Know Your Merchant (KYM) is the mandatory due diligence and underwriting process that acquiring banks, payment facilitators (PayFacs), and payment processors conduct before providing merchant accounts. It involves verifying a business's identity, evaluating its financial health, and assessing its potential for fraud or chargebacks.
Why is KYM Important?
In the payment processing industry, acquirers assume the financial risk for the merchants they onboard. If a merchant commits fraud, sells prohibited items, or incurs excessive chargebacks, the acquiring bank is held liable. A robust KYM process is essential to:
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Prevent Financial Crime: Ensure the merchant is not involved in money laundering, terrorism financing, or transaction laundering.
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Maintain Regulatory Compliance: Adhere strictly to global Anti-Money Laundering (AML) laws and card network rules (like Mastercard BRAM).
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Protect Brand Reputation: Avoid associating the payment provider with severe adverse media or illegal activities.
How the KYM Process Works
Traditionally, KYM involves manually collecting business registration documents, identifying Ultimate Beneficial Owners (UBOs), checking credit histories, and screening against global watchlists (such as OFAC or the UN).
Automating KYM with Onlayer
Manual KYM checks are slow and create onboarding bottlenecks. Modern risk teams use platforms like Onlayer to automate the KYM process. By utilizing advanced entity correlation and AI-driven decision rules, Onlayer completes comprehensive background checks and watchlist screenings in minutes, allowing you to scale merchant acquisition without adding operational headcount.
