What is Merchant Underwriting Process

Merchant Underwriting Process

The merchant account is basically a line of credit. In the case of chargebacks, the amount is cut from the merchant’s account. But, if there are not enough funds in the bank to pay for chargeback then the provider pays that amount right away to the customer. So the essential part of underwriting is to evaluate the risk level of the merchant’s business. Following are the things that provider review:

What Providers Check

Industry Type: Risk is in every kind of business but the level of risk varies from business to business. Few businesses are less likely to fraud and chargebacks as compare to others. Higher the level of risk, higher the amount of documentation.

Return Policy: Businesses that indulge in shipping products are risky because there are chances of non-delivery of product, wrongly delivery or delivery of the broken product that might result in chargebacks.

Business History: If you are not new in the market and have applied for a merchant account, underwriting will involve reviewing of your credit history as well as chargeback history (to know chargeback ratio) before approving or rejecting your application.

Card Acceptance Method: Provider will like to know about merchant terminated file if your business has been or still is on it. Most of them will evaluate current statement to get a fair idea of volume and acceptance methods. In case an application gets approval, business accepting telephonic orders or online orders is into account for more features and more security measures.

Processing Limit Request: Depending upon your requirement of regular processing, limit of your account should best sup. If there is no requirement for high limits, do not settle with such an account. A provider should set your limits at a medium level that would allow processing on a regular basis not leaving much room for fraudulent charges.

Financial Stability: To check the financial stability, underwriting may include your bank statement and credit. This is very important for businesses while applying for a new merchant account, as it directly affects the decision of underwriting approval.