As we know, a quick and efficient onboarding process for merchants to accept payments is paramount for an Independent Software Vendor (ISV). During onboarding, the ISV’s payment processing partner reviews merchant account applications, complying with the U.S. government’s Know Your Customer (KYC) requirements by collecting business documentation, banking information, and identity verification from the merchant.
The seamlessness of this process partially depends on whether or not a merchant is deemed to be “high-risk.” Merchants who receive this designation often have to provide more documentation, giving way to a longer onboarding period, and may be subject to higher fees, as well.
What is a high-risk business?
Chargeback Frequency
Fraud Likelihood
International Base
Reputation and Regulation Management
Low Credit Score
How does onboarding a high-risk business differ from a low-risk business?
Preliminary account information such as the MCC code for the business type as well as sales volume are collected early, which are typically a good indicator of whether or not the merchant will be able to be auto approved.
A merchant who is doing business in a low-risk vertical (one that does not require that EDD questionnaire), who has a monthly volume under 200,000 (barring a lot of high-ticket inventory), and with a brick-and-mortar location, is likely to speed through this onboarding proceeding. Any variation could kick the process out for more manual checks and balances to protect all parties involved. The payment provider’s underwriting team takes the lead on this, along with its compliance team.
For a complete underwrite, the payment provider needs to collect business ownership verification and years of operation, along with bank statements and processing statements. The depth of these documents isn’t necessarily the same across the board, and can depend on the type of high-risk business the merchant has. A contractor with long delivery times might have to submit more proof of ownership, whereas a merchant with a low FICO score would need to provide more bank statements.
What is a low-risk business?
Conclusion
Regardless of whether a company falls into the low- or high-risk category, partnering with a payments provider that has the merchant services to manage merchant onboarding programmatically with the support available to take on additional processing is a win-win for all involved. To learn more about applying for a merchant processing account, contact our Sales Engineering team.