Straight Through Processing (STP) for Merchant Onboarding


October 25, 2016

Recent research by Capgemini and MIT has found that “old-world operators with traditional processes” are losing to competitors with faster, more streamlined back-office operations. One of their top recommendations to organizations who want to survive is to adopt Straight-Through Processing as a competitive advantage. The study surveyed 157 executives in 50 large companies and revealed how traditional companies could benefit from a digital transformation. One of their findings was that companies face huge pressure from customers, employees, and competitors to speed up their adoption of digital technologies, such as a digital onboarding process.

For merchant acquirers and ISOs, Straight-Through Processing in merchant onboarding and underwriting is an effective way to stave off disruption and increase efficiency.


Straight-through processing (STP)


As recently as 1993, the entire onboarding process took months. Clients had to sign documents or mail proof of physical ID at a post office or local branch to complete the transaction. In the case of customer service, customers had to mail their complaint, or call and wait for it to be processed by a clerk. Systems were hardwired and took months to update. While technology has come a long way since then, merchant acquirers haven’t made full use of these advancements. Even today, merchant onboarding with most acquirers takes about three weeks. To busy merchants used to instant online transactions, that is an eternity and is costing acquirers in the form of merchant abandonment and attrition.

In contrast, new payment facilitators such as Square and Intuit, which have emerged as competitors in the small merchant space, help users open accounts in minutes. Clients of traditional acquirers wonder, “My friend opened a payment account with Square in 15 minutes. Why is it taking this company so long?”

Straight-Through Processing (STP) can be part of the solution to that problem.


How STP Works


STP works in conjunction with onboarding automation software (such as Agreement Express) to automatically assign a risk score to various categories. The software then automatically marks the application as approved, declined, or ‘needs review’ depending on the overall risk score, and the thresholds established by the acquirer.

Between the merchant application, and the hundreds of data sources available, you can collect every piece of relevant merchant data in minutes, from credit score and online activity, to fraud detection such as conflicting IP addresses. The difference between this and traditional underwriting is not only speed, but precision. You can set pre-defined score rules for each category that will be followed in every case, and when a particular merchant fails to meet your risk standard, they will automatically be declined, or passed on for human review.

There are certain merchants that all underwriters would approve. Similarly, there are certain merchants that all underwriters would decline, based on their credit score, type of merchandise sold, online behavior, or other factors. These merchants can be automatically declined without human review. In order to implement STP, an organization must agree on these rules beforehand, and automatically pass them “straight through” to the next phase. You can see where “straight-through processing” gets it’s name! The net result is the right merchants are approved, the wrong merchants are declined, and your underwriters spend their time doing what they do best: analyzing the tricky cases.


MIT reports that straight-through processing increases sales up to 30%, reduces fulfilment times by up to 80%, and achieves cost savings of up to 20%.

In short, STP allows organizations to keep their business afloat by providing faster account opening times, lowering organizational risk, reducing exposure, and shielding them from fines. In the case of an automated merchant onboarding system, it increases the number of applications that can be process and enhances the customer experience. With an agile system like Agreement Express, it’s easy to make changes to your onboarding process and update your underwriting thresholds as you learn more about performing KYC and AML digitally.

After implementing Straight-Through Processing with some of the leading merchant acquirers and ISOs, Agreement Express has been able to reduce the average merchant onboarding time to one day, increasing the total capacity for merchant intake without the need to hire more staff.




Merchant acquiring is becoming a commodity. More entrants are joining the game with faster, smarter technology, and the biggest players are adopting new technology every day to compete. This leaves the average acquirer and ISO with a tough question: what is the smartest, most effective technology investment to stay in the game? Arguably, the answer is Straight-Through Processing. If you are still managing underwriting in Excel, and handling merchant applications on paper, you’re already at risk of being disrupted by a fintech alternative, or a direct competitor that has automated their onboarding processes.

Interested in STP and creating a smarter underwriting strategy? Download our latest eBook, The Merchant Acquirer’s Ultimate Guide to Onboarding More Merchants