Merchant Onboarding Process in South Africa

Merchant onboarding process in South Africa is one of the key components of the modern payment gateway. A merchant is required to submit information about its business for review, a process known as underwriting before this merchant can accept electronic payments.

As the world continues to move towards a digital future, modern payment gateway and merchant onboarding services are becoming an increasingly important part of the South African economy. In fact, according to Statistica.com, 41% of e-commerce transactions in South Africa were completed using a credit card as of January 2022. This underscores the growing trend of modern payment gateways preferred by South Africans. 

However, the process can be complex and time-consuming, involving a range of merchant onboarding risk assessments and compliance procedures. In this blog post, we'll provide a comprehensive overview of the merchant onboarding process in South Africa, highlighting the merchant onboarding process flow and offering insights into how businesses can optimize their approach to minimize risk and maximize success.

What is Merchant Onboarding Process?

The merchant onboarding process is the process whereby payment service providers or payment processors in South Africa bring new merchants onto their payment platforms or marketplace, enabling them to accept payments.

These payment processors allow for transactions to happen between merchants and consumer banks.
 

Who is a Merchant Service Provider?

A Merchant Service Provider (MSP) is a financial services company that facilitates electronic payment transactions for merchants. They are also known as payment processors or payment service providers. 
 

MSPs in South Africa provide merchants with the necessary infrastructure and services to accept various forms of electronic payments, including credit cards, debit cards, and other electronic payment methods during the merchant onboarding process.
 

What are Merchant Onboarding Solutions?

Merchant onboarding solutions refer to the processes and tools that enable payment processors to onboard or sign up new merchants onto their payment processing platforms or systems. These solutions help payment service providers streamline the merchant onboarding process, which can otherwise be time-consuming and complicated.

Merchant onboarding solutions typically involve a combination of technologies, including application programming interfaces (APIs), software applications, and other digital tools. These solutions enable merchants to submit their information and documentation electronically, which is then verified and processed by the payment processor.

As a payment processor, one of the best practices for a seamless merchant onboarding process is using professional merchant onboarding services to onboard new merchants. These merchant onboarding services help to automate your merchant onboarding process and ensure compliance with regulatory requirements.

What is Merchant Onboarding Risk?

Merchant onboarding risk refers to the potential financial, legal, and reputational risks that a financial institution or payment processor may face when onboarding a new merchant or business onto their platform.

When a financial institution or payment processor agrees to provide payment processing services to a new merchant, they assume certain risks. These risks can include fraud, money laundering, regulatory violations, or reputational harm if the merchant engages in activities that are illegal or unethical.

To mitigate merchant onboarding risk, payment processors typically implement thorough due diligence procedures, such as background checks, credit checks, and risk assessments, to evaluate the potential risks associated with a merchant. They may also require merchants to provide additional documentation or security deposits to reduce the risk of financial losses.

What is the Best Payment Gateway in South Africa- Top Payment Gateways in South Africa

The common payment processors otherwise called payment gateways in South Africa include:

• Payfast 
• Yoco – Best for card payments
• Ozow – Best for Instant EFTs
• Zapper – Best for QR codes payments
• SnapScan
• Mobicred
• Payflex
• Peach Payments
• Paygate
• PayGenius
• Netcash
• PayU
• Paypal
• 2checkout
• Stripe South Africa

In South Africa, the Payments Association of South Africa (PASA) manages a National Payment System (NPS) comprising of over 18 different payment systems which customers and businesses can choose from. These range from low-value card transactions to high-value bond exchange payments.
 

The South African Reserve Bank (SARB) oversees the NPS and is responsible for guaranteeing the safety, efficiency, and settlement of all transactions made by South Africans in the SAMOS system. 

To protect the stability of the country’s financial sector, the SARB further implements measures to reduce systemic risk within the NPS.

Which Payment Method is commonly used in South Africa? 

There are several payment methods payment processors provide for merchants during the merchant onboarding process in South Africa. They include:

• Cash
• Checks.
• Debit cards.
• Credit cards.
• Mobile payments.
• Electronic bank transfers
• Digital Wallets

Among these payment options provided by payment processors, the most common payment option used in South Africa is credit cards.

What is Merchant Onboarding Process Flow?

The merchant onboarding process flow typically involves several steps that enable businesses or payment processors to effectively onboard new merchants onto their payment processing platforms. 

