Top 5 Merchant Onboarding Challenges

Independent software vendors (ISVs) and independent sales organizations (ISOs) know the benefits of selling merchant services. It allows you to offer in-demand solutions as companies transition from traditional in-store payments to mobile, e-commerce and unattended self-service payments.

Selling merchant services also allows you to provide solutions to companies that plan to transition from paper-based invoicing to the efficiency and improved cash flow of electronic invoicing or text-to-pay solutions.

However, to meet market demands and add to your payment residual revenue stream, you must navigate the challenges of merchant onboarding, including risk management, compliance, time and resources, customer experiences and scalability.

5 Common Merchant Onboarding Challenges

Merchant onboarding, the process that takes a merchant who wants to sign with you for merchant services to final approval, can present several challenges:

1. Managing Risk

Acquirers take on risk when they facilitate transactions for merchants. They are often responsible for covering the costs of fraudulent charges, and they want to mitigate those losses. So, before approving a merchant account, acquirers require documentation and data to help underwriters identify risks and set appropriate processing fees.

Some of the information your clients must provide include:

• Transaction volume and average transaction amount – Merchants that process higher-value transactions and a more significant number of transactions represent more risk.
• Industry segment – Some merchant categories, like gaming, tobacco and e-cigarettes, travel, direct marketing and pawn shops, are historically high-risk. Merchants can also be classified as high-risk if they do business online or sell to consumers in other countries.
• Chargeback/fraud rate – An overview of each merchant’s history is essential for underwriters assessing risk. High chargeback or fraud rates, for instance, may suggest that the merchant is unreliable and too risky for approval.

2. Complying With Regulations

Knowing who you’re doing business with is difficult in a digital economy. As a result, acquirers, payment processors and other players in the payment chain must comply with strict regulations, including anti-money laundering (AML), know your customer (KYC) and know your customer’s customer (KYCC) laws.

Compliance includes conducting document checks, sanctions and politically exposed person (PEP) checks for each merchant application. It also requires due diligence, which includes:

• Researching each merchant’s business history
• Reviewing news articles to see if the company has been the subject of adverse media
• Examining its website to see if any information raises red flags

The due diligence required to meet compliance requirements is time-consuming and prone to error - something that automation can help solve.

3. Time & Resources

Manual risk assessment, underwriting and regulatory compliance all take time. Collecting the necessary data to move an application forward requires a back-and-forth with each merchant. Unfortunately, gathering this information manually can delay your payment processor partner, who needs data to move forward, and your customers, who may lose patience with a long process.

Furthermore, the time it takes to onboard merchants manually (and effectively) can make selling merchant services less profitable. You may need more employees to fill gaps, and your team will have less time to serve customers and drive sales. Over time, inefficient workflows will impact your bottom line.

4. Customer Experiences

Once you’ve convinced a prospect to use your merchant services, you don’t want to damage your new relationship with a lengthy, complex merchant onboarding process.

J.D. Power research reveals that the quality of customer service is a significant factor in overall customer satisfaction. With merchant services, setting the right tone with your clients and providing a smooth, efficient and fast onboarding process from the beginning is crucial.

5. Scalability

Manual merchant onboarding can stand in the way of growth; the time and complexity required make scaling your business a challenge - especially if you must hire more people to fill out paperwork.

Lessening your reliance on manual processes will enable you to pursue lucrative opportunities and onboard more merchants. After all, you don’t want to pass up the chance for more revenue because you don’t have the capacity or resources to handle increased workflows.

How Technology Solves Merchant Onboarding Pain Points

Automation is the key to faster merchant onboarding and better customer experiences. For example, integrating a payments-specific customer relationship management (CRM) solution with your merchant onboarding platform can reduce underwriting time by 80% and cut overall onboarding by up to 8x. More efficient onboarding will decrease the burden on your staff and keep new customers happy.

The right solutions save time, streamline underwriting and compliance, bolster your risk management, improve customer experiences and simplify scaling your business. They also work to eliminate human error, which can lead to rejected applications and lost business.

Don’t settle for less. Contact us to learn more about the advantages of automated merchant onboarding with an industry-centric CRM integration.