes were made and all the correct information was entered, approval can happen immediately or within the same day, depending on who is processing it.

However, it’s common for processors to return an application to request more information. Those requests can get lost at a busy ISO, resulting in unnecessary delays that could add days. Once the processor sends back an approval, the merchant is ready to begin taking payments.

Saving Time With an Automated Merchant Onboarding Solution

Merchant onboarding is undergoing a technological revolution. Today, more merchant service providers are foregoing manual onboarding in favor of automated solutions. 

Onboarding involves two things automated systems are ideally suited for: repetitive tasks and data handling. As a result, automated merchant onboarding solutions make the process faster, more accurate and more profitable. The following is a high-level overview of what using this new technology looks like.

Step 1: Collecting a Fully Digital Merchant Application

The tech-forward onboarding process still begins with an MPA, but wet signatures are replaced with eSignature technology. Going fully digital makes filling out applications easier for merchants by eliminating the need to print or scan anything; it also streamlines the collection process. 

Many merchant providers now avoid downloadable forms altogether, instead enabling merchants to sign up directly over the web. That is an important step in beating out big platforms like Square and PayPal.

Once an ISO has an MPA PDF, the first step is to upload it to an automated merchant onboarding system where you can map the document for automatic population and e-sign. Sending a link to a merchant is as easy as a few clicks to select the application and send an email. When the merchant clicks their link, the page they see will show everything that was already populated about them, along with any pricing details. The merchant can review and complete the remaining requirements and e-sign the document.

Step 2: Automatic Form Population and Add-On Service Selection

After the e-signature is complete, the document and its info are returned to the ISO program, where they can select a processor and upload the completed MPA file. The system then automatically pulls all the relevant data into a custom interface preconfigured to match the chosen processor’s required fields. This eliminates the entire manual data transfer process, reducing the time it takes to onboard a merchant from 30 minutes or more to five minutes or less.

Before submitting, the user only needs to review the application details to ensure accuracy, select equipment options, and confirm pricing for the merchant’s payment services. Merchants can even be onboarded to additional services like payment gateways, fraud protection and more, within the same system.

Step 3: Submission and Approval Monitoring

Submitting will send everything to the processor through a direct connection. Unlike traditional onboarding, automated onboarding with a merchant relationship management solution offers two-way communication. That enables the user to quickly check the status of any pending application using the built-in reporting dashboard.

Suppose a processor declines a merchant or sends an application back for more information. The status is immediately updated in the dashboard, and the system can send an alert to the person handling the account. That ensures the absolute fastest time-to-approval possible, creating an efficient, frictionless experience for everyone.

Fast, Effective Merchant Onboarding With NMI MRM

NMI MRM is a complete merchant management system designed to centralize, streamline and enhance all the most important tasks ISOs and other payment providers perform. Its proprietary automated onboarding solution, TurboApp, is the fastest and most reliable way to onboard merchants. Since it connects seamlessly with the industry’s top processors, TurboApp eliminates the need to juggle multiple portals or to develop and maintain in-house connections.

NMI MRM extends past onboarding. It also offers post-onboarding support, automated underwriting for wholesale ISOs, automated residuals calculations and merchant management, a full suite of communication and operational tools and more.

To find out more about how NMI MRM can revolutionize your merchant onboarding and drive company-wide improvements, reach out to a member of our team today.

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