The specific steps involved may vary depending on the business and the payment processing platform they use, but generally, the process includes the following:

Step 1: Application: 

A new merchant will apply to accept card payment using a Merchant Account on the payment service provider’s platform he has chosen. The application typically includes providing personal and business information, such as legal name, business name, tax ID, contact information, and banking details.

Step 2: Card Reader

The merchant pays the payment service provider the fees for the chosen Card Reader.

Step 3: Due Diligence:

The merchant due diligence process is an important step in the merchant onboarding process. It includes: 

i. Merchant Identity Verification: 

To comply with AML and KYC requirements for FICA verification, the payment service provider will perform due diligence to verify the merchant's identity, business operations, and financial stability. This may involve conducting a credit check, checking for any criminal history, and verifying the merchant's bank account. 

 Upon completion of these identity verifications, the payment service provider will notify the merchant as to whether or not the application has been approved or declined. If the merchant’s application is approved, the payment service provider will arrange for the Card Reader or any other payment method to be delivered to the merchant’s trading location.

ii.  Merchant’s Document Verification:

There are some FICA requirements for the merchant onboarding process in South Africa. Merchants must provide all FICA documentation! The payment service provider will undergo a verification process on all submitted FICA documents. Merchants must provide the service provider with Fica documents from time to time, as required.

Step 4: Integration:

Merchants will be required to download the payment service provider app and connect the Card Reader to their Compatible Device.

The payment service provider provides the merchant with technical integration information and tools to connect to their payment gateway. This includes APIs, SDKs, and other technical documentation to help the merchant integrate their website or application with the payment service provider's platform.

Step 5: Activation:

Once the merchant has completed the application, due diligence, integration, and compliance requirements, the payment service provider activates the account and the merchant can start accepting payments. The payment service provider may also provide additional services, such as fraud detection and chargeback management, to help the merchant manage their payment transactions.

By agreeing to the terms and conditions of payment processors, merchants automatically authorize payment processors to perform credit and regulatory checks on them and their businesses and/or any other principal, partner, proprietor, or owner of your business. 

All merchant onboarding process in South Africa may not follow the same exact process, however, there are key steps that must be taken like the FICA document verification. The above are the common merchant onboarding processes payment processors follow in South Africa.
 

What is Digital Merchant Onboarding- How to Automate your Merchant Onboarding Process

The digital merchant onboarding process typically involves the use of digital tools and platforms that allow merchants to submit their information and documents online, and for the payment processor or acquiring bank to review and approve the application in a timely manner. This can help reduce the time and cost associated with traditional paper-based onboarding processes.

Effective digital merchant onboarding is important for ensuring that merchants are legitimate and comply with regulatory requirements, and for reducing the risk of fraud and chargebacks. It can also help improve the customer experience by enabling merchants to quickly start accepting electronic payments. 

Today, there are several digital merchant onboarding process in South Africa for payment processors.

Frequently Asked Questions on Merchant Onboarding Process in South Africa

1. Can my Card Reader work on another merchant’s account?

The Card Reader that is delivered to you is linked to the Merchant Account that you created and will not work with any other Merchant Accounts. 

2. When can I start processing transactions on my card reader as a merchant? 

You can commence processing Transactions from the date on which you have activated the Card Reader but the payout for these transactions will not be completed by the payment service provider until and unless your FICA Documentation has been received, reviewed, approved and electronically stored by the payment processor.

 3. Can I transfer my merchant account to another business?

Kindly be aware that if you dispose of your business in any manner or there is any alteration in the Authorized Account Holder, principal, partner, proprietor, or owner of your business, you will be required to notify your payment processor in writing about this change and submit all relevant FICA Documentation again. 

Failure to do so will result in the suspension of your access to the Services, and you will have to complete the merchant onboarding process once more to receive the Services provided by your payment processor.

Digitize your Merchant Onboarding Process

Take the first step towards modernizing your business by digitizing your merchant onboarding process. By leveraging technology to streamline your workflows, you can improve efficiency, reduce costs, and provide a better experience for your merchants. Don't let manual processes hold you back - make the switch to digital onboarding today and stay ahead of the curve!

Join 100+ leading companies to automate your merchant onboarding process with the Youverify workflow automation tool. Try our product to get started.