Significance of Merchant Identity Verification Automation in the Payment Sector

Merchant Identity Verification


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Payment sector ID verification automation is about balancing the risks and revenues, i.e., abiding by the AML-KYC regulations without merchant abandonment hurting the bottom line. Today, payment automation has invigorated the mass-merchant onboarding process, and the robotics techniques have been fast evolving to offer improved user experience to onboarding merchants per diem.

To avoid monetary fines and reputational loss, organizations are advised to opt for automated identity verification in payments which is vital to blocking bad merchants, with malicious intentions, from doing business.

Why is Automated Identity Verification in Payments Important

As per the international AML-CFT guidelines set up by FATF and other similar rule-setting bodies, all financial and regulated sectors, including payments, must obey the anti-money laundering and anti-terrorism regulations about Know Your Business (KYB) and Ultimate Beneficial Ownership (UBO) checks while carrying out business-to-business (B2B) operations.

The payment sector is a high-risk industry wherein high-risk merchant returns bring high-volume transaction processing. A few high-risk merchant segments include adult, travel, gambling, dating, CBD, subscription, brokerage, remittance, and collection agencies.

Robotics Processing Automation (RPA) in payments is core to speeding up merchant identity verification procedures. New technologies like Blockchain and Artificial Intelligence (AI) have brought automated KYC in payments. From performing KYC merchant onboarding to fulfilling merchant monitoring, mostly all due diligence techniques used today have been centralized, with single API integration. The development has drastically reduced the lengthy form-filling, allowing the payment risk department to seamlessly verify and monitor merchant activities.

Merchant Underwriting and Merchant Identity Verification Checks  

Recent upgrades in payment sector ID verification automation with pre-screening and compliance tools have made the merchant underwriting process more accurate and secure. Besides confirming business history and transaction volumes, certain business identity verification checks, such as validating operating nations, marketing channels, and product segments, are important pre-screening checks that can be achieved smoothly with AI-Machine Learning algorithms. Merchant identities are scanned against verified KYB database for Sanctions, Politically Exposed Persons (PEPs), and Adverse Media lists to ascertain the business is what it claims to be.

Thus, payment robotics helps the underwriting team set specific profile thresholds to segment the risk levels of the onboarding merchants. The consolidated risk level helps determine subsequent countermeasures and friction levels at the time of merchant onboarding.

Risk Automation in Payment Processing

The fact is that the onboarding and merchant underwriting processes can never be fully automated. There is always a certain level of manual AML verification procedures involved in payment processing. However, the risk staff can rely on a set of automation tools to gain an optimum level of accuracy while defining merchant risk profiles.

Identifying the operational model, analyzing the website, performing PCI-DSS compliance checks, merchant payment history checks, and underwriting credit risks are the core procedures in merchant payments that require human intervention in the process to a great extent. Fortunately, payment sector ID verification automation has succeeded hugely in merchant identity verification and KYC merchant onboarding procedures. Know Your Business (KYB), PEP risks, Sanctions, Adverse Media screening, and UBO checks are the main AML-KYC measures that can be performed with high-degree automation.

Merchant Due Diligence in the Payment Sector

Payment aggregators, payment service providers, and third-party payment processors all have one thing in common, i.e., they all deal with high-value transaction merchants. Hence, a holistic approach to automated identity verification in payments must go alongside other AML-CFT merchant due diligence practices in this sector.

Recently, third-party payment gateway and processor options have escalated money laundering to a new level, known as Transaction Laundering. To unearth the true identity of merchants, they must be continually monitored against their transaction patterns, business activities, and behaviors. Thus, payment sector ID verification automation must include monitoring transactions and filing Suspicious Activity Reports (SARs) to the state AML authorities for further examination.

AML-KYC consultancy helps payments stay compliant

Alongside PCI-DSS compliance, the payment processors, payment service providers, and payment gateways must inevitably follow AML-KYC compliance with automated identity verification in payments.

IDMERIT ensures world-class identity verification services to the payment sector. Learn more about automated KYC in payments and identity verification regulations in payments. We offer a free consultation with our IDMkyc compliance advisor for businesses processing large-volume merchant transactions.

Jay Raol
Jay Raol

Jay Raol has been a Media Manager, Entrepreneur, Political Analyst and an Environmentalist. He aspires to climb the mighty Himalayas, and learn a new language every year. He lives in the beautiful city of Carlsbad in Southern California and owns a great collection of books. He is on schedule to publish his first book; 'Thou Art, Dope'. Co-founded two companies that provide futuristic solutions to the world while being quite enthusiastic about helping and investing in technology startups.

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