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What is merchant underwriting?

What is merchant underwriting?

In payment processing, merchant underwriting is a risk assessment every merchant undergoes before they can accept electronic payments.

When a payment processor carries out transactions on behalf of a merchant, they take on a certain amount of risk.

For banks, processing a payment is like providing a business with credit, similar to a line of credit. To ensure a merchant is worthy of this trust placed on them, payment processors will do their due diligence and assess a business’ risk level before going ahead and providing them with a merchant account. This process is called underwriting.