5 Ways to Vet New Merchants

Acquirers have a tough task when it comes merchant adoption of new payments technology. Breaking down the barriers to that adoption can mean making processes more transparent for merchants without sacrificing security or efficiency.

But before any of this can happen, there’s the question of compliance. Most acquirers know that building a long-term KYC (know your customer) strategy is crucial to their success, but not every one realizes the complexity involved in implementing this strategy.

Compliance begins with rigorous due diligence long before merchants are onboarded. Some recent guidance from the Federal Trade Commission outlines some of the things acquirers should watch for when establishing new relationships with merchants.

Don’t Ignore Gaps in a Merchant’s Business History

A lot can happen to a business in its lifespan: New names, name owners and new locations, making it essential to investigate their entire history to make sure their submitted track records match the documentation.

Transaction Models Don’t Tell the Whole Story

Proper vetting for potential merchants means you’ll need to understand their entire business model, and not just how fast their company is growing. This means examining exactly the “what” and the “how” of their revenue and whether their models match up with real-life supply and demand.

Don’t Hesitate to Flag Inconsistencies

If you’re maintaining a relationship with noncompliant merchants, you’re putting yourself and your company at unnecessary risk. It’s important to flag suspicious activity and halt payments or transaction management relationships immediately at the first sign of impropriety. This is a basic practice that cannot be ignored.

Be Wary of Rapid or Batch Approvals for Merchant Accounts

Merchant acquirers’ operations can scale quickly, particularly those that provide a wide range of services to new businesses. With that scale comes a substantially greater risk for noncompliance. That’s why it’s essential to employ a thorough vetting process or a third-party solution that allows for rapid compliant merchant onboarding.

Using Data to Ensure Ongoing Merchant Compliance

It’s not enough to vet merchants during onboarding and then monitor transactions every so often for potential fraud and risk. Compliance needs to be proactive and ongoing, which is why enterprise-grade, third-party solutions are so useful. They can streamline compliance monitoring as acquirers get ready to scale.

Would you like to learn more about compliance and onboarding from the POV of other acquirers and PSPs? Download our Enabling Payments In A Global Connected Economy report, a PYMNTS and technologi collaboration.