Part One: The Merchant Acquirer’s Guide to Onboarding More Merchants
This is part 1 of a 2-part series on how Merchant Acquirers and ISOs can keep up with the merchant onboarding race in a competitive market.
Merchant acquirers and payment service providers are under increasing amounts of pressure to grow their business, and therefore onboard more merchants due to the sheer amount of competition in the marketplace. It’s becoming one big game of Pac-Man.
Between the giants of the Merchant Acquiring world, and the new (can we still call them new?) disruptive fintechs like Square, the market pace is only growing more aggressive and competitive. The fundamental goal, the raison d’etre, is to increase your volume and onboard more merchants than your competition. That’s the source of consistent, sustainable growth for merchant acquirers. It’s how you keep the fire burning.
Acquirers who don’t continue to grow and attract new merchants are allowing their business to fade into embers and ash, instead of adding fresh firewood and stoking the flames higher and higher. Without those new merchants, your competition grows while you flicker and fade away.
Or, to take another analogy, consider Global Payments, a veritable behemoth in the industry. They’re not only after new potential merchants, but they’re also after other acquirers, virtually swallowing them whole. And looming less large are disruptors like Square, Intuit, and PayPal, who are drastically changing merchant expectations. Luckily, you don’t have to compete directly with the giants nor the disruptors. If you and a couple other hikers are walking along in the woods, and a bear begins to run after you, you don’t have to outrun the bear, just the other hikers.
It’s easier said than done, but onboarding more merchants is how you outrun your competition. If you’re wondering whether it really is the best method to grow your business, here are some responses to common concerns.
Why Do We Need More Merchants, What About Quality Over Quantity?
This is one of the most common excuses to bypass the need to onboard more merchants than your competitors. There is a false assumption that onboarding is a zero sum game: you either choose quality or quantity when acquiring merchants.
The problem is that the very choice is putting a stranglehold on your business. The market is constantly accelerating, and the only way to keep up is to acquire more merchants, while simultaneously reducing the time and cost to onboard each one without sacrificing quality.
Speed is key to attracting new merchants, allowing you to keep up with the new time expectations created by the disruptors. Typical merchant acquirers take 3-5 days to onboard each merchant, in contrast to the 15 minutes or less it takes the new kids on the block like Square. It’s tempting to try to match speed with them, but rather than racing to the bottom, making it as quick and easy as possible, it’s your experience with quality underwriting and risk assessment that differentiates you from the disruptors. You can take steps like implementing a minimum viable process – ensuring you gather only the essential, core information you need during the onboarding process, eliminating wasted space – that reduces risk and allow you to save time and money.
Instead of seeing quality and quantity as two opposite colors in a spectrum, look at them like a Venn diagram. It’s possible to stray out too far into one or the other, but there is a happy medium with significant overlap.
Won’t Increasing Onboarding Mean Sacrificing Good Underwriting?
It follows that with more merchants, time constraints and increased workload can put pressure on underwriting teams, leading to costly mistakes and human error, or requiring hiring more staff. It’s a higher risk and an increased cost, what’s the upside to acquiring more merchants than you can handle?
While it’s true to some extent, since companies like Square have admitted that they “face an inherent trade-off between security and customer convenience,” it’s far from a universal truth. It’s a choice to make the trade-off, but there isn’t a gun to your head forcing your hand.
One way of helping maintain quality underwriting is automating parts of your underwriting process, simplifying it for your team by compiling data, from KYC information to key points regarding regulatory and legislative issues, allowing the underwriters to avoid the hassle of data entry and calculations, and giving them more time and energy to ensure due diligence and optimize the process.
How Can We Maintain Scalability If We’re Constantly Onboarding?
Onboarding is incredibly labor intensive, so it seems counterintuitive that it’s one the most significant factors in helping keep growth sustainable. Its strength is determined by how you’re equipped to handle more merchants. Navigating a constant stream of overwhelming amount of data to process and staying on the right side of regulators with AML and KYC requirements is tough, and ensuring that your system can handle the growth is difficult to stay on top of, especially when your goal is to continue onboarding as many merchants as you can.
The biggest mistake in regards to scalability is to incorporate new tech and assume that adding new technology is a binary problem to be solved, like flicking a light switch. It’s much more like adjusting a dimmer switch, accommodating your ability to adjust and adapt as needed. You need to continually stay in the game, making sure your system doesn’t become obsolete and fall by the wayside. Flexibility and innovation will enable to you ensure scalability for years to come.
What Are the Practical Steps to Take?
Now that it’s clear why it is critical to focus on your onboarding process as the key to growing as a more efficient and productive business, what are the actual steps?
One of the most effective methods to streamline your onboarding process is through an automation platform. Now, there is some warranted skepticism about the cure-all effects of transforming your business through automation software. But if you put away the rose-tinted glasses and accept that no model is perfect, it’s still plain to see the advantages automation provides, particularly in your onboarding capacity.
From using digital applications to using a rules-based engine, incorporating risk scorecards, and taking a flexible risk based approach, onboarding software can drastically allow you to increase your volume.
However, not all automation processes are created equal, and simply updating your software is not a guaranteed fix. It’s still a path fraught with peril, from the lumbering Minotaur of legacy systems to the labyrinth of underwriting and risk assessment.
In our next section, we’ll outline you should expect from automation software and how to avoid potential pitfalls of automation. Read Part 2 of this series here.