Payment Service Providers (PSPs) and payment processors rely on merchant onboarding as a key Know Your Business (KYB) step since it directly correlates to increased revenue for these organizations. To prevent dealing with fraudulent merchants, it is important to adhere to the necessary KYC compliance standards when onboarding them. An astounding $97.04 trillion worth of non-cash payments were recorded in 2018, according to a report by the U.S. Federal Reserve. Regrettably, this opens up a huge opportunity for scammers, fraudsters, and money launderers, who are becoming more and smarter every day.
For this reason, we have taken the time to compile an exhaustive manual outlining all of the finest procedures for merchant onboarding. Learn what merchant onboarding is and how it operates here.
What is Merchant Onboarding?
When a new company or merchant signs up for a payment platform, this is called merchant onboarding. Acquiring and validating merchant data, establishing payment processing systems, and checking for compliance with applicable standards and laws are all part of this process.
Payment processing systems rely on the merchant onboarding process to ensure the security of payment transactions and high-quality merchants. The payment platform may be more secure and in line with all applicable rules and regulations if a thorough onboarding procedure is followed.
A General Outline of the Merchant Onboarding Procedure
One crucial part of the merchant onboarding process is KYB, or Know Your Business. The aim of any payment processor or PSP should be to increase the number of merchants that handle transactions; nevertheless, the quality of these merchants should be a company’s primary focus.
The number of cybercrimes and fraudsters is on the rise in the global payment sector. A business, as a PSP, will be better equipped to identify its merchants and evaluate the risks of carrying out transactions with them if you include KYB in the merchant onboarding process. Businesses and banking institutions are required to follow a series of processes and rules known as KYB (Know Your Business) when they onboard new merchants into their systems. The goal of business verification processes is to confirm the legitimacy of the business and evaluate the dangers it brings, such as the possibility of fraud, money laundering, or other illicit actions.
Advantages of Merchant Onboarding in KYB Compliance
There are a lot of benefits to using KYB (Know Your Business) while onboarding merchants, including as:
- Regulatory Compliance
First and foremost, KYB ensures that PSPs follow all applicable rules and regulations, including those pertaining to payment card data security (PCI DSS) and anti-money laundering legislation.
- Deterring Fraud
Truth in lending and other forms of online fraud may be lessened with the use of know-your-business (KYB) procedures. Payment processors may safeguard their clients from fraudulent actions by confirming the merchant’s identity.
- Hazard Analysis
With the use of Know Your Business (KYB) processes, payment processors may evaluate the merchant’s financial history and ownership structure, among other things, to determine the level of risk involved. By using this data, payment processors may reduce risk by determining the right amount of due diligence.
- Establishing Trust
By proving the PSP’s dedication to providing a secure payment environment, Know Your Business (KYB) may aid in establishing confidence between businesses and payment service providers (PSPs). Loyalty and repeat purchases may rise as a result.
- Company Reputation
By showcasing their dedication to compliance and client safety, payment processors may assist merchants enroll with a strong KYB procedure, which in turn helps them retain their reputation in the market.
Final Thoughts
Assisting companies with a seamless transition into the digital arena and ensuring safe transactions is the role of merchant onboarding. Businesses and customers alike may rest easy knowing that it will improve trust, security, and operational agility. In addition, companies can start their merchant onboarding experience quickly and securely with corporate verification service providers while ensuring enhanced efficiency and getting comprehensive insights.
