I’ve seen many threads regarding how to choose a payment processor. Few are about the opposite side — how processors make their choice and how to be sure not to be declined. I've decided to share some insights on why businesses may not pass underwriting based on my own experience working for a PSP. I believe this will be especially relevant to medium-sized businesses that havent worked with high-risk PSPs before and for those who have faced rejection in the past
Here are some key factors to consider and common mistakes to avoid:
1. Proof of Volume: Almost all PSPs require the proof of claimed monthly transaction volume.
Common Mistake: Presenting no verifiable documents like bank statements or transaction reports will most probably be the reason for which your application will be denied. You should be able in a position to present complete and accurate financial records. Your records should, in every sense, justify your claims. If you don't present any history, then you should be prepared to accept higher rates and possibly reserves because you will be considered a start up.
2. Justify your requirement for high-risk PSP according to the nature and level of your business risks.
If the nature of business is such that it is too low risk, such as a furniture store, and it seeks high-risk payment processing, this is an instant red flag. What challenges your business faces or its risk factor that justifies high-risk services, one should be upfront and clear about.
3. Transparent Business Model
PSPs have to ascertain that your business model is clear and legitimate enough and sustainable enough in the long-haul.
Common Mistake: Having unreasonable pricing either too high or too low or unclear value that you provide to your customers. For example, selling $200/month access to basic weight loss videos and recipes that are available in principle for free on youtube, is a dead giveaway
4. Consistency Between Amount of Transaction and Price on Website
(Seems to be obvious but I see this problem very often)
Common Mistake: The cases of the disparity between them suggest fraudulent activity. PSPs are protecting themselves. Regularly audit your website and financial records to ensure consistency
5. Significant Daily Volume with No Organic Traffic
PSPs will be constantly on the lookout for organic and direct traffic on your website
Common problem: Very high transaction volumes and at the same time very poor organic traffic visiting the website is a concern. PSPs would then question, how are customers finding your business model? And how are you collecting money? Improve your online reputation, and be able to justify any deviations from traffic and transaction norms
6. High % of Transactions from Prepaid Cards in the US
A high level of diversity and normal distribution in the payment method is preferable.
Common Mistake: Look carefully at prepaid card transactions if abnormally high volumes run through a business with foreign ownership. Prepaid card usage volumes can vary widely between regions, and this is a factor likely to be the subject of over-scrutiny by PSPs. Be ready to explain the distribution of your payment methods and that it correctly reflects the nature of your customer base.
Hope it helps,
Please share your experience if you have anything else to add
Here are some key factors to consider and common mistakes to avoid:
1. Proof of Volume: Almost all PSPs require the proof of claimed monthly transaction volume.
Common Mistake: Presenting no verifiable documents like bank statements or transaction reports will most probably be the reason for which your application will be denied. You should be able in a position to present complete and accurate financial records. Your records should, in every sense, justify your claims. If you don't present any history, then you should be prepared to accept higher rates and possibly reserves because you will be considered a start up.
2. Justify your requirement for high-risk PSP according to the nature and level of your business risks.
If the nature of business is such that it is too low risk, such as a furniture store, and it seeks high-risk payment processing, this is an instant red flag. What challenges your business faces or its risk factor that justifies high-risk services, one should be upfront and clear about.
3. Transparent Business Model
PSPs have to ascertain that your business model is clear and legitimate enough and sustainable enough in the long-haul.
Common Mistake: Having unreasonable pricing either too high or too low or unclear value that you provide to your customers. For example, selling $200/month access to basic weight loss videos and recipes that are available in principle for free on youtube, is a dead giveaway
4. Consistency Between Amount of Transaction and Price on Website
(Seems to be obvious but I see this problem very often)
Common Mistake: The cases of the disparity between them suggest fraudulent activity. PSPs are protecting themselves. Regularly audit your website and financial records to ensure consistency
5. Significant Daily Volume with No Organic Traffic
PSPs will be constantly on the lookout for organic and direct traffic on your website
Common problem: Very high transaction volumes and at the same time very poor organic traffic visiting the website is a concern. PSPs would then question, how are customers finding your business model? And how are you collecting money? Improve your online reputation, and be able to justify any deviations from traffic and transaction norms
6. High % of Transactions from Prepaid Cards in the US
A high level of diversity and normal distribution in the payment method is preferable.
Common Mistake: Look carefully at prepaid card transactions if abnormally high volumes run through a business with foreign ownership. Prepaid card usage volumes can vary widely between regions, and this is a factor likely to be the subject of over-scrutiny by PSPs. Be ready to explain the distribution of your payment methods and that it correctly reflects the nature of your customer base.
Hope it helps,
Please share your experience if you have anything else to add
