Why is Getting Underwritten a Big Deal?

There are many ways to start taking payments as a Merchant, but regardless, you need a Merchant account.

PayFacs can get you up and running with a sub-Merchant account quickly, which depending on your transaction volume, may require minimal underwriting. But those options can be more expensive and restrictive—there’s little room to negotiate prices, which can become an issue as you scale. Minimal underwriting can also mean stricter compliance thresholds around fraud and chargeback rates.

Merchants can also opt for working with an Acquiring bank or ISO/MSP, which gets them set up with their own Merchant account. Access to your own Merchant account can bring lower fees, negotiated pricing and full control over your own account. But getting a Merchant account will require complete underwriting.

A Merchant Account can mean lower fees, more control, and scalability. But the only way to get one is through a long and expensive underwriting process with an Acquirer.

What Acquirers review when underwriting Merchants:

  1. Business financials – bank statements, tax returns and income statements
  2. Credit score – merchant and owner credit scores
  3. Transaction volume and size
  4. Industry risk – review industry, products/services, business model and chargeback history
  5. Business licenses and permits
  6. Anti-money laundering and Know Your Customer (KYC) – Due diligence, since their reputation is on the line
  7. Data security measures – security, compliance, and other data related policies

Pouring through a Merchant’s history takes time and resources for everyone involved. But it’s a crucial step for any Merchant trying to lay the groundwork for success in Payments.

February 9, 2024

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