Quick Guide to Merchant Onboarding - definition, examples, guidelines

I had wanted to start my own business for the longest time.

A software startup, a small clothing business, and even a little coffee shop, I had my interests change constantly.

And as I started looking into it, I found out that starting your own business, especially if you are becoming a merchant, is way harder than just renting a place and filling it up with goods.

One particularly cumbersome requirement is the merchant onboarding process, and if you know anything about the world of payment processors and card networks, you'll get what I mean.

But, my point today is that it doesn't have to be so complicated.

Let's take a look at:

• What merchant onboarding is,
• Why merchant onboarding matters,
• How a typical merchant onboarding process takes place, and 
• How you can create a self-serve digital merchant onboarding process

Let's start right up with:

What Is Merchant Onboarding?

Merchant onboarding or the merchant boarding process is what merchants need to go through to acquire payment gateways and thus be able to take credit card payments and different payment methods like contactless payment for their services and goods. Though this process was traditionally a very tedious and long one, thanks to the initiatives of payment companies and other payment service providers to become digital, automated merchant onboarding is easier and more accessible than ever.

Still, it goes without saying that the process can become even more intuitive and that a better user experience for merchants is possible. 

Why is enhancing merchant onboarding important?

Merchant onboarding is more of an application and verification process than it is onboarding in the sense that the latter is often used to refer to familiarizing users with a system, platform, or process.

But still, this doesn't make merchant onboarding any less important.

In fact, here are three reasons why a merchant onboarding process can create a positive effect on the rest of your business processes:

1- Drastically accelerates business processes

It is common knowledge that, much like any other business process, merchant onboarding depended on manual processes and lots of paperwork up until not so long ago.

A merchant onboarding process carefully tailored can accelerate business processes for both merchants and for payment providers, given that it is not a high-risk merchant and/or the merchant application documentation are complete.

2- Enhances security for both merchants and payment providers 

Onboarding merchants can be tough both for payment service providers and for merchants, but in the end, it is rewarding.

And that is why it is a necessary and important process.

For instance, because merchants go through KYC and MLA processes to ensure security before granting a payment gateway, the payment facilitators know that doing business with the merchant is secure and beneficial, and because the merchant has a legally granted payment gateway, in the event of payment error or worse scenarios, the merchant is safe from most risks.

3- Creates a collection of merchant data 

After a verification team confirms a merchant is eligible to receive payment processing services, the collected data is stored in a database which helps create a business profile for the merchant and ease business processes in the long term, both with the payments partners and other merchant services experiences in the future.

But the most important question is:

How Is Merchant Onboarding Done?

Though being a newly digitalized process, merchant onboarding has pretty much well-structured steps most payment facilitators follow.

A typical merchant onboarding process goes like:

1- Merchant Application

Most merchant onboarding processes start with a merchant application that looks a little something like this:

As is the case with American Express' example, the application can be pretty smooth with just 2 steps.

Or as in Visa's case, it might give you a list of all the payment providers you can work with:

In any case, what matters is what comes after.

2- Identity Checks and Due Diligence

It is a standard procedure that merchants go through identity checks, KYC, MLA, and other due diligence processes to start working with payment service providers and get access to different checkout options.

This is, in fact, a common stage in the finance onboarding and banking onboarding processes.

This step often requires information on the company name, business address, and tax identification number. Still, the duration of the stages, as well as the requirements, might be subject to change since the industries are not necessarily the same.

3- Background Checks

Background checks is a stage in merchant onboarding that is often mixed up with identity checks; however, more often than not, these stages take place separately, often following identity checks and due diligence verifications.

This stage often looks into critical insights from the merchants' financial history, like credit score history, spikes in transactional activities, cross-border transactions, or any other unexpected actions, to ensure there is no risk of fraud after the rise of CNP (card-not-present) fraud.

4- Business model analysis

Business and operational model analysis looks into the compatibility of a merchant to the type of payment gateway they applied for and is often a stage visited for high-risk merchants.

Still, some payment providers might choose to conduct this stage to predict and monitor how sustainable a business will be in the long run.

5- Web content analysis

Though not all payment services facilitators go to the lengths of web content analysis, this is a valid stage in the merchant onboarding process that often looks into the online presence of the business and the network of the business owner.

6- Information Security Compliance Checks

Information security compliance checks is a stage where the initial processes are done, and merchants are provisionally accepted.

This stage only requires that whatever the payment method or the service received from the payment provider is, be it contactless payment, regular credit card payments, or online payments, the requirements of the provider stated are followed. 

7- Credit Risk Underwriting

Lastly, credit risk underwriting is the stage where the payment services providers ensure that there are no credit risks and the merchant is, in fact, eligible for the services offered.

After this stage, an average merchant can start making sales via payment gateways.

Now, all these stages, as I said above, are pretty well-established, and for many organizations, they have proved to be efficient.

But hear me out: what if we made it even more efficient?

How to create self-serve digital merchant onboarding processes

Merchant onboarding might come off as efficient, and the stages might not sound too complex, but it is only so compared to how merchant onboarding used to be in the past.

It is now a new era of digitalization, and I know the best way to make your merchant onboarding more merchant friendly, self-serve, and automated when needed.

With UserGuiding!

UserGuiding is a no-code user onboarding tool that was designed to help ease the burdens and pain points of onboarding for all types of products and all industries.

And in 3 simple steps, you can start creating onboarding elements for your merchant-facing platform as well.

Let's take a look:

1- Create onboarding element

You can start creating your digital onboarding by going to UserGuiding Panel.

Let's try creating a guide, we'll name the guide, enter the URL of the site we want to create an onboarding process on, and choose our theme:

Once we click on confirm, it will take us to the website where we can...

2- Edit & Customize

Using the UserGuiding extension, we can create a guide using modals, tooltips and input field tooltips:

We can also make changes to the design, location, and other advanced settings of each element.

Once we are doing with our guide's design, it is time to:

3- Configure settings

Going back to the panel, we can make changes to the settings of the guide or any other onboarding element we've created.

Page targeting, audience segmentation, triggers, scheduling, and page targeting are among some settings:

Once done, all there is left to do is save and publish changes.

Here's a look at the end product:

The best part is, that is just one type of onboarding you can design with UserGuiding.

You can create:

✅ Interactive product tours, walkthroughs, and guides,

✅ User onboarding checklists,

✅ Hotspots, tooltips, in-app messages,

✅ Resource centers,

✅ NPS surveys, and more...

...with powerful analytics, user segmentation and targeting, and high customization options.

👉 Try UserGuiding for FREE 👈

To Wrap Up... 

Merchant onboarding is, as I've mentioned again and again, is a process that is pretty established but also still complex.

It is in your hands to make the process more intuitive, digital, and automated, given that you have the right tools in your arsenal.

Best of luck!