How to onboard small merchants faster and with high confidence

The number of small businesses has increased massively during the pandemic. There are currently 30 million in the US and 25.1 million in Europe. This growth comes with an increasing demand for quick and effective onboarding of these merchants by PSPs. Ekata has launched a solution to help PSPs, B2B lenders and marketplaces onboard the growing number of small merchants across the globe faster and with more confidence.

How is the onboarding process different for small merchants and sole proprietors? Are there any key variables to consider per region or industry?

The process needs to be a little different for small merchants and sole proprietors of today because they usually don’t have traditional data signals organisations use to assess if a business is valid. If you think about the traditional small business of yesterday, that might be a small corner store in the neighbourhood, selling groceries. It has a physical address, it belongs to several community associations, and it was most likely set up with the owner’s savings. The sole proprietors and micro-merchants of today are more in line with an Etsy vendor: they sometimes don’t have a physical location, perhaps a PO Box at best, and their first stop might be a small business loan from a bank. 

As for regional variables, we have the following case. For merchant sign-ups in the EU, a customer of ours experiences 22% of merchants fail passive KYC checks for name-to-address and are sent document requests. Of the 22% who receive a document request, only 20% will complete the document request and move forward in the onboarding process. This has huge implications for the onboarding flow and more importantly, for the speed with which a merchant passes through that flow. 

What challenges do PSPs and lenders currently face when it comes to onboarding small merchants?

Many PSPs and lenders have probably used manual reviewers to assess business risk in the past. As mentioned, we’re seeing a high volume of micro-merchants and sole proprietors entering the marketplace, and there’s high competition to do business with them from other lenders and PSPs. For this reason, organisations should think about automating as much of the process as possible on one hand, and optimising the efficiency of their agents on the other. These micro-merchants and sole proprietors expect to be onboarded quickly. Businesses that are unable to do so risk losing out to their competition.

What tools and technologies are needed to ensure a fast and efficient onboarding experience that can facilitate access to a wider merchant ecosystem?

Customers in the PSP and lending space excelling at processing high volumes of micro-merchants usually have a strong, automated business logic behind – one that assesses initial risk of a merchant, onboards them, and then continues to monitor their transactions until they hit a milestone in revenue. A subsequent risk check is initiated when a merchant reaches that milestone or whenever a transaction of theirs is deemed suspicious. There is “spot checking” of the automated process and a very streamlined system for manually investigating merchants and reaching a quick decision. 

Ekata has recently launched a solution for merchant onboarding. Could you please provide details on how it works and how it stands out from other similar solutions in the market?

We recently launched a holistic solution for addressing merchant onboarding: the Merchant Onboarding API and our Pro Insight Merchant Review web app. There are two key differentiators we have against other similar solutions. We show the linkages between the individual filling in the application and the business entity (from a mix of authoritative and probabilistic indicators) and we enable businesses to build entirely different workflows for low vs. high-risk customers. 

As we built our solution, we spent a lot of time observing the best manual reviewers across dozens of companies: they always had over 20 web browsers open in an effort to triangulate the information available on the individual from social media, Google Maps, etc. with the business data they provided. Not only is this process cumbersome, but a social media footprint is relatively easy to fake - our signals are tested against real data from customers and shown to be associated with potential fraud. 

Fraudsters also take advantage of the micro-merchant economy rise and hide illicit activities (e.g. money laundering, stealing data) behind a reliable looking business. What best practices have you seen the market adopt in an effort to mitigate fraud and risk in this space? 

Much of our compliance regulations of KYC (Know Your Customer) and AML (Anti-Money Laundering) come from efforts to stem the fraud rampant in the B2B space. However, if an organisation only ticks compliance regulations, they won’t necessarily win as a business - not when your competitors have a faster process and perhaps are more willing to take on some extra risk. Companies need to balance anti-fraud activities with staying competitive in the market.

Interested in learning more about Merchant Onboarding? Click here to register to attend a webinar on May 19th with The Paypers!

You can also learn more about Ekata’s merchant onboarding API here. 

About Spencer McLain

Spencer is Ekata’s Vice President & General Manager of the EMEA region. He leads Ekata’s international expansion efforts into Europe, The Middle East, and Africa. Spencer works closely with many acquirers, card schemes, and merchants. Through these relationships, he develops unique insights into market trends that he enjoys sharing with other industry professionals.
 

About Ekata

Ekata provides global identity verification via APIs and a SaaS solution. Our product suite is powered by the Ekata Identity Engine that uses complex machine learning to derive unique data links from our customer network and graph to provide the standard in global identity verification to companies like Alipay, Stripe, and Microsoft.