Credit and debit cards continue to dominate consumer spending. Federal Reserve research published in 2026 found that Americans made roughly two-thirds of their payments using cards. For independent software vendors (ISVs) and vertical SaaS platforms, that creates an opportunity to generate revenue by embedding payments directly into their software.
That’s where merchant onboarding comes in. A streamlined process helps merchants start accepting payments sooner while minimizing friction and managing risk.
In this guide, we’ll break down how merchant onboarding works, why it matters, and how to make the process more efficient.
What is merchant onboarding?
Merchant onboarding is the process of registering, verifying, approving, and setting up a business to accept payments through a payment processing provider. It involves collecting business information, verifying identities, assessing risk, and configuring payment processing capabilities.
For ISVs and vertical SaaS platforms offering embedded payments, merchant onboarding is what enables customers to start accepting payments directly through their software.
Who’s involved in merchant onboarding?
The merchant onboarding process typically involves multiple parties, including the merchant, the SaaS platform, payment service providers (PSPs), and acquiring banks.
While the exact steps vary depending on the provider and merchant’s risk profile, the goal is the same: get businesses approved and processing payments as efficiently and securely as possible.
Learn MoreThe importance of merchant onboarding for ISVs and vertical SaaS companies
In addition to getting businesses set up to accept payments, merchant onboarding (when done right) can help increase payment adoption and revenue, all while delivering a better customer experience.
When you follow merchant onboarding best practices, you can unlock benefits such as:
Faster merchant activation and time to revenue
The sooner merchants complete onboarding, the sooner they can start processing payments through your platform. And if your business earns revenue from those transactions, faster activation means you can start generating payments revenue sooner.
On the flip side, lengthy applications, manual reviews, and unnecessary delays can slow down activation and leave potential revenue on the table.
Higher payment attachment rates
Your payment attachment rate measures the percentage of eligible software customers who adopt your embedded payments offering.
A complicated onboarding process can discourage merchants from signing up, even if they’re interested in using your payment processing services.
Making enrollment simple and convenient helps reduce drop-offs and encourages more customers to adopt payments within your platform.
Better merchant experiences and retention
Your customers already rely on your software to run their businesses. Ideally, accepting payments should feel like a natural extension of that experience.
A seamless merchant onboarding process lets customers sign up for payment processing without navigating multiple systems, repeatedly entering information, or dealing with unnecessary back-and-forth.
That convenience can improve customer satisfaction and give merchants another reason to stick with your platform.
Stronger risk management and compliance
Merchant onboarding is also an important part of protecting your payments ecosystem.
Identity verification, Know Your Customer (KYC) checks, and underwriting help payment providers assess merchant risk, detect potential fraud, and meet applicable regulatory obligations.
A well-designed onboarding process builds these safeguards into the experience without creating friction for legitimate businesses.
Greater operational efficiency as you scale
As your SaaS platform grows, so does the number of merchants you need to onboard.
Without efficient workflows, your team could spend more time chasing documents, answering application questions, and troubleshooting approval delays.
Streamlined and automated onboarding helps reduce that administrative burden, allowing your team to support more merchants without proportionally increasing headcount.
How does merchant onboarding work?
The merchant onboarding process involves several steps, from collecting business information to verifying identities and activating payment processing capabilities.
The exact workflow depends on your payments partner, but here’s a general overview of the process.
1. Merchant application and registration
The process starts when a merchant applies to accept payments through your platform. They’ll typically provide basic business information, including:
- Legal business name and address
- Business registration documents
- Employer Identification Number (EIN) or other tax identification number
- Business ownership details
- Bank account information
- Expected transaction volume and average transaction size
Depending on the provider, merchants may also need to submit additional documents or details about their business operations.
2. Identity and business verification
Next, the payment provider verifies that the business is legitimate and that the people behind it are who they claim to be.
This typically involves Know Your Customer (KYC) and Know Your Business (KYB) checks, which may include verifying business registration, identifying beneficial owners, and reviewing personal identification documents.
Providers may also conduct anti-money laundering (AML) and sanctions screening to meet applicable compliance requirements.
3. Risk assessment and underwriting
Once the merchant’s information is collected and verified, the payment provider or acquiring partner evaluates the risk of processing payments for that business.
Underwriting may consider factors such as the merchant’s industry, business model, expected transaction volume, prior payment processing history, and chargeback activity.
Businesses operating in higher-risk industries may undergo enhanced due diligence or be asked to provide additional financial documents.
4. Merchant approval and account setup
If the merchant passes underwriting, the provider approves the application and sets up the necessary payment processing capabilities.
