Safe payment processing is very important in the emerging world of digitization. Companies adopting digital payment methods have to consider using merchant onboarding processes to check transactions. This makes the payment process streamlined and, therefore, easier for businesses. Merchant onboarding is a process whereby a business is assimilated into a payment service provider so that transactions become safe. It helps reduce fraud cases, delay cases of transactions, and charges imposed by law due to non-compliance. Corporations should anticipate and implement the process of onboarding a business to avoid threats and dangers.
What is Merchant Onboarding?
Merchant onboarding refers to opening a new company account. The process is important to ensure that payments are made on time and without delay in the future. Once the organization opens a merchant account, the corporation must collect data and industry-based documents. The information that could be incorporated includes the name, residential address, contact number, registration number, and tax reference number. The documents include the registry, balance sheet, certificates, and permits. Hence, the main point is that all the information should be filtered through the legal authorities‘ databases. However, the objective of due diligence here is to establish a gateway for safe payment at merchant onboarding so that the merchants will be verified to follow security measures.
Merchant Onboarding Requirements
There are certain documents and materials that a business must ensure before onboarding a merchant. The collection of information about them smoothens the payment process and minimizes the risk involved. There is a checklist that companies should pay for before contracting a merchant, and there are verification processes for various documents and materials. Gathering all this information actually streamlines the process of making payments and minimizing potential risks. The documents and materials which the merchants must provide are outlined as follows:
- Articles of incorporation
- Certificate of Formation
- Other essential documents
- Tax identification number
- Bank account details/ statements, and others.
- Ownership and structure information
Essential Steps of Merchant Onboarding
- Pre-Screening: Businesses assess the payment service providers to align with their requirements.
- Identity Checks: The next step is the analysis of the potential risks of fraud and verification of the merchant’s legitimacy.
- Merchant Assessment: This comprises assessing the financial stability of the merchant and checking whether it is the risk profile.
- Merchant History Screening: Proper evaluation of the merchant’s history is crucial as it helps businesses gauge its reliability and trustworthiness.
- Operational Analysis: Understanding the way the business operates its operations makes merchant onboarding easier.
- Compliance Setup: Compliance with the industry regulations (AML/CFT) is critical to ensuring ultimate security and data protection.
Advantages of KYB Merchant Onboarding
For the past years, the merchant onboarding requirement has to be more secure and safe. The KYB procedures allow the verified onboarding of companies to become partners. The advantages of KYB during the merchant’s onboarding are as follows:
- Better Risk Management
KYB actually involves the risk checking type that happens when onboarding has been done to the merchant. It deals with the investigation of the sizes of the transactions and the gaps in time associated with the merchant. A merchant’s operational sector, industry, and geography need to be clearly identified.
This also helps in the onboarding of merchants to identify the risks associated with it. This sector mainly involves a lot of love transactions and is more vulnerable to financial crimes. In order to investigate this, checklists related to merchant onboarding and any regulations pertaining to AML and CTF become necessary. The investigation process helps in the execution of mitigation strategies needed for such risks.
- Ongoing Monitoring
This forms part of the process when taking on a merchant in KYB. Since UBO status can change after incorporation, the ownership structure must be scrutinized on an ongoing basis. Monitoring includes both the financial and the legal condition of the business.
Another source of adverse media screening can be cross-referencing the news archives, social media, and other related business information with databases. This highlights potential dangers and thus prevents financial loss.
- Combating Money Laundering
It is a highly severe threat to corporates and financial firms due to money laundering and terrorist funding. Companies need to verify whether newly onboarded merchants adhere to AML/CTF. With this, businesses can ensure safe modes of transactions and limit any possible risks that may arise from financial crime.
In Conclusion
KYB policies and procedures allow organizations to onboard merchants efficiently. Corporations, therefore, must ensure KYB practices during merchant onboarding are in place to ensure financial safety. Healthy financial relationships AML and CTF compliance promotes healthy financial relationships, which leads to more market confidence. KYB authentication during merchant onboarding provides all the above benefits to businesses. Business appreciates a deep understanding of merchants before onboarding and due diligence afterward.
