Learn about payments and the payment facilitator model from our team of experts

What Is Frictionless Underwriting?

When a merchant begins selling their products or services, one of the first steps in the process is to obtain a merchant ID (MID) so that they can accept credit card transactions.  Traditionally, this means a merchant applies for an account with an acquiring bank or other bank sponsored entity (known as the acquirer). For this to occur, the acquirer must conduct a series of information collection and due diligence checks known as underwriting in which they appraise your business. Due to many acquirers having a manual underwriting process, this can mean delays and unnecessary paperwork for a new merchant to begin accepting electronic payments, slowing down their speed to revenue.

Payment facilitators have strategically reinvented this outdated model of manual review. They recognize that time is truly of the essence, and that not all merchants, especially new and small businesses, can afford to wait days or weeks before accepting electronic payments. Therefore, one of their many tools in their arsenal is the process of Frictionless Underwriting.


Reduce Onboarding Delays For Your Merchants

Simply put, frictionless underwriting is a way for a payment facilitator to underwrite a merchant in a matter of seconds, using a series of automated checks and data collection. The information from the merchant’s application is sent through a series of underwriting services to automatically conduct the necessary screenings. If there are no errors or additional information needed, the merchant is automatically approved and onboarded. At this point a notification is typically sent to the merchant informing them of their ability to begin processing payments from customers immediately.

Previous to the age of payment facilitators, a merchant had to go through an acquiring bank or other acquirer to be approved to accept credit card transactions. The traditional model of underwriting that these acquirers used (and still use in many cases), however, predates many technological advances and lacks efficiency and streamlined organization that payment facilitators have brought to bear. It could take days, or even up to a week, before the acquirer was able to onboard a merchant and allow them to begin processing payments due to the manual process.


Give Your Merchants An Experience Tailored To Their Vertical

One of the main issues within the traditional model is that the acquirers paid little attention to the specific size or vertical of a merchant. A small Mom-and-Pop store was often put through the same application and underwriting process as big businesses that may do millions in revenue a month. The process wasn’t tailored to your needs as a merchant, but was rather crudely designed by and for acquirers to have a uniform application process.

Payment Facilitators took notice of the serious need for an updated system. Frictionless underwriting creates a completely automated, online process, that allows a merchant to get up and running fast by combining technological knowhow with a risk-based approach acceptable to regulators and other parties who oversee the payments ecosystem.

For vertically focused payment facilitators, their application can be curated to the specific vertical in which they are conducting business, helping to further streamline the underwriting process. As an example, since restaurant owners have very different business and revenue models to health care providers, payment facilitators are able to cater the application to collect the information that is important and relevant for their merchants’ specific line of business.  Again, applying an appropriate underwriting process for the type and size of business being considered, rather than the traditional “ant with a sledgehammer” approach many of us are used to.


A Process Expedited by Software but Safeguarded by Human Watch

Frictionless and risk based underwriting approaches don’t completely do away with the human element, however. The process acknowledges that an applicant may not have everything they need to begin processing payments or certain automated processes may flag a piece of information for further review. Once and if an applicant is flagged, they may be assigned to a human agent that is there to help appraise what further proof of legitimacy they may need or if the flag is, perhaps, erroneous. It is a process that is expedited by software but safeguarded by human watch.

Frictionless underwriting is another large step forward in an age of technological advances that seeks to accomplish the old entrepreneurial adage of saving time and money. It is a tool that payment facilitators use to understand their client more closely, and a process that minimizes red tape and frustrations on behalf of the merchants. Infinicept is here to provide the infrastructure that includes frictionless underwriting as one of its many tools in creating better, faster business, speeding payment facilitators to revenue.

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