Depending on the payment model, this may involve provisioning a merchant account or merchant identification number (MID), configuring settlement details, and enabling supported payment methods.
Some approvals may come with conditions, such as transaction limits or reserve requirements.
5. Payment activation
Once the account is configured, the merchant can begin accepting customer payments through your software.
This stage may involve testing transactions, confirming payment settings, and helping merchants become familiar with the payment features available to them.
For SaaS platforms, it’s important to distinguish between approved merchants and active merchants. Approval alone doesn’t generate processing revenue; merchants need to start transacting.
6. Ongoing monitoring and support
Merchant onboarding doesn’t necessarily end after activation.
Payment providers continue monitoring transaction activity by reviewing potential fraud risks and managing disputes. They may also request updated business information or conduct additional reviews when necessary.
Ongoing support helps merchants resolve payment issues and maintain a reliable processing experience as their businesses grow.
How to streamline merchant onboarding
A complicated onboarding process can lead to abandoned applications, delayed approvals, and missed payments revenue. The good news? There are several ways to make enrollment easier.
1. Embed enrollment directly into your SaaS platform
Make it easy for merchants to sign up for payment processing without leaving your software.
Rather than redirecting customers to a separate website or third-party portal, integrate enrollment into your existing interface. This creates a more consistent experience and reduces the number of steps merchants need to take.
Look for embedded payments providers that offer white-label enrollment capabilities, APIs, or hosted components that let you customize the onboarding experience to match your platform.
2. Automate data collection and verification
Manual data entry and document collection can slow down merchant onboarding, particularly as your customer base grows.
Manual processes remain common across the financial services industry. In fact, a LexisNexis Risk Solutions study found that 44% of surveyed financial institutions relied mostly or entirely on manual fraud processes. For SaaS platforms, automating routine verification and document collection can help reduce administrative work while keeping necessary risk controls in place.
Putting these tasks on autopilot can streamline workflows and minimize errors. For example, you can:
- Prepopulate applications with business information already stored in your platform, where appropriate and authorized.
- Use automated identity and document verification tools.
- Flag incomplete applications before they’re submitted.
- Send automatic reminders when additional information is required.
Not every application can be fully automated, but reducing manual steps wherever possible can make a meaningful difference.
3. Give merchants visibility into their application status
Few things are more frustrating than submitting an application and not knowing what happens next.
That’s why you should keep merchants informed throughout the onboarding process. Let them know when their application has been received, whether additional documents are needed, and when they’re approved to start processing payments.
Clear status updates also benefit your team by reducing support inquiries and helping you identify applications that need attention.
4. Tailor onboarding to different merchant needs
Not every business has the same payment processing requirements or risk profile.
For example, a small professional services firm may have a different underwriting profile than a business handling large transaction volumes or operating in a higher-risk industry.
Work with a payments partner that supports flexible enrollment paths and risk-based reviews. This can help you avoid unnecessary steps for straightforward applications while ensuring merchants that require additional due diligence receive the appropriate checks.
5. Focus on activation, not just approval
Getting merchants approved is important, but it’s only part of the equation. You also need them to start processing payments.
Track metrics such as application completion rates, approval rates, time to activation, and the percentage of approved merchants that become active processors.
If merchants are getting approved but not transacting, investigate what’s holding them back. They may need help configuring payment settings, understanding available features, or completing their first transaction.
Proactive onboarding assistance and follow-up can help close that gap.
6. Choose an embedded payments partner that supports your growth
Your payments partner can make a significant difference in how efficiently you onboard and activate merchants.
When evaluating providers, look beyond payment processing capabilities. Consider their enrollment technology, underwriting expertise, risk management processes, reporting tools, and ongoing support.
Ideally, your partner should help you manage the entire payments customer journey, from initial application to activation and beyond.
That way, your team can focus on building and growing your software business rather than managing every aspect of payment operations internally.
How Stax Connect simplifies merchant onboarding
Merchant onboarding doesn’t have to be complicated. With Stax Connect, ISVs and vertical SaaS platforms get the technology, payments expertise, and support they need to onboard merchants efficiently without building their own payments organization.
Here’s how Stax Connect helps.
Flexible, branded enrollment experiences
Stax Connect offers multiple enrollment options, so you can choose the approach that works best for your platform.
Whether you prefer a Stax-hosted signup page, hybrid enrollment, white-glove assistance, or a fully customized experience built with APIs, you can create a process that fits your business and your merchants’ needs.
You can also track application statuses and outstanding requirements, making it easier to identify and resolve onboarding delays.
