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What documents are needed to open merchant accounts

Payment processing and transactions in businesses

One of the main fields for financial services is providing platforms for merchant transactions. Businesses often manage large volumes of these transactions, including sales and purchases both locally and internationally, and an increasing number of these is conducted online. Around 4 of 5 customers prefer to buy with their credit cards or other form of online payment instead of cash, especially when they purchase high value goods or services, engage in monthly payments or bills, or buy abroad. Online businesses, as well as retailers or other companies with online presence, realize that not offering the option for online purchases, often including the option for international shipping, leaves them far behind in the competition.

For this reason, thousands and thousands of businesses of all sizes apply every year for merchant accounts in banks around the world. How easy or difficult it will be for them to get an approval and start working with a merchant platform that works for their activities will depend on a number of factors. It's not just about choosing the bank with the best plan for them. Background information on both the applicant(s) and the business should be provided as due diligence, and in some cases more information will be required. Let's take a closer look at this.

The risks of granting a merchant account

Merchant transactions are a great opportunity for banks, but at the same time they can be very risky. Unlike other schemes, merchant account often offer very narrow margins. There are many risks involved, including rejected payments, extra fees by other intervening banks, returns of goods, reimbursments, and the big threat of the business itself underperforming and even declaring bankruptcy. And this is just the tip of the iceberg.

Some businesses or other applicants might be just a cover for entities or persons engaged in illegal activities and even financing terrorism, who use the former as a way to get money and platforms for ilicit purposes. All banks and financial entities have anti-money laundry policies, and most of them are under the Know Your Client (KYC) guidelines. To put it simple, KYC standards state all due diligence for credit or account applicants. They must submit paperwork and documents disclosing relevant information about themselves and their businesses, so the bank can evaluate potential risks associated with their activities and detect possible alerts or red flags about ilicit activities or money laundry.

Since this is a matter of industry security, aimed to prevent fraud and financing illegal activities, applications considered riskier for banks will be required to submit more information so the bank can determine the actual level of risk and whether or not they are willing to accept their request. In case the applicant does not show any sign of a potentially dangerous activity, and their business prospects are realistic and optimistic, they shouldn't be required to provide extra documentation with their application.

What documents should applicants submit?

Every bank and financial entity has its own KYC policies and therefore, the application requirements may vary. Here is a sample list of documents required by a bank that provides merchant account services. We have chosen the Credicorp Bank's list, since it is one of the most renowned banks internationally in terms of merchant services, security and reliability.

If you want to open a merchant account in Credicorp Bank, if you already have a history of commercial activities, you are required to submit information on the last six months of your processing history. This will allow the bank to get an idea on how your business works and what to expect from you as a client. In case you don't have processing history yet, you must provide ID as well as a detailed business plan.

Along with this documentation, you must also complete and submit your application form. You can do this online on the bank's website. Information required in this form includes persional information - name, address, contact details -, basic information of your business, basic tax information, details on products and/or services offered, and some insight on your sales and transactions. 

In case your application is considered risky for the bank, you might be cited to provide more information about your activities, the origin of your wealth or capital, your partnership with other businesses, the reason for changes in sector or volume of activities, and details on who else directly benefits from your activities or your profit. 

If everything goes fine and well, you should have your merchant account approved and ready to go in a very short time.