Take Risk with Confidence: Automating Payfac Underwriting


February 18, 2021

Merchant acquirers and payment service providers (PSPs) have a common challenge.

Growing the business requires onboarding merchants. More merchants means more transactions, which fuels your growth and increases your processing volume. The faster you can onboard merchants, the faster you can grow your business and the more revenue you will bring in.

So far, so good.

However, the common challenge for both merchant acquirers and PSPs arises during the underwriting process.

Onboarding merchants without sufficient investigation will hurt you in the end, whether you’re a merchant acquirer or a PSP. Even a single shady merchant that authorizes fraudulent transactions can cause significant losses for your business. This is an area where it pays to proceed with caution.

On the other hand, a long onboarding time may result in fewer merchants choosing your services. They don’t want to wait a long time to see if you’ll take them on as a client. They just want to do business as quickly as possible.

Slowdowns in onboarding can arise from both lengthy review processes and the sheer size of the backlog. The quicker your underwriters can get to a merchant’s file, the faster they can review and either approve or reject the merchant.

Fast, efficient onboarding means merchants are producing transactions faster, leading to more revenue for you. Every hour that they’re not processing payments through you is an hour you’re losing money.

Higher speed during onboarding also leads to higher client retention. Merchants want a frictionless underwriting process. Simply put, happy clients tend to stick around and won’t want to jump ship.

On the downside, onboarding clients at breakneck speed may end up with you approving a client that you really shouldn’t. Not all merchants are honest. A fraudulent merchant can cost you a lot if you’re not careful.

The ideal solution would be to onboard clients very fast, but with all the care that comes from going slowly. The solution lies in underwriting automation. The right solution in this area lowers costs and increases revenue without exposing your business to unnecessary risk.


Automated underwriting turns Pintos into Mustangs

There are many advantages to automated underwriting for payment facilitators, but we can sum it up with one analogy. Right now, your underwriting staff is essentially driving a Pinto. Giving them the right underwriting automation software puts them behind the wheel of a brand-new Mustang with all the options.


Your underwriters have a lot of specific knowledge about the processes and checks used to evaluate merchants. Continuing our analogy from above, that makes them very skilled drivers. How fast can the best driver go if they’re limited to a Pinto?

It’s not just a case of speed. You may recall that the biggest problem with the Pinto was not performance. The main issue with these vehicles was safety. In particular, Pintos had a tendency to literally explode when hit from the rear. No matter how careful the driver was, a single mistake, even one made by outside forces, could cause catastrophe.

Your underwriters are in the same position as the Pinto driver. They have the skills, but they can only go so fast. Plus, sooner or later, a catastrophe will come along.

Merchant ScanXpress is the brand-new Mustang your underwriters have been waiting for. The solution handles much of the tedious part of the underwriting process, freeing your staff to spend more time on the cases that really need their attention. By automating underwriting, and presenting your underwriters with recommendations, Merchant ScanXpress can help lower costs and generate better returns while successfully managing risk. You’ll onboard merchants quicker, leading to higher client satisfaction and longer client retention.

Onboarding merchants: high-risk, low-risk, and no risk

Let’s take a look at two very different merchants, a high-risk merchant and a low-risk “mom-and-pop” merchant, and see how Merchant ScanXpress can help you serve both by empowering your underwriters. For the sake of this example, let’s say the merchants sell electronics.

The high-risk merchant is a relatively new online store. The mom-and-pop is a long-standing retail location. Right away, our gut tells us that onboarding the online store is likely riskier than the established retailer. Underwriting doesn’t work by gut feelings, though. All the usual checks still need to be run.

Merchant ScanXpress runs these checks automatically and gives your underwriters a recommendation for both merchants. The full process takes between two and eight minutes, depending on the checks performed, but the underwriter can start reviewing while the checks continue to run in the background. At the end of the process, the system recommends approval for the mom-and-pop store. The underwriter finalizes the review, and the store is successfully onboarded.

The high-risk merchant, on the other hand, is flagged by the system. This prompts the underwriters to review their case more closely. This is where you really need your underwriters’ skills and knowledge base. The merchant is high-risk, but after a careful review, they decide that the merchant is reputable and worth taking on as a client.

Note that your clients don’t see any part of this process. All they know is that they were approved and that they can now process their payments through you. In other words, you have two happy customers.

When you reduce underwriting review times, you create happier, longer-term clients. Even when you must reject a merchant, their unhappiness will be minimized because you didn’t keep them waiting for very long before providing them with an answer.

Nobody wants to wait a long time just to hear bad news.

Agreements Express even provides your merchants with a fast and easy application process, leading to near-instant approvals. Most of the know-your-customer (KYC) data has already been gathered during the first stages of the onboarding process. Merchant ScanXpress takes this data and verifies it against the needed checks, providing solid recommendations for your underwriters.

Humans only need to get involved in the process when a situation really requires their insight. This speeds up the underwriting and approval process enormously, without exposing your business to unnecessary risk. This is why the solution both reduces costs and increases revenue.

Merchant ScanXpress is completely configurable to your needs. Your expert staff can set thresholds and easily configure the system to the needs of the merchants you’re evaluating. No matter the industry you serve, Merchant ScanXpress can help you onboard faster, increase revenue, and take risks with confidence.

For more information on Merchant ScanXpress or to book a demo, please contact us here.