The Merchant Onboarding Idea

The term “merchant onboarding” refers to a process in which a new business is added to a network of existing merchants that process payments. ISO, payment service providers, and payment facilitators are all examples of these. Applicants for merchant accounts often express a desire to start the acceptance of electronic payments promptly. While doing so, many different payment aggregators have made it a priority to streamline the payment process for the businesses in their portfolios. This article will examine the significant steps in the merchants’ onboarding process. Moreover, we will detail steps you may take to enhance it.

Credit Card Networks are at the top of the Payment Services Pyramid, Followed By Acquirers and Processors, Resellers and Merchants

We must first appreciate that the process of “merchant onboarding” (also known as “merchant boarding”) occurs on the first floor of the payment services pyramid. Merchants, particularly those of a smaller size, are comparable to the capillaries that carry blood throughout the body. Acquiring financial institutions and transaction processors may be compared to major blood vessels. Credit card organizations are at the very pinnacle. Acquiring banks and processors is the next tier (from top to bottom). A payment processor is the technical side of an acquiring bank.

The decision to grant an applicant the acquirer/processor makes a merchant account. The acquirer takes on the risk associated with the merchant’s business once the account is activated. The primary concerns are monetary and legal responsibility. Because of this, thorough background checks are essential.

At first, acquiring banks deliberated individually on each application for a merchant account. The number of applications continued to rise, even though most of them had shallow anticipated processing volumes. This made it unfeasible for acquirers and processors to evaluate each application independently. Eventually, it led to the emergence of several sorts of intermediary organizations to whom acquirers outsourced the task of enrolling merchants. In this category, you’ll find ISOs, PayFacs, and PSPs (payment facilitators and processors, respectively).

Merchant Onboarding Process

The applicant is linked to the electronic payment processing network by completing the boarding process. There are a few mental hoops to jump through before it can complete the job.

An important first step is for the ISO or PayFac to establish a connection with the acquiring or processing entity’s boarding interface. The two most common methods of establishing this link are through an application programming interface (API) and a dedicated website. Once the link has been established, potential merchants may apply via either the ISO or PayFac. Include everything required for a thorough background check in your application. Some of the most crucial sections are company classification, account documents, tax identification number, and maybe credit/processing history. The acquirer/processor decides whether or not to approve the merchant account based on the information provided in the application. Put another way, we need to know whether it can be relied upon, if the amount of residual income we can anticipate getting is “worth the work and responsibility,” and if the associated risks are tolerable.

Enhancing Merchant Boarding Procedures

Early merchant onboarding procedures relied heavily on human intervention. It was pretty labor-intensive and needed many hours of work from real operators. The applications from potential merchants were also submitted on paper, and the underwriter’s personnel had to go over each one individually.

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Many businesses’ current plans for indirect cost reduction include making the merchant onboarding procedure more streamlined. For the sake of efficiency and convenience, aggregators have used a number of automated solutions for merchant onboarding. The onboarding process may be greatly enhanced by allowing applicants to input their information online. Two common ways to think about submitting data in this field are through pre-allocated MID blocks and an application programming interface (API) or a file.

Methods for Submitting Merchant Onboarding Data

Merchants may provide their application data to certain underwriters (PayFacs, processors, or acquirers) and ISO in particular file formats or using specialized APIs. The underwriter’s ability to verify the application information and provide a merchant ID is instantaneous. As soon as the application is submitted, the applicant may begin receiving payments.

One other set of underwriters hands out whole batches of already-issued merchant numbers. To disperse MIDs from these blocks across merchants in the same categories, aggregators and PayFacs may use this method (including health clubs, restaurants, etc.). After submitting their applications and receiving payment facilitator approval, merchants with the same MCC code may begin accepting orders. However, within a day or two, the PayFac must give all the information the acquirer (underlying processor) needs to do a full background check on the new sub-merchant.

By using these and related strategies, the whole process of onboarding new merchants may be automated. That is, the information about the merchant may be automatically retrieved from the online application forms and checked against the appropriate KYC logic. It doesn’t take long for newly certified merchants to begin processing, and everyone involved— acquirers, ISOs, processors, and PayFacs —gets their fair share of the residual money.

Get in touch with our payment specialists at if you have any questions regarding our cutting-edge merchant onboarding services.

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