What Is the Payment Processing Underwriting Procedure

What Is the Payment Processing Underwriting Procedure

If you are planning on taking payments for your online business, you will need a payment processor and a merchant account. To get one, though, you will need to pass the merchant underwriting process. This process has been invented to protect both the payment processor and the merchant from any mishaps. While all businesses pass through the payment processing underwriting process, the high risk merchant account is mainly put under the spotlight.

So, what exactly is this process? The payment processing underwriting procedure is there to evaluate the potential risk that is associated with a particular merchant account. It was created to ensure that the merchant can meet the requirements both financially and professionally to keep a business running smoothly. A central requirement for that proof includes if they can handle issues like chargebacks and refunds. Therefore, there is an application process for merchants.

What to Expect from The Bank

Taking payment online is not an easy task, especially if merchants want to offer various payment options. The more payment options, the more risk is involved. These risks do not just affect the merchant, but everyone that comes in contact or any business transaction is made with them. That is why passing this process with the bank and payment processor is so crucial for a merchant. Here are some of the most important aspects to consider when applying for a payment processing underwriting process and what you can expect from the bank itself. They will want to know how long your business has been running, what type of business it is, any previous issues with chargebacks and fraud, billing policy, and credit score.

Business History

Payment Processing Underwriting Business History  

One of the first aspects that are considered during the payment processing underwriting process is this business's history. Has it been active for a long time, and why is it applying for a merchant account? Did this business have a merchant account previously, and why was it shut down? If this was because of low credit scores or chargebacks and fraud, it is not likely that the business will be approved for a merchant account, let alone payment processing. It is also essential to have all your banking documents ready and organized for the underwriter to help in the process.

Business Type

Payment Processing Underwriting Business Type  

The next information your underwriter and payment processor would like to know is the type of business you intend to pursue, as some businesses are thought of as riskier than the others. Merchants would be surprised to learn all the industry types that are considered high risk. The more concrete and well known the product or service you are offering, the less risky it is. Sometimes your merchant application will get disapproved just because of the business type. Here is a list of some industries deemed as high risk:

  • Accounting services
  • Adult Entertainment (e.g. cam websites)
  • Alcohol
  • Cannabis
  • Cryptocurrency
  • Financial Services
  • Gambling
  • Insurance
  • Legal Services
  • And much more 

You can read more about these high risk business types in one of our previous blog posts.

Chargeback Background

Payment Processing Underwriting Chargeback Background  

Products and services exist to satisfy customer's needs; when those needs are not met, the customer has a right to a chargeback. Chargebacks are refunds given to customers when they did not receive the product or service they requested or unsatisfied with the ones they received. They can receive their refund by calling the company or the payment processor that processes for the company in question.

The more chargebacks a company has, the more problematic it seems to an underwriter; likewise, if you've previously had a business that got closed due to chargeback or fraud, the chances of getting a merchant account are less likely.

Billing Policy

Payment Processing Underwriting Billing Policy  

Underwriters will also want to know your billing policy so that they can access your cash flow risk. Specific billing methods are considered high risk; these include annual billing, recurring billing, and billing in advance. These are the billing methods that usually lead to chargebacks, especially if the customer no longer wants the product or service but is being charged for it.

Credit Score

Payment Processing Underwriting Credit Score  

Like with any purchase, an underwriter will want to see the merchant's financial situation or, better said, the credit score. If your credit score or financial statement is not right, you are less likely to get a merchant account. It is as simple as that. However, if your business has multiple stakeholders, you can try and apply with the one that has the best credit score or financial statement to have a better chance of getting approved.


Getting accepted for a merchant account through a payment processing underwriting process can be difficult, but it is impossible. The trick is to have all your documents laid out and in the open for the underwriter and payment processor to see. The cleaner your background and the more honest you are with your underwriter, the quicker your approval process will be. When applying for a merchant account, keep that in mind, especially for if you are in the high risk industry with high risk merchant account applications.