Built-in underwriting and risk management expertise
You don’t need to manage every aspect of payments compliance and underwriting yourself.
Stax Connect provides specialized expertise across merchant underwriting, risk management, and compliance. This helps you navigate complex payment processing requirements while keeping your team focused on your core software business.
Dedicated support to drive merchant activation
Getting merchants approved is one thing. Getting them to actively process payments is another.
With Stax Connect Plus, you get a dedicated team that helps with payments sales, merchant enrollment, onboarding, activation, and Tier 1 support.
In fact, a six-month Stax Connect Plus program with Fishbowl resulted in a 36% increase in onboarded merchant IDs (MIDs), a 25% increase in active processing MIDs, and a 93% increase in revenue from onboarded merchants.
Ready to simplify merchant onboarding and grow your payments revenue? Explore Stax Connect and see how our end-to-end technology and dedicated support can help.
FAQs about merchant onboarding
Q: What is merchant onboarding?
Merchant onboarding is a process where payment processors or payment service providers (PSPs), such as acquirers or independent sales organizations (ISOs), sign up new merchants. Due to risks of fraud and money laundering, they perform thorough evaluations of potential new merchants before offering them their services.
Q: Can you describe the steps involved in merchant onboarding?
Merchant onboarding involves several crucial steps:
- Payment processor pre-screening: The initial stage where the service providers examine the new merchant’s application.
- Identity verification (know your customer/KYC): Merchants provide various pieces of information for background checks.
- Merchant history check: The PSP examines the merchant’s track record and prior transactions.
- More in-depth analysis: Depending on the risk associated with the merchant, a detailed analysis of the business and operational model may be necessary.
- Information security compliance: Assurance is given that all transactions adhere to the latest network security standards.
Q: Which documents are needed for merchant onboarding?
Merchants usually need to provide proof of identities of all individuals involved in the company, proof of address, registration documents, such as incorporation certificates or LLP agreements, income tax returns, and bank statements.
Q: What factors make a merchant “high-risk”?
Merchants operating in industries with a high likelihood of chargebacks or fraud, like online gambling platforms, are usually deemed ‘high-risk.” These merchants require a more rigorous vetting process during onboarding.
Q: How does digitization streamline the merchant onboarding process?
Thanks to technological advancements, automation and digitization have streamlined KYC procedures. Most payment processors now integrate API-based applications through which merchants can directly submit their information for verification. This trend has hugely accelerated the process and improved efficiency.
Q: Can you state the purpose of merchant onboarding?
The chief aim of merchant onboarding is to thoroughly evaluate potential new merchants, confirm their legitimacy, assess the risks of offering them payment services, and ensure that all transactions follow the latest network security requirements.
Q: How does merchant onboarding protect against fraudulent activities?
The merchant onboarding process encompasses steps like pre-screening, KYC procedures, and merchant history checks to vet the legitimacy of the business and its proprietors. It plays a fundamental role in identifying potential fraudsters and reducing the risk of fraudulent activities.
Q: What happens when irregularities are detected during the merchant onboarding process?
Irregularities flagged during the reviews of previous transactions or personal credit history can instigate a more meticulous evaluation. Large discrepancies in reported sales, unusual cross-border activities, or unresolved debts could raise concerns and prompt tighter scrutiny.
Q: What are “know your customer (KYC)” & “know your business (KYB),” and what roles do they play in merchant onboarding?
KYC and KYB are integral to the merchant onboarding process and involve a thorough investigation of the merchant and their business. The KYC step requires merchants to provide various details to the payment processor for background verification. KYB is the process of verifying the legitimacy of the business entity, including its legal structure, beneficial owners, and registration documents. The merchant history check (part of underwriting) then examines the business’s track record and prior transactions.
Q: How does the length of the merchant onboarding process vary?
The duration can vary based on multiple factors, including the completeness and accuracy of the information provided, how quickly identity verification and KYB checks can be completed, and the complexity of the merchant’s business model. However, advancements in digitization of the KYC process have largely expedited this process.
Q: Is merchant onboarding mandatory for all merchants?
Yes, this is a regulatory and legally required process that payment service providers must follow. It validates the legitimacy of the businesses they are servicing and ensures they comply with all security requirements, thus reducing the risk of fraudulent activities.
Q: Is the merchant onboarding process standard for all businesses?
No, the merchant onboarding process may vary depending on certain factors. For instance, a merchant deemed “high-risk,” due to frequent chargebacks or fraud within their industry, may undergo a more stringent risk management process.
