Onboarding new verticals can be a complex and challenging process for acquirers. These verticals, particularly those deemed high-risk, bring unique challenges that require careful consideration and strategic planning. Ensuring a smooth onboarding process while maintaining compliance and mitigating risk is essential. Here are some key considerations for acquirers when onboarding new verticals.
Understanding the Vertical’s Risk Profile
Every new vertical comes with its own set of risks. These risks can include higher chargeback rates, increased fraud potential, and regulatory scrutiny. Acquirers must thoroughly understand the specific risks associated with each vertical they plan to onboard. This involves conducting comprehensive research and analysis to identify potential red flags and areas of concern.
High-risk verticals, such as online gaming, adult entertainment, and nutraceuticals, often require additional scrutiny due to their increased likelihood of encountering fraudulent activities and higher chargeback rates. Acquirers must assess whether they have the necessary resources and expertise to manage these risks effectively.
Compliance with Regulatory Requirements
Regulatory compliance is a critical factor when onboarding new verticals. Different industries are subject to various regulations and standards, which must be adhered to in order to avoid legal repercussions and fines. Acquirers need to ensure that they fully understand the regulatory landscape of the new vertical and implement processes to maintain compliance.
This includes verifying that the merchants in the new vertical adhere to Know Your Customer (KYC) requirements, anti-money laundering (AML) laws, and data protection regulations. Acquirers should have a robust compliance framework in place to monitor and enforce these regulations effectively. National and supranational risk assessments should be taken into consideration.
Enhancing Underwriting Processes
Effective underwriting is essential for managing risk and ensuring the long-term success of onboarding new verticals. Acquirers need to enhance their underwriting processes to accommodate the specific requirements of each new vertical. This involves developing tailored underwriting criteria and procedures that align with the unique characteristics and risks of the vertical.
Comprehensive due diligence is crucial during the underwriting process. Acquirers should thoroughly assess the financial health, business model, and operational practices of potential merchants in the new vertical. This helps in identifying any potential issues early on and making informed decisions about whether to onboard a particular merchant.
Supporting Vertical-Specific Requirements
Each vertical may have unique requirements that need to be supported by the acquirer’s product. This can include specific transaction types, tokens, indicators, and other features that are critical for the vertical. For instance, subscription-based businesses may require support for recurring billing, while industries dealing with sensitive information might need enhanced data security measures.
Acquirers must ensure that their systems and processes are adaptable to these vertical-specific needs. This may involve updating their payment processing infrastructure, integrating new technologies, or collaborating with third-party service providers to meet the specialized requirements of the vertical.
Adhering to Card Scheme Requirements
Card schemes often have specific requirements and regulations for different verticals. These can include registration requirements, collateral demands, and other compliance measures that must be met to process transactions within the vertical. Understanding and adhering to these card scheme requirements is crucial for successful onboarding.
Acquirers should stay informed about the latest card scheme rules and ensure that their processes and documentation comply with these requirements. This may involve regular training for their teams, updating internal policies, and maintaining open communication with card schemes to stay ahead of regulatory changes.
Securing Payment Partners
Having reliable payment partners who are willing to support and pay merchants in the new vertical is essential. This is particularly important for high-risk verticals where payment processing can be more challenging. Acquirers need to build strong relationships with payment partners who understand the specific needs and risks of the vertical.
Collaborating with payment partners who have experience in the new vertical can provide valuable insights and support. These partners can help acquirers navigate the complexities of payment processing, manage risk more effectively, and ensure that merchants receive timely and reliable payments.
Leveraging Technology and Data Analytics
Technology and data analytics play a significant role in the successful onboarding of new verticals. Advanced technologies, such as artificial intelligence (AI) and machine learning (ML), can help acquirers automate and streamline the onboarding process, making it more efficient and accurate.
Data analytics can provide valuable insights into the performance and risk profile of merchants in the new vertical. By leveraging data, acquirers can identify patterns and trends that can inform their decision-making process. This helps in predicting potential risks and taking proactive measures to mitigate them.
Providing Ongoing Support and Monitoring
Onboarding new verticals is not a one-time task; it requires ongoing support and monitoring to ensure continued success. Acquirers need to establish robust monitoring systems to track the performance of merchants in the new vertical and identify any emerging risks or issues.
Regular communication with merchants is also essential to address any concerns and provide support when needed. This helps in building strong relationships with merchants and ensures that they adhere to compliance requirements and best practices.
Conclusion
Onboarding new verticals presents acquirers with both opportunities and challenges. By understanding the risk profile of the vertical, ensuring regulatory compliance, enhancing underwriting processes, supporting vertical-specific requirements, adhering to card scheme regulations, securing reliable payment partners, leveraging technology and data analytics, and providing ongoing support, acquirers can successfully navigate these challenges and maximize the potential of new verticals.
At Boardimize, we specialize in assisting acquirers with the complexities of onboarding new verticals. Our expertise in risk management, compliance, and underwriting ensures that your onboarding process is smooth and efficient. Contact us today to learn more about how we can support your business in expanding into new verticals with confidence.