Banking Article, Banking Finance 2021, Banking Finance May 2021


Onboarding a merchant in less time with proper due diligence has always been the prime objective for every acquirer in the market. The conventional process of onboarding merchants is complicated. It is time-intensive and could require a lot of back and forth with pages and pages of paperwork.


From a merchant perspective, the process is often seen as cumbersome, time-consuming, and a less than desirable experience. From the perspective of the acquirer, it is costly, labour intensive and not efficient. Digitizing the process is an ideal solution. It provides speed, flexibility, and scalability.



The traditional process of merchant onboarding 

The traditional process of merchant onboarding can take 6-8 days. The process is time-consuming and tedious. Here is a basic rundown of the current process of onboarding:

  1. An RM (Relationship Manager) visits the merchant
  2. Physical application forms are manually filled in by the merchant
  3. Original documents are submitted to the bank
  4. The documents are sent for screening and verification by the bank. In case something is missing or details incorrect, the merchant is again contacted and asked to provide further information.
  5. Final approval is granted by the Merchant Acquiring Business (MAB)
  6. Merchant identification number (MID) is either approved or rejected

(MID is a unique number assigned to a merchant account to identify it throughout the course of processing activities)

Now, this process can have two models depending on the level of input from the RM – Assisted model and Self model.



Fallacies with the traditonal process

The traditional merchant onboarding process is fragmented. It is not seamless and convenient. Each step can take time and face roadblocks. When that happens, there is more delay until correct details are retrieved, documents backed, or clarifications provided. Drawbacks of the manual process are:


  1. Higher turn-around-time: It takes time for each step to be carried out. The entire process for one merchant can take anywhere from 6-14 days.
  2. Manual form-filling: With merchants filling in the forms manually, there are greater chances of error. This will cause further delays later on in the process. The forms themselves are tedious to fill and are often abandoned.
  3. No fraud detection: The traditional method does not provide the security of advanced fraud detection using the latest technology. There are greater chances of fraudulent and higher risk merchants to make it through.
  4. Broken journey: The linear process is broken into separate steps. Each step takes its own time and has its own problems. The onboarding journey is far from seamless and takes extra effort by both the merchant and bank.


How does digitizing merchant onboarding solve these problems?

Adopting a comprehensive Merchant Onboarding Solution can eradicate these pain points. It is the need of the hour especially given our socially distant times. With the COVID-19 crises, face-to-face interaction has to be avoided. Digitization is the solution. With the help of a digital process, the onboarding ordeal becomes a streamlined journey. Here is why:


End-to-end digital journey: It is not just one step which is digitized, but the entire process end-to-end. This ensures swift communication and rapid decisions. The workflow will be explained in the next section.


Reduce several levels of manual verification: Apart from basic compliance norms, an acquirer can require different levels of verification. In a digital process, these can be carried out simultaneously with the help of various APIs. The verification journey in this case is customizable. For example, some acquirers may want to check whether any authorized signatories of the onboarding entity has any court cases against them. Or, they may want to carry out a website check.


Help to identify fraudulent cases: The digital process can incorporate multiple layers of security checks and verification. The use of AI in these checks helps increase the chances of identifying fraudulent cases with no chances of human error or oversight.


Reduce overall TAT (turnaround time): Everything from form filling, to document verification, background checks and decision making is aided by digital alternatives. With this, the average time to process an application is significantly reduced.


Expedite decision making: An underwriting tool incorporated in the onboarding solution can help deliver risk assessment and KYC reports which helps officials make decisions at the back end. This speeds up the decision-making process.



Workflow of the digitized process

An effective Merchant Onboarding Solution should consist of four modules. Each tries to address a specific pain area of the client.


Front-end app: This is the sole point of interaction of the merchant for the entire onboarding experience. It can be in the form of a mobile or web-based application. An AI-based OCR (Optical Character Recognition) performs extraction at the front-end. It is optimal to reduce time and error. With this technology, it is now possible to extract customer details from their IDs. The field filling process is also automated. This reduces the mistakes which were made by individuals filling the application. The cumbersome need for manual form filling is eradicated.


Middle verification engine: It automatically verifies the authenticity of the documents provided by the merchant. This is heavy-duty time-consuming work when done manually. It can extract data from IDs and perform face-match and video forensics. The report can then be reviewed by the Back Ops.


RM management system: An RM can monitor the active applications at the Back Ops. They can reassign the onboarding process in case something is wrong or missing. This system helps them track incomplete and complete onboardings.


Robotic back ops: Action can be taken on the applications received at the Back Ops. The generated reports after verification and underwriting can be reviewed here. A back-operations workplace generally has a set hierarchy.

  • Backops User: A backops user goes through all the applications and documents provided and decides whether to accept, reject, or ask for clarification.
  • Backops Manager: A backops manager manages all the backops users under them.
  • IT admin: Ensures the smooth functioning of the process and can edit the settings.



Benefits of digital merchant onboarding

An ideal digital merchant onboarding solution is a complete end-to-end automated application and underwriting tool. Using Digital KYC, helps acquirers onboard merchants in a more automated and digitized way. The process removes all bottlenecks from the onboarding process and offers a customizable solution to automate the application and underwriting process from end-to-end. Leveraging artificial intelligence, optical character recognition and other best-of-breed technologies, Digital Merchant Onboarding solution brings the speed and security needed to scale successfully into the MSME segment.


Adopting this technology helps in reducing TAT by about 70% and has also proven to reduce digital fraud by 90%. Digital merchant onboarding solutions are fully customizable and so can be adopted to suit various workflows and requirements providing 3x increase in business efficiency.

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