Merchant Onboarding Process for Startups

Written by

James Davis

Written by James Davis

Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by

Kathrine Pensatori

Reviewed by Kathrine Pensatori

Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

Merchant services companies, located in the US often reject merchant account applications, coming from small-size startup merchants, coming from other countries. MSPs are reluctant to deal with them because of several reasons.

Startup Merchant

First, if a company is processing transaction volumes, which look insignificant to a US MSP, the MSP will not take the risk of underwriting such a company, because the MSP’s payment for that risk is too low. For instance, if a startup merchant processes $7000 worth of transaction monthly, the MSP gets only $70 to $100 in revenues.

Second, if a startup merchant is coming from a country, which is considered a high-risk location by MSPs and PSPs, they might also be reluctant to grant him a merchant account, because they get almost no control and plenty of liability if something goes wrong.

Finally, if a startup merchant is involved in some high-risk business, such as outsourced software development, tech-support, or (which is even more risky) gambling, porn, where chargeback rates are high, the MSP is reluctant to underwrite such a merchant and, potentially, deal with the chargebacks, issued by his customers.

 In our article on #Paylosophy you can find more detailed information on why merchant account applications coming from startup merchants often get declined.