Manual vs Digital Merchant Onboarding: What PSPs Must Know

Merchant onboarding is where it all starts for Payment Service Providers (PSPs) and Independent Sales Organisations (ISOs). It’s the process that brings new merchants into your ecosystem—verifying who they are, checking for compliance, managing risk, and getting them ready to process payments.

For years, onboarding has been a slow, manual slog—forms, back-and-forth emails, chasing signatures. It’s inefficient, error-prone, and often leads to drop-offs. But that’s changing. Automation, live data checks, and biometric ID are turning onboarding into something faster, sharper, and far more scalable.

In 2025, PSPs and ISOs are at a fork in the road: stick with the old way, or shift to digital onboarding that cuts delays, strengthens controls, and accelerates revenue.

This article lays out the key differences, the impact on your bottom line, and why digital onboarding gives you a real competitive edge.

‍

Key Takeaways

• Manual onboarding is slow, expensive, and leaves too much room for error—causing delays, drop-offs, and compliance headaches.
• Digital onboarding is quicker, smarter, and far more efficient—using automation to streamline checks and spot fraud earlier.
• A hybrid approach—where automation handles the bulk and humans step in where needed—offers a balance of speed, accuracy, and adaptability.

‍

Manual vs Digital Onboarding

Merchants onboarding goes beyond ticking boxes—it’s a pivotal process that influences growth, risk control, and scalability. While the goal remains clear—vetting, approving, and enabling merchants to accept payments—the approach has shifted sharply between traditional manual methods and modern digital alternatives.

‍

Traditional Onboarding: Holding Back Growth and Efficiency

Manual onboarding often means handling physical or scanned documents like identity cards, business licences, and bank statements. Merchants may need to visit a branch or post paperwork, which staff then painstakingly verify and enter across different systems. This method brings several drawbacks:

• Paperwork-Heavy and Error-Prone: Dependence on physical documents can leads to mistakes in transcription, lost files, and incomplete submissions, causing delays and repeated efforts. Manual checks are slow, inconsistent, and vulnerable to human error.
• High Costs and Drop-Off: Running physical processes and employing staff to manage them pushes operational costs up. Lengthy, cumbersome onboarding frustrates merchants, who may abandon the process, leading to lost business.
• Limited Growth and Increased Risk: Manual procedures restrict the number of merchants onboarded and leave little room for real-time fraud checks, heightening compliance risks and potential losses.
• Disjointed Merchant Experience: Variations across branches or teams erode trust, impacting long-term customer value.

Ultimately, manual onboarding acts as a barrier to growth and efficiency, constraining PSPs and ISOs in a competitive market.

‍

Digital Onboarding: Speeding Up Growth and Streamlining Operations

Digital onboarding rethinks the merchant journey through automation, real-time data, and advanced verification tools:

• Instant Data Integration and Automation: Digital systems connect with government registries, credit agencies, and AML watchlists via APIs to verify merchants instantly. Optical Character Recognition (OCR) pulls details from uploaded documents, removing manual input.
• Biometric Checks: Facial recognition and liveness detection confirm identities, cutting down fraud while keeping the process smooth.
• Scalability and Cost Savings: Automation reduces manual work, slashing operational costs and allowing more merchants to be onboarded swiftly without extra staff.
• Flexible, Mobile-Friendly Processes: Digital onboarding supports remote applications, available anytime, tailored by merchant profile, location, and risk level.
• Stronger Fraud Detection and Compliance: analyse multiple data points to flag suspicious activity early, ensuring adherence to changing regulations.

This approach slashes approval times from weeks or days to hours or minutes, improving merchant satisfaction and enabling quicker expansion.

‍

Digital Onboarding in Action: Nayax Australia Success Story

Nayax Australia struggled with manual paperwork, fragmented systems, and complex compliance under their new PayFac model. OnBoard by MVSI changed that with smart forms, an offer generator, reseller integration, and automated KYC/AML checks—cutting onboarding time by 98%.

As Nayax CEO, Dylan Winik puts it:
“OnBoard is a fully integrated, easy-to-use platform that’s now central to nearly every team.”

The result was over 8,000 new merchants onboarded smoothly across 100+ partners, with improved efficiency, compliance, and a consistent merchant experience.

