Challenges Merchants Face During Onboarding and Merchant Account Opening - CatalystPay PoV
We are excited to announce our new blog post series, CatalystPay PoV, in which our skilled crew will be sharing their point of view and industry insights on online payment.
In our first installment, Anna Miteva, Senior Underwriting Account Manager, shares her view on some frequent merchants onboarding and merchant account set up challenges. Anna's extensive expertise offer a unique perspective on this crucial topic, and we're thrilled to have her as our first "CatalystPay PoV" contributor.
Don't miss out on this opportunity to learn from "the kitchen" in the industry. Stay tuned for more expert articles in the coming weeks.
Throughout my experience in working with online merchants, I have realized that each one has its own understanding of how an onboarding process goes and that the one-size-fits-all approach doesn’t work. Setting the right expectations for our clients can be challenging as there are many factors that could affect the timeline for opening a merchant account. It is simply very hard to find the balance between good user experience and compliance with regulatory and other requirements.
The problems our applying merchants have are diverse since what looks simple to a merchant that’s been in the business for years is not that easy and understandable for a business owner that has just entered the industry. So, the approach we are taking to onboard established businesses, is different than the one for a newcomer.
There are merchants who already have an operating website and a merchant account. They usually come to us to open an additional merchant account for their business in a different acquiring bank. I’ve noticed that in most cases such merchants are struggling to understand why they need to provide new or additional documents and are reluctant to make any significant changes to their website.
It is no surprise that such merchants are usually more prepared with a full document pack compared to the ones that don’t have any experience with opening a merchant account. However, active merchants, that have already gone through an onboarding process with a given acquirer, expect the same procedure when applying for a new acquirer. The challenge with experienced merchants is to educate them of the requirements of each acquiring bank. There are many merchants that get annoyed by the fact that previously accepted documents are not acceptable for the new acquirer as well.
Start-ups are usually not familiar with the documents they need to provide or the requirements they need to fulfil in terms of website compliance to start accepting card payments. New business owners require more extensive assistance. At the same time, they are usually more flexible with fulfilling any new requests or website changes. Sometimes, we need to start from the very beginning, meaning that we explain to our merchants any unknown terminology associated with online payments and the reason for requesting a specific document.
Below, I have listed some examples of the most frequent problems that our clients face during onboarding.
1) Issues with Personal (KYC) / Corporate (KYB) documents
Often merchants have these documents available. However, acquirers might request new ones for the following reasons:
- Expired documents: While most banks accept documents issued within the last 6 months, some acquirers can ask for ones that are as recent as 6 weeks. This sometimes stands as an obstacle for our merchants as it is associated with more time to obtain the renewed documents as well as additional costs if these documents cannot be downloaded for free from the respective trade register.
- Certification and translation: Part of the documents might be requested with a specific certification – either self-certified by the company director or apostilled and notarized by an independent notary. Moreover, if documents are in a language different than English, some of the acquirers might need them translated by a sworn translator.
- VAT number: Even though this is not a mandatory requirement, there are some acquirers that insist on having a VAT registration, so before submitting a given merchant to one of these banks, we discuss with them beforehand if they have a VAT number or are planning to apply for one.
2) Challenging or missing processing history
In order to analyze applying merchant’s performance, we need to provide banks with a processing history that outlines the name of the company as well as the amounts and number of sales, refunds and chargebacks. Based on this, banks would pre-approve the merchant to start the onboarding procedure, so if for some reason, an existing merchant has a bad performance, meaning that the merchant had excessive number of refunds or chargebacks, the application might get declined.
For start-up businesses, we would ask for a business plan to be supplied. As new businesses, clients are not always aware of all the details they need to present in such a plan, so in such occasions we would give them some directions about what they need to add. I must say that most acquirers are hesitant to accept merchants that don’t have a processing history, especially if the given business model is classified as a high-risk. The reason behind this is that with limited data the banks are not capable of making an informed decision. When we have such instances, we redirect our applying merchants to a bank that is more open to accepting start-ups and try to re-apply to the initially desired acquirers once we have obtained a history of the transactions.
3) Issues with billing descriptor and city field
These are the details shown on website’s checkout page as well as on every cardholder’s bank statement. They allow customers to identify and associate the transaction with the payment they’ve made on merchant’s website. The billing descriptor is usually the name of the website or the company name, while the city field is the support number or the city where company’s registered address is. Having these details on the payment page is mandatory and there are cases where business owners already have a billing descriptor and city field that have been accepted by their current acquirer but are not accepted by the additional bank where they are applying at the moment.
