Operating as a payment facilitator (PayFac) can be deeply complex. The sheer number of variables you need to monitor makes it all too easy to make common mistakes. Whether you are in the process of registering as a PayFac or you are already facilitating payments, there are a few mistakes you must avoid. Here are the top five mistakes businesses make during payment facilitation and how you can avoid them while underwriting and onboarding merchants.
Offering Slow Underwriting Processes
In today’s world, technology exists to help you underwrite merchants automatically, quickly, and efficiently. Merchants expect fast turnaround times for their applications. If you don’t provide this convenience, you can trust that someone else already does and is working to steal your audience.
Take advantage of automated underwriting technology to keep your application process short. If a merchant has to wait for more than a few days, they’re likely to lose interest in your service.
So many PayFacs are available that it’s not uncommon for merchants to apply to multiple ones simultaneously. In that situation, the facilitator with the quickest underwriting process is most likely to win the merchant’s business. If your competitors provide your potential clients with faster underwriting, you’ll likely lose those prospects.
- Lacking Onboarding
Underwriting is just one part of the process. Your company needs to do more than judge whether a merchant is a good fit. You also need to onboard them onto your own platform and the payment processor platforms you work with. More importantly, you need to automate the onboarding process to make it as easy as possible.
Some small merchants are comfortable enough with technology to figure out your system on their own. However, these clients are in the minority. Most of your new clientele will need to be taught how to use the system.
Automating this process is essential. Failing to automate onboarding causes delays, reliance on manual work, error-prone procedures, and merchant dissatisfaction. Instead, work with a payment solution that offers automated onboarding systems that you can customize as needed.
- Being Network Noncompliant
Becoming a Payment facilitator requires many compliance checks throughout the process. A full PayFac needs to follow the know your customer (KYC), anti-money laundering (AML), and card network regulations to be considered compliant. Noncompliant PayFacs can lose the right to facilitate payments — and that’s devastating for the PayFac and its merchants.
A good onboarding and underwriting platform makes it easier and simpler for you to comply with tedious regulations. Some compliance checks are presented as guidelines, not as hard-and-fast rules. As a result, it’s not always clear which checks are genuinely mandatory. It can also vary depending on your business. Before you begin processing payments, it’s vital that you fully understand which compliance checks are actually required and which aren’t.
- Missing Risk Management
Any time assuming risk on behalf of merchants is in play, risk management is essential. It is not enough to implement a generic risk management strategy. You also need to work with experts who have the knowledge and experience to keep your strategy up to date.
A lack of risk management can be catastrophic. PayFacs that aren’t prepared to monitor their portfolio 24/7 can face serious financial and legal consequences. That is why you need to prioritize working with the right people and the right platform. An efficient monitoring package allows payment platforms to remain on top of all assumed risks and makes their platforms safer for all users.
The best person to handle your PayFac’s risk management is someone with prior experience in the field. Payment facilitation is different from other forms of finance, and it requires unique safeguards. If you can find experts who have worked in your specific vertical or industry before, even better.
- Attracting the Wrong Merchants
Payment facilitation, by nature, involves at least two parties. The merchants you work with are just as important to your success as your own operations are. Attracting the wrong kind of merchants means you might be working with low-quality clients, turning down lots of applications, or fighting off scammers who want to exploit your underwriting weak spots.
Several factors can cause you to attract the wrong type of clientele. Aggressive recruitment, misleading marketing information, and weak brand recognition can scare off legitimate merchants and leave you with a poor audience.
On the other hand, good marketing can do the opposite. Marketing your PayFac as a trustworthy, reliable, recognizable company helps attract the kind of merchants that your risk manager is more likely to approve. These merchants are more likely to be legitimate, which presents less of a risk to your PayFac business.
Make Underwriting and Onboarding Merchants Easy By Avoiding Mistakes
Payment facilitation is a great way to enhance your business. However, you need to do it correctly or it can cause you more problems than it solves. By avoiding these five common mistakes, you can ensure that your business is successful for years to come.