As technology continues to reshape the way we conduct digital transactions, software businesses are increasingly embedding payment functionalities into their platforms to expand their capabilities, enable frictionless experiences and create new revenue streams. However, amidst the excitement of embracing and owning the embedded payments experience, one crucial step often stands out as a challenge as software platforms get started on their payments journies – merchant onboarding.
This blog will delve into key topics and cover everything you need to know about merchant onboarding from what it entails and why it matters, to the common challenges and risks associated, and how partnering with the right embedded payments provider can ensure frictionless experiences.
Merchant onboarding is the process through which businesses are brought into the payment acceptance ecosystem of a software platform. It involves the collection of customer details, verification of their business identity, and integration of capabilities to enable them to start processing payments and collecting invoices seamlessly.
Merchant onboarding is a critical step and although it may seem difficult, it doesn’t have to be.
Frictionless onboarding refers to a streamlined and efficient process where customers can complete applications without any hiccups. enables users to complete the onboarding process efficiently, ensuring a smooth and hassle-free experience. Additionally, it provides clear visibility to customers about the status of their application and any additional requirements needed to progress further, allowing for a transparent and informed onboarding journey.
A lot of initial conversations for software platforms focus on the ability to process payment transactions, but onboarding is the start of the payments journey for every platform and should not be overlooked. A seamless onboarding experience greatly improves user experience for software platforms and their customers. With features like automated onboarding, hosted boarding links and embedded components, software platforms gain more visibility and control over the customer experience, while reducing any friction on the customer’s end. These features also allow platforms to white-label and brand their experiences.
A well-executed onboarding process also lays the foundation for a long-term, productive customer relationship. It demonstrates the platform’s commitment to delivering a user-friendly and reliable service, increasing customer loyalty.
Once customer information is collected, they must be verified. Thorough underwriting helps platforms validate the legitimacy of merchants, mitigating the risk of fraud or non-compliance. Additionally, by analyzing the financial history of the business and creditworthiness of its owners software platforms can determine appropriate payment processing terms and risk controls. This ensures a smooth and reliable payment experience for both the platform and its merchants.
Another key aspect is scalability. As software platforms continue to grow and acquire new customers, having smooth and streamlined onboarding automation is essential. This can eliminate the hassle of sending and receiving paper documents and emails by replacing them with more automated and secure features like e-sign and embedded document uploads.
By simplifying the onboarding process, platforms can effortlessly expand their customer base and handle a higher volume of transactions. This not only saves time and effort but also maximizes revenue generation potential.
Software platforms often encounter challenges during merchant onboarding. One challenge is the ease of entering and collecting information from merchants. Utilizing tools like boarding links and embeddable forms like our creator widgets can simplify this process, ensuring a smooth and efficient data collection experience.
Another challenge is managing the status of merchant applications. Platforms need robust systems in place to track and communicate the progress of the application to both the platform and the merchant. Software companies should be able to get play-by-play updates about their users with capabilities like our onboarding webhooks and portfolio management dashboards.This helps maintain transparency and enables timely updates on the status of the onboarding process.
Tailoring the underwriting policy to the specific industry is also a common challenge. Platforms must consider factors like client size, industry-specific risks, and other relevant demographics while formulating their underwriting policy. Working with an orchestration platform like Payabli, can provide software companies with access to hundreds of risk vendors to accommodate any risk profile or factors. This customizability ensures that the onboarding process aligns with the specific needs and expectations of different merchants.
Throughout the process of onboarding merchants, software platforms must be prepared to handle potential underwriting flags. These flags may include TIN mismatches and can occur in large numbers for specific industries. In addition, delayed deliveries may also lead to a need for further diligence. It is important for software platforms to ensure that merchants accurately fill out the onboarding application and are aware that additional documentation, such as previous merchant records, bank statements, and financial statements, may be requested if there are high transaction volumes.
Merchant onboarding comes with inherent risks that software platforms need to address. One such risk is fraud, which includes the use of fake identities or stolen data by bad actors. This can lead to financial losses and reputational damage.
Compliance is another critical aspect to consider, as platforms must adhere to regulations such as the Unfair, Deceptive, or Abusive Acts and Practices (UDAAP) and Financial Crimes Enforcement Network (FinCEN) guidelines. Failure to comply with these regulations or other rules can result in penalties and legal consequences.
Misconfigurations pose a risk as well, with errors in pricing, missing equipment, or other setup issues potentially causing financial discrepancies and customer dissatisfaction. It is crucial for platforms to implement robust processes and systems for merchant onboarding to mitigate these risks effectively.
It’s important for software platforms to partner with an embedded finance provider who can help the platform onboard customers with ease and handle the heavy-lifting. The right partner can not only provide frictionless, digital onboarding experiences with some of the key features mentioned above, but also can help software platforms avoid any risk associated with payments compliance and regulatory laws.
Payabli’s Payment Infrastructure & Monetization Platform enables software businesses to build, customize, and manage a frictionless, automated merchant onboarding experience under one umbrella so they can start accepting and monetizing their payments quickly and securely. We can tailor to your business’s onboarding needs and provide flexible options including the ability to onboard your merchants via:
Learn more by watching the video below.
Product Leader in Embedded Finance | Experienced Team Builder | Scaled Platform Creator