The process of underwriting is all about assessing the potential risks for a financial services provider, or finance company, when offering account facilities to a customer. Naturally enough, there are certain types of businesses that are deemed to be riskier than others.
If you operate a business that is in a certain sector and need card processing facilities, you will need to apply for a high risk merchant account. That means being subjected to the underwriting process. So, let’s take a look at what’s involved and what sort of checks are carried out before your account can be opened.
The need for underwriting
Certain types of business have a history of chargebacks and fraudulent activity. That is a fundamental reason why underwriting is necessary when vetting applications from business operators in certain sectors that are considered high risk categories.
Specifically, adult entertainment, gambling, and subscription-based services are typical examples of a type of business where a high-risk merchant account would be required.
Payment providers understand the risks and try to take steps to mitigate those risks. That is why your business will be subjected to greater scrutiny when opening an account that qualifies as high risk.
What underwriters are looking for
There are a number of key factors where underwriters want to accurately assess the risk of problems with a merchant account, in advance.
The application and underwriting process tends to focus on several key aspects and areas. It usually starts with a look at the stability and financial health of your business. Underwriters will also want to have a good understanding of the structure and nature of the business you are operating.
They may well also wish to analyze your transaction history. This helps to highlight any patterns that are deemed concerning, or require further questions. It is also important that your business ticks all the right compliance boxes relevant to the industry you are in.
Last but not least, an underwriter will also want to assess how robust your data protection and security measures are.
All of these checks are perfectly normal and are a reflection of the nature of the industry you are operating in rather than your business setup and practices, in isolation.
Keys steps in the underwriting process
There are several hoops you will have to jump through before your merchant is approved and opened.
You will be asked to provide relevant documentation, such as business registration details, proof of ID and address, together with financial statements and tax identification numbers.
This information will be verified and allow the application process to proceed to the next step. After all the relevance checks and formalities have been completed there is normally a final review of application. This stage might trigger a few additional questions or requests for more information.Once everything is done and you have answered all the requests for data and details, you should be in a position to be offered a high-risk merchant account.
You might have to deal with certain restrictions and limits in the early stages of your account, until the merchant provider gets to fully know and understand your business.
Now that you have a better understanding of what underwriters are looking for and the sort of information they need, you can anticipate these requests by gathering everything together before you apply.
Once everything is approved, you can start to focus on growing your business, knowing that your merchant provider has got you covered.
