Breaking down the Merchant Onboarding Process

Merchant onboarding process for shop owner

Breaking down the merchant onboarding process

Onboarding new merchants is vital for payments businesses to maintain continued growth and success, whether they’re an acquirer, ISO, ISV or payments facilitator.

However, the traditional merchant onboarding process is slow, frustrating and inefficient, making it harder for payments firms to successfully onboard the new customers they need to support their growth.

The global card payments sector continues to develop and grow. Datam research indicates the total value of card payments will be around £14 trillion by 2022* – and that’s just for Visa, MasterCard and AmEx. COVID-19 has played its part to accelerate the switch away from cash, but consumers are increasingly more attracted to digital payments and ecommerce channels so this trend will no doubt continue.

While changing trends in consumer habits and increased technology adoption have created opportunities for tech-driven payments firms, they’ve also given rise to greater risk as online fraud becomes more sophisticated and cyber-attacks increase.

Many payments firms have made some efforts to speed up getting new merchants signed up and taking payments quickly through better onboarding. But they must balance it against the need to improve risk assessment, monitoring and management.

As with many things in life, technology holds the key.

Automated merchant onboarding can help accelerate the process while eliminating traditional, manual, paper-based processes that are inefficient, time-consuming and prone to failure due to complex systems and data entry errors. Automation can make it quicker and easier for payment providers to validate data, reduce input errors, and manage compliance, risk and underwriting to keep everyone involved safe and compliant.

What does the merchant onboarding process look like?

While individual payments providers have slight differences or variations in the way they onboard new merchants, the merchant onboarding process, in general, includes the following steps:  

Once the merchant has passed through each stage, and the acquirer approves their application, it will issue a merchant ID. This must be configured into the preferred terminal provider, payment gateway, logistics provider and possibly even a hardware finance company.

The ISO, ISV or payment company will then provide the new merchant with the hardware and technology they need to start taking payments.

As mentioned above, traditional merchant onboarding is a time-consuming process involving multiple systems from different service providers, with manual data entry, possibly even paper-based systems and – usually – a long wait for underwriting approval.

Acquirers must perform rigorous verification procedures to meet their regulatory and risk requirements.  So, they require a significant amount of information from merchants.

This makes the resulting process a long, drawn-out affair that’s fraught with difficulty and frustration.  A significant challenge for merchant acquirers is the sheer amount of manual work the traditional onboarding process involves. The same data often needs inputting multiple times, and the process is also vulnerable to human error and fraud, which can slow it down even further.

Manual work is also highly inefficient and can add substantial unnecessary costs to the process. And the problem is even more complex for ISOs and ISVs representing multiple acquirers, forcing them to use an even larger number of systems to successfully win new business and earn their commission. 

Merchant onboarding process cog

Why automation is key in merchant onboarding

Technology has evolved rapidly in recent years, which, when coupled with innovative thinking, creates an opportunity to automate merchant onboarding. Systems have been developed to help acquirers streamline the merchant application process, but the merchant journey is much more than this, covering merchant profiling, complex pricing models and quotation systems, a wide range of sensitive personal information and multiple service providers to fulfil merchants’ requirements. 

Automation is key to giving merchants and sales and operations teams in the payments value chain an excellent new sales experience. But it must be more than just acquirer ‘on-boarding’.  

It needs to cover the entire merchant journey, including: 

Then, there’s coordinating the wider payments value chain to consider, which can include an independent gateway, terminal hardware and software systems, finance companies, logistics and help desk services. And it should avoid forcing ISOs to use different systems depending on which acquirer they want to introduce to the merchant. 

While some acquirers have built systems to speed up on-boarding processes, they have limited capability when it comes to orchestrating the wider payments value chain.  

They are also designed to meet their individual requirements and do not fulfil the ISOs requirements to have one system they can use for all their acquirer partners. 

This is why we created Datam – to automate each stage of the merchant journey, orchestrate the entire value chain into one seamless experience and drive operational efficiency and compliance into every business the merchant needs to work with.  

The Datam platform is also independent of the acquirers and other service providers so can be configured for ISOs to use with multiple acquirers and value chain partners.  

To find out why Datam is much more than automation and on-boarding, click here to arrange a demo and we’ll tell you all about our unique ‘Lead to Live in Five’ approach to selling card processing services. 

* Source – 2020 Visa, MasterCard and American Express annual reports (Q1 2021) / IMF growth forecasts 2020/2022 report