At the same time, for merchants that haven’t operated with their website yet, we would have to give further instructions about how these details should be displayed on the website. So, the challenge again is to educate the merchants of the intricacies of disclosing billing descriptors in compliance with the cards schemes requirements as well as the banks’ own acceptance policies.
4) Lack of clarity about settlement account needs
A merchant should have a bank account in order to have a merchant account. The bank account is used by the Acquirer to settle funds from card payments processing to it. That sometimes presents challenges for us to meet merchant’s needs because the bank account of the merchant can be in a currency that is not supported by the acquiring partner. So, it is very important to discuss the desired settlement currency with the merchant in the beginning of the onboarding process. Each acquiring bank supports different settlement currencies with EUR being the most widely offered in the European region. If this is not clarified at the initial stage, it could result in realizing that the given bank cannot serve the needs of the merchant and hence, end the onboarding before the end. Merchants are commonly unwilling to pay extra charges for FX and we must make a note of that during the onboarding.
5) Difficulty with PCI DSS Compliance
During the onboarding process the merchant must attest its compliance with PCI DDS. This is done in the form of a self-assessment questionnaire (SAQ) where the merchant fills in information related to sensitive card data storage, processing and transmission. It is usually difficult for the merchant to complete it correctly from first time as there are several problems here:
- Clients are not aware of which questionnaire is applicable for their company. The two main versions are SAQ A and SAQ D:
- SAQ A means that no information is stored regarding your clients and their cards. All this information is being stored and taken care of by other 3rd party providers who are PCI compliant. So, this form is used by the merchant to attest compliance by outsourcing the handling of all sensitive card data to compliant vendors.
- If such information is stored by the merchants themselves without using third-party services, this means they should fill out SAQ D. For SAQ D, we'll also need a ASV scan. The ASV scan can be obtained by contacting an Approved Scanning Vendor (ASV) who will produce a report about any vulnerabilities on the website (we can send a list of vendors who merchants can contact).
- The questionnaires are long and hard for merchants to complete as there are a lot of questions that need to be answered and, in most cases, we or the acquirer would go back to the business owner several times with comments until we get a satisfying version of this document.
6) Concerns about website compliance
While acquiring banks have very similar requirements, there are differences and merchants get concerned that if they make any changes on the website, their other providers might close their account with them since they’ve done some amendments to the already approved websites. The idea of having a website to be compliant is to minimize the risk of clients being mislead by the content and to meet the rules of the card schemes.
Therefore, if a bank asks one of our clients to change something or make it appear clearer, this could only help the merchant present its website in a “better light”. I believe that if a merchant informs its alternative banks of the changes made, there shouldn’t be place to worry about its active accounts because, at the end, we are all trying to make one web shop look more desirable and apparent to all – acquirers, cardholders and the card schemes.
7) Complicated ID verifications
Some acquirers ask merchants to undergo an online ID verification. There are different providers that banks use to verify the identities of the individuals which sometimes causes confusion in the merchants. Every system has its own process and interface. This sometimes makes it complicated for merchants to complete. It could be either because of the quality of the document provided or because the system itself is not user friendly. This gets merchants frustrated as they need to go through the process multiple times (especially if they need to complete it for several banks).
8) Challenges with the Merchant agreement
When it comes to this phase the merchants are all set with previous stages of onboarding and almost on the finish line. This doesn’t mean that this very last stage is not as challenging as the previous ones. I’ve seen some applications getting stuck on this final line as agreements are usually long and are different for each bank. At this point, our clients start asking multiple questions as they are trying to understand the wording, conditions and how each of the applicable fees is collected from them. Also, they often need to discuss the contract with their legal team which delays the process a bit as there is again some back-and-forth until we see that all parties are familiarized with the information.
Moreover, for some banks, signing the agreement does not mean that there won’t be further requests for clients to complete. Such banks wish to have the signed agreement before the end of the process to be sure that the merchant has acknowledged the included information. It is particularly important for us to inform our merchants about this as they sometimes do not understand why requests keep coming after signing the contract and we need to explain further.
In my view, one of the most effective practises with both existing and start-up merchants is to always complete the application forms and agreements for our merchants to minimize the risk of gaps and errors in the information, save their time and speed up the underwriting process.
Closing Words
These are some of the most common issues we see merchants face when applying for a merchant account. Of course, there could always be many other as each industry has its own specifics. Even though problems sometimes can be major, there are rarely cases when they cannot be solved.
If you are an online merchant looking to open a new merchant account or struggling with the onboarding process, we understand the challenges you are facing. We know that the onboarding process can be complex, and the requirements may differ depending on the acquirer you are applying to. However, as experienced payment service provider, we can help guide you through the process and provide you with the necessary information to help you succeed. Contact us today to learn more and get started on the onboarding process.