The term “underwriting” is typically used in references to banks or insurance companies or any institution looking to mitigate their risk exposure. Due to the above mention, you should expect that in the process of getting a processing merchant account the bank will follow the Five C’s of Credit: Character / Capacity / Capital / Collateral / Conditions, but adapted to credit card processing environment.
Having a merchant application process is extremely important, and we should always focus our attention on the details, collecting the right information, keeping the big picture of the process in mind. When I am doing the underwriting for a merchant account I am looking at least at the following:
- Documents received from the merchant and connections between the documents and the URL or DBA.
- URL requirements
- Owner details
- Business model: industry, history, products and/or services
1.Documents received from the merchant must be up to date, complete, and all the important information as address, phone numbers, owners name, driver license must be the same on all documents and URL. It is especially important to have a clear scan copy of your corporate documents and have them ready when needed; you can have them saved on a drive location to have easy access. In most cases you will be asked for the following documents:
- Articles of Incorporation
- Most Recent 3 Months Business Bank Statements
- Owner’s Driver’s License
- Owner’s Utility bill
- EIN Filing (IRS Form SS-4)
- Pre-printed Voided Check
- Customer Support Agreement
- Fulfillment Agreement
- Ingredient List. If the product is an ingestible product, a full ingredient list with amounts for each ingredient must be provided.
2.URL requirements- we recommend the following:
- DBA and Legal Name listed on every page.
- Products/services sold clearly described.
- No unrealistic, false, or misleading claims, no use of conveying a false sense of urgency to the customer (ex: countdown timer). No hidden or forced up-sells. No cross-sells from other vendors. The use of “risk-free”, “free”, or “no cost” is prohibited.
- Delivery methods listed on checkout page (i.e. USPS, FedEx). Shipping times should be clearly stated.
- Products/services listed throughout the website should be in the correct currency.
- Terms & Conditions are clearly stated and easy-to-read in 12-point font. Refund/Return Policy present and makes sense. Privacy Policy present and makes sense. Hyperlinks to Terms & Conditions, and Privacy Policy and Cancellation Policy should be present on the website.
- Customer service phone number should be consistent throughout website and match the number listed on the application. One or more methods of contact information should be clearly posted (business mailing address, email address, online chat, etc). The preferred method of communication for cardholder correspondence should be listed clearly on the checkout page.
- Order checkout page is secure and lists full business address including country. i.e. USA.
- URL/Domain registration are registered to the merchant and made public for validation. If you are using WHOISGuard or another domain privacy service, the service should be turned off during the underwriting process, so the underwriter can validate the domain’s ownership.
- Any trial or recurring billing must be disclosed clearly, with, a checkbox for the customer to agree to the terms.
- The merchant descriptor must be located on the checkout page.
3.Owner details will always have an important role in the underwriting process. Your Credit Score can impact your chances of approval. Generally, a credit score of 650 or higher is suggested. You may be asked to submit financial statements (business and personal) in addition to your credit score.
4.Business model
Industry – High risk business, is directly proportional with the profit, so high risk may offer high profit, but the risk will follow. Examples of high risk business are: CBD, adult, dating, credit repair and monitoring, nutraceuticals, online gaming, skin and hair care, vape, web-design, SEO. We understand how to position the business and prepare an application package the right way – so you get more processing capacity and better terms with the best banks.
History – Your payment processing history can really make a big difference in merchant account underwriting. Having good processing history will have a direct and positive impact on your rates and approved volume. Your chargeback history is very important. If you haven’t checked it out already, you may want to read our article on How to Fight Chargebacks.
Transaction Volume – Transaction volume is one of the most important factors when it comes to merchant account underwriting. It is not uncommon for brand new businesses to have a smaller volume processing capacity, until their business model is proven successful. That cap will be increased when you have proven business stability by showing consistent sales volume, low chargebacks (under 1%) and low returns (below 10%).
Straight sale vs Continuous sales – One time purchase of a good or service with no other monetary obligations from the client vs continuity billing or rebills that appear when goods or services are bought by the consumer who understand that they will continue to pay the merchant on a recurring billing.
Adding recurring payments (like a monthly subscription) adds risk to your account. If you do have a subscription payment setup, it is important to be transparent with the consumer (and the underwriter) in order to be approved. Your terms and conditions should be clearly displayed on your checkout page. Your subscription terms should include the product/service description, shipping times, initial charge, trial period, and the amount and frequency of the recurring charge.
Feel free to contact us if you need help finding the right team to help you represent and manage your Underwriting Process.