Instant onboarding— which refers to a merchant’s ability to complete a single-page digital application, and process payments immediately— has been regarded as one of the most remarkable improvements merchants have seen in decades. But some market specialists beg to argue otherwise.
According to Rich Aberman, the Co-founder of WePay, while instant onboarding eases the process of obtaining a merchant account for business owners, “it isn’t the “magical secret sauce” like most retailers believe.
The payment expert, however, feels that the actual “secret sauce,” is inventing a risk engine that can review and act on business data like a merchant’s processing history as soon as they are operational. In a nutshell, a transparent system that’s dynamic so that merchant can do businesses knowing well their fate depends on their business performance; and one that detects fraud and acts in real time.
Risks and User Experience
The major security checks during onboarding of a new merchant involve “anti-money laundering (AML),” “know your customer (KYC), and use of network screens to block bad actors and businesses in breach of network rules. These checks are often automated, and onboarding can be instant, provided a merchant passes all the screens.
Still, Aberman is pessimistic whether the above checks can solve all onboarding problems. New merchants often lack crucial data that a service provider can use to learn more about their business. So, is it safer for vendors to find out more about a new merchant before onboarding or just allow them onto the platform and monitor them in real time, as they run operations?
For merchant services providers, instant onboarding is more about whom or what comes next. And most merchants may fall in love with the idea because it directly translates to quick access to funds. According to Aberman, this winds down to two matters: how new a merchant is; and real-time data access.
Piles of data
Assessing data will mean looking into heaps of info other than the normal transactional data. For instance, if a merchant service provider chooses to scrutinize invoicing, they may analyze whether the payments were made before or after the service, whether the invoices come from a group of repeat buyers or a series of new shoppers, and if there’s feedback or not.
Aberman explains that these piles of data may grow over time each time getting more informative. The more record or history a firm leaves behind, the easier it gets to see abnormalities because it is easy to set a baseline. These kinds of data allow merchant services companies to set more levers when assessing a merchant’s risk profile.
With vendors relying on batch systems, we still expect some loopholes. They may spot fraud, but that could be 24 hours later (because too much data is flowing) after the service providers have incurred losses. The matter gets even more complicated when it comes to monitoring instant payments.
The payment industry will have to come up with innovative ideas to solve the problems surrounding instant approval merchant account or continue to accept more merchants who do not qualify for the spot.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by using instant approval merchant account solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.