‍

Boosting Merchant Retention and Conversion

Digital onboarding isn’t just faster—it encourages greater merchant loyalty and value by:

• Cutting Drop-Offs: A smooth, clear process captures more sign-ups and reduces churn.
• Providing Real-Time Insights: Platforms track key metrics like approval rates and abandonment, helping fine-tune the process.
• Enabling Personalisation: Linking onboarding data with CRM systems opens doors for targeted cross-selling and upselling.

A seamless onboarding experience lays the groundwork for lasting merchant relationships and business success.

‍

Challenges in Digital Onboarding

Despite its benefits, digital onboarding brings new challenges that must be managed carefully:

• Data Security: Safeguarding sensitive merchant data requires strong encryption, multi-factor authentication, secure biometrics, and strict compliance with privacy laws like GDPR.
• Accessibility and Inclusivity: Systems must cater to merchants with different levels of tech know-how and connectivity, offering easy interfaces, multiple languages, and human support options.
• Regulatory Flexibility: Platforms need to adapt quickly to changes in KYC, AML, and other rules without disrupting the user experience.

Striking the right balance between automation and personalised help ensures a secure, efficient, and user-friendly onboarding process.

‍

Dynamic Offers, Contracts and Digital Forms

Modern digital onboarding goes well beyond simply collecting data. It reshapes how PSPs and ISOs handle offers, contracts, and merchant information through adaptable, tailored solutions.

‍

From Static Paperwork to Flexible Contracts

Onboarding used to mean dealing with fixed, generic paper contracts, often filed away as physical copies or PDFs—leading to delays and compliance headaches.

Now, digital platforms generate contracts instantly, automatically customised according to the merchant’s business type, location, product choices, and regulatory needs. This allows for:

• Swift updates to terms, pricing and conditions
• Built-in e-signatures that remove waiting time
• Complete contract lifecycle management with live updates and full audit trails

These tools enable PSPs and ISOs to react promptly to market shifts while maintaining clarity and compliance.

‍

Adaptable Digital Forms for Every Requirement

Gone are the days of static forms. Digital onboarding now means smart onboarding forms that adapt dynamically based on merchant responses—such as product range, region, language and regulation—ensuring only relevant questions appear, which cuts down errors and simplifies the experience.

Highlights include:

• Support for multiple languages and adherence to web accessibility standards (WCAG)
• Mobile-friendly design for smooth onboarding on any device
• Smart validation with immediate error prompts to speed completion

These improvements deliver onboarding that’s quicker, more precise and inclusive for all merchants.

‍

Real-Time Risk Management

Successful merchant onboarding depends on assessing risk swiftly and accurately—finding the right balance between speed and careful scrutiny to prevent fraud, maintain compliance, and safeguard revenue.

‍

Automated Risk Assessment

Modern onboarding systems use advanced risk engines that instantly analyse multiple data points—credit records, business credibility, transaction patterns—to determine merchant risk without delay.

• Speeding up low-risk approvals: Merchants with solid profiles clear preset criteria and gain rapid approval, cutting down time to revenue.
• Closer review for higher-risk cases: Those flagged receive further checks, including automated assessments and further document verification, in line with regulatory requirements.

This layered approach, powered by clear rules to slashes decision times from days to minutes while keeping fraud and compliance firmly in check.

‍

Handling Interruptions

Applications can stall due to technical glitches or distractions. Leading platforms tackle this with smart recovery features:

• Save and resume: Merchants can pause and pick up applications later without losing progress.
• Automated reminders: Emails or texts nudge merchants gently to return and complete their forms.
• Backup support: Difficult or delayed cases are routed to human agents or alternative paths to ensure completion.

By managing interruptions proactively, PSPs and ISOs cut abandonment rates, protect potential revenue, and deliver a smoother experience.

Compliance, Privacy and Data Protection

With regulatory demands growing more complex, compliance and data protection lie at the heart of effective digital onboarding. PSPs and ISOs must not only meet global standards but also safeguard merchants’ sensitive information.

Meeting Global Regulatory Standards

Digital onboarding systems are designed to keep pace with a range of evolving regulations, including:

• KYC and AML: Automated identity checks and due diligence streamline compliance with anti-money laundering regulations.
• GDPR and CCPA: Privacy settings control consent, data access, and deletion rights, ensuring merchants’ data is handled properly across borders.
• Real-time updates: Platforms adjust automatically to legal changes, reducing manual effort and maintaining compliance without delay.

