Imagine this -- you do the tough job of building a software company to solve a specific problem for your industry. Your solution is so good, that in a matter of a few years you are the industry leader of your vertical, thousands of businesses rely on your solution to manage their industry-specific workflows. There’s just one problem; they need payments to do more and serve their end customers.
You desperately want (and need) to help your customers who rely on your platform, but you aren’t exactly a financial services wiz and are unsure of how much money and time it would cost to develop a custom payments component in-house for your software. So you hire a third party. The third party is very happy to help you process payments for your merchants. But there’s just one fine print thing; they technically own the merchant agreement with your customers; the same merchants you’ve worked hard to earn the trust of over the last few years.
The merchant agreement is a critical piece of the payments processing puzzle. It outlines how the merchant and bank will handle payment processing. In other words, the third party wants to own the rights to limit or expand rules and regulations for how your customers get paid.
In a worst-case scenario, the third party you hired (and pay a lot of money to, remember you’re the industry leader) implements a rule that adversely impacts how your customers get paid. Your customers, of course, don’t know that you use a third party to provide payments to them, so mistake the new implementation as a failure of your product and quietly start investigating other solutions, perhaps with a competitor. Best case scenario, you pay the third party a lot of money to process your payments. But the more money you make, the more money you spend. To keep your customers happy, you become dependent on your third party payments provider to serve your merchants.
Managing Merchant Onboarding
Giving new merchants access to your payment gateway to process their payments is commonly referred to as merchant onboarding. For obvious reasons, the federal government requires software companies who greenlight businesses to process payments to conduct due diligence on merchants they bring on to their platforms.
An often reported pain point related to independently building and managing payments in-house is related to federal requirements regarding the process of merchant onboarding. Put simply; people don’t want to take on risk. But the process of onboarding new merchants is relatively straightforward. To remain compliant, organizations must handle the underwriting and KYC for each merchant they wish to bring onto their software platform. To complete these requirements for each merchant, organizations must complete:
- Identity verification/KYC
- Merchant history check
- Business and operational model analysis
- Web content analysis
- Information security compliance
- Credit risk underwriting
For organizations considering making the transition to embedded payments, it may seem a daunting task to create the internal systems needed to ensure compliance adherence regarding merchants.
Merchant Onboarding with Finix
While we primarily help businesses build custom, embedded payments infrastructure in a fraction of the time, in addition to payments solutions, we offer guidance every step of the way for customers in need of support onboarding merchants.
Through Finix Professional Services (FPS), we offer underwriting policy assistance for organizations in need of guidance. Support regarding everything from the credentials you should collect for your underwriting process to best practices for setting up internal resources for ongoing maintenance are available with our full suite solution. Via the Finix API, clients who are more confident with the process can integrate directly to our API for onboarding, or they can use our dashboard for merchant onboarding, which allows for provisioning access to sub-merchants, adding merchants with multiple beneficial owners, and instructions for underwriting.
Historically, much of the work associated with onboarding merchants required organizations to gather information on a paper form, transcribe that documentation into a digital system, email to a processor partner, and then wait for a response, which could take weeks or months in some cases. Merchant underwriting of the past that used to take several days is now available with Finix in a matter of minutes.
Onboarding more merchants to your vertical software platform is a primary way to increase transactional processing volume rapidly. Beyond adding to top-line growth, bringing payments in-house allows software companies to do more to serve the needs of merchants and enhance commerce experiences. Embedded payments allow for complete control of the merchant experience, faster settlements and reconciliation, and most importantly the ability to iterate and innovate quickly where it matters most for merchants, access to their funds.
Ultimately, it’s up to software companies to decide to take control of their payments and merchant experience by bringing their payments in-house. Finix offers the easiest and most cost-effective solution to managing merchant onboarding and building out a seamless payments experience. To learn more about how you can embed payments into your vertical software platform and get the support you need to successfully onboard merchants, get in touch with our sales team.