Merchant Account Acquiring – A Small Insight.
The merchant underwriting process is quite extensive, and it involves a lot of talented people who are capable of understanding credit risk along with different associated risk parameters. Once the underwriting team approves the account, then the merchant gets the capability of accepting transactions. The acquiring process also gives the opportunity to the merchant account acquiring institution to reject any application.
Merchants are considered High Risk or Prohibited because of multiple factors. Few of these factors are listed below.
- If the merchant is from a specific Industry that is considered prohibited. If the merchant is selling a product or service that is banned. Merchants from prohibited industries cannot get any Credit, Debit . They can not accept echeck payments online.
- If the chargeback ratio of the merchant is high.
- If the owners of the company are not financially stable
- If the merchant does not fulfill the requirement of submitting a complete KYC document set.
- If the business license is not valid, if the merchant does not have additional approvals from different agencies that may be required for that specific industry.
There are many high risk payment solutions that on-board merchants from various high risk industries. You can email us for more info. The Merchant account acquiring institution reserves the right to reject any application. The team that handles the underwriting should have the required level of experience in underwriting, and the financial institution should always update its team members about the latest guidelines, regulations, and recommendations from the card schemes and acquiring banks. More or less all the acquiring institution follow the same risk analysis process. Some may be more investigative and some may be moderate. No matter where a merchant is located in terms of nations like Canada, Austria, Belgium, Luxembourg or anywhere. The merchant will have to go through a strict underwriting process.
Financial institutions may work with different organizations to generate sales. These organizations are also known as agents or referral agents or sometimes as resellers. In case, if the institution is working with resellers, then the KYC document along with the application should be analyzed to a much broader level, and there should be a proper agreement between the financial institution and the resellers so that the reseller is not violating any guidelines.
To get the account started the merchant account acquiring Institution requires
- A signed merchant account agreement.
- A signed term sheet that mentions the rates which the merchant would be paying, additional charges associated with the merchant account.
- An undertaking if required declaration from the directors or shareholders of the institution.
- In case if the financial institution requires an on-site inspection, then there should be an on-site inspection report also.
- Proper analysis of the credit score of the business owners.
- Analysis of profit and loss statement of the organization in the past year and they should preferably be-be developed by a third party auditor and not by the merchant themselves or himself.
- Proper risk analysis as per the chargeback ratio that has appeared on the merchant most recent processing statement with a different processor.
- Risk analysis report based on critical values that include monthly expected sales volume, number of transactions, minimum ticket size, maximum ticket size, mode of operation API or Moto or point of sales.
- Business and Bank Reference letters or emails
- Analysis report obtained from a third party, risk analysis companies like G2. These companies evaluate multiple endpoints on the internet and report to the merchant account acquirer. This report can further be used by the acquirer to make the decision whether the account should be approved or not.
- Checking if the merchant is on the Match list or TMF file has been created.