These features lower the risk of breaches, keep audit trails robust, and speed up merchant onboarding.

‍

Protecting Sensitive Merchant Data

Securing payment and identity information demands a layered security strategy:

• Encryption: Data is protected end-to-end, both while being transmitted and when stored.
• Access controls and audit logs: Role-based permissions paired with detailed logging prevent misuse and support investigations if needed.
• Biometric authentication: Methods such as facial recognition and liveness checks enhance identity verification and help combat fraud.

While biometrics boost security, they also raise important privacy issues.

‍

Addressing Challenges with Biometric Verification

Biometric tools improve onboarding but must be handled with care. Key concerns include:

• Algorithmic bias: Some groups may experience higher rates of false acceptance or rejection. Using diverse training data and thorough bias testing is vital for fairness.
• Verification errors: Poor image quality or user mistakes can cause failures. Combining multiple biometric methods and fallback options helps reliability.
• Transparency and consent: Merchants need clear information on how their biometric data is used, stored and protected.

Ongoing improvements to algorithms, open communication, and strong privacy policies are essential to balancing security with trust.

‍

Data Integration and Automation

A cohesive data and systems framework is essential for smooth digital onboarding.

Varied Data Sources

Effective onboarding depends on gathering and aligning data from multiple places to create a full merchant profile. This includes:

• Applicant data: Information supplied directly by the merchant.
• Internal data: Records of past performance, transaction patterns, and CRM notes.
• External data: Credit bureau reports, commercial databases, compliance watchlists, and sector-specific risk indicators.

Centralising this data removes silos, cuts down on manual checks, and ensures the merchant assessment remains consistent throughout.

‍

System Integration

An effective onboarding platform allows data to flow in real time between underwriting tools, CRM, fraud detection, credit scoring, and banking systems. Middleware and APIs make sure:

• Underwriting and fraud assessments happen without delay.
• Data stays aligned across all systems for smooth operations.
• Everyone involved can track applications, manage exceptions, and oversee compliance from start to finish.

‍

Implementation Strategy and Ecosystem

Rolling out a digital onboarding solution isn’t as simple as switching on a new system. It calls for a well-thought-out strategy that covers technology partnerships, reworking existing processes, and managing change throughout the organisation.

While automation can efficiently handle most merchant applications, complex or high-risk cases still need a human touch. A hybrid approach—automated initial screening combined with expert analyst review—strikes the right balance between speed, cost, and thoroughness, delivering both scale and quality service.

‍

Tackling Common Implementation Challenges

Transforming onboarding digitally often brings its own set of hurdles:

• Legacy integration: Linking modern platforms with outdated core banking or CRM systems usually demands APIs, middleware, or bespoke connectors.
• Security and compliance: Strong encryption, thorough penetration testing, and compliance with standards like PCI DSS and SOC 2 are non-negotiable.
• Training and change management: Teams must be equipped to handle new tools, manage exceptions, and guide merchants through change.

Careful planning—phased rollouts, aligning stakeholders, rigorous testing, and ongoing training—is key to successful adoption.

‍

Emerging Trends Shaping Onboarding 

To keep pace, PSPs and ISOs need to watch these developments closely:

• Blockchain-based identity verification: Offers secure, tamper-resistant credentials with merchants controlling their own data.
• Real-time detection tools: Support real-time fraud detection, predictive risk scoring, and highly tailored onboarding experiences.
• Embedded finance: Integrating onboarding directly into partner platforms like marketplaces or SaaS products smooths merchant acquisition and boosts ecosystem loyalty.

‍

Conclusion

Digital onboarding is now a vital part of the payments industry, where regulation and efficiency are paramount. Moving away from manual, paper-based systems to automated, data-led processes allows PSPs and ISOs to speed up merchant sign-ups, boost revenues, manage risk more effectively, and deliver a better experience for merchants.

For organisations looking to update their onboarding, the focus should be on flexible contracts and forms, real-time risk oversight, stringent compliance measures, smooth data integration, and a blend of digital and human support. Keeping a close eye on performance and embracing new technology will keep onboarding sharp and future-proof.

In an environment where speed, security, and customer experience dictate success, digital onboarding is the critical enabler for PSPs and ISOs striving to lead in the global payments arena.