KYC Needs & Processes for Merchant Onboarding

Merchant Acquirers (MAs) and Payment Service Providers (PSPs) act as the host and conduit of merchants’ financial transactions. As more and more micro-merchants enter the digital marketplace, PSPs and MAs can use fast, efficient, and effective KYC tools like KYC-Chain to ensure their customers – and the services they provide them with – are compliant with global regulations.

PSPs and MAs have enjoyed a boom in business as micro-merchants proliferate in the digital marketplace. However, as the industry has grown, so too has the need for greater insight into who merchants are – and what risk providing services to them represents. 

This quickly monthly update details the main KYC steps for merchant onboarding:  

The massive growth in digital commerce and transactions over the last decade has meant new micro-merchants are constantly entering the digital marketplace. These new merchants are untethered from the limitations of brick-and-mortar retail and are accustomed to fast, efficient, and dynamic digital processes. 

So, Payment Service Providers (PSP) and Merchant Acquirers (MA) face a challenge: how to onboard merchants efficiently while having a clear picture of their risk profile and providing them with fast and effective transactional services. 

While PSPs provide the technology that facilitates a transaction, MAs are responsible for hosting a merchant’s finances. These roles – as a conduit and a host of merchant’s financial transactions, mean that MAs and PSPs need to have a precise understanding of the regulatory risk presented by their merchant customers. Manual form filling, case-by-case document verification, and risk assessment carried out by human compliance teams can drag out application times and pose a considerable cost burden on both customers and the service providers – in this case, MAs and PSPs.

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When onboarding a new merchant, PSPs, and MAs can use an automated KYC solution that will perform the following steps as part of the onboarding process:

Verifying the business – this initial step in a Corporate KYC process involves checking a business’ name against global corporate registry databases, ensuring that the company is real, licensed, have a verified address/place of business, and is active. 

Watchlist screening – The second step involves vetting the entity for known involvement in illicit financial activity – and assessing the risk that it might be. This involves checking the company and its registered principals and Ultimate Beneficial Owners (UBOs) against global sanctions and watchlists, including global lists of Politically Exposed Persons (PEPs) and adverse media.

Establish Risk Profile – Once these elements of a business’ identity have been established, the potential customer can be assigned a risk profile based on risk assessment procedures.

Building risk profiles is an essential element in any automated KYC onboarding process, as it allows companies to take a risk-based approach to compliance. By understanding a potential customer’s risk profile, companies can make informed decisions on how to process them.

Are you looking for a market-leading automated KYC tool for onboarding your corporate or individual clients? 

Get in touch, and we’ll be happy to discuss how KYC-Chain can be your partner in the process.