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A wholesale ISO recently ran an audit on their merchant setups. Theychecked ten applications that had already been approved and boarded. All tenhad errors. Wrong pricing. Incorrect tax IDs. Fee structures that didn't matchwhat was sold.
This isn't a story about one bad underwriter. This is what manualmerchant onboarding produces at scale.
The Revenue Math That Nobody Wants toCalculate
Here's the uncomfortable reality: pricing errors created duringonboarding don't resolve themselves. A merchant boarded at the wrong rateprocesses transactions at that wrong rate every single month. One setup mistakemade in January costs you margin in February, March, April, and every monthafter until someone catches it.
Industry data suggests 3-7% of merchant portfolios have significantlyunderpriced accounts. For a portfolio processing $500 million annually, that's$15-35 million in volume priced below where it should be. If your margin onthose accounts averages just 20 basis points, you're leaving $30,000 to $70,000on the table every single month.
The math compounds. Manual spot checks can't systematically reviewthousands of merchant accounts. You might catch the obvious problems, butsubtle pricing discrepancies hide in your portfolio for months or years. By thetime someone notices, you've lost six figures in margin that you'll neverrecover.
Why Manual Processes Guarantee Errors
The merchant onboarding workflow wasn't designed for accuracy. It wasdesigned decades ago when ISOs processed hundreds of merchants per year, notthousands. Underwriters manually extract data from bank statements,cross-reference documents, verify ownership through corporate registries,calculate interchange-accurate credit risk, and transfer information acrossmultiple systems.
Each step introduces opportunities for error. Data entry mistakes.Transposition errors. Misread documents. Copy-paste failures between systems.Fatigue from processing the 47th application that day.
The real problem isn't individual mistakes. The real problem is thatmanual processes make errors inevitable. When an experienced underwriteranalyzes a statement and calculates pricing, they might get it right 95% of thetime. That sounds acceptable until you process 1,000 merchants per year. Nowyou've systematically created 50 incorrectly priced merchants.
And that assumes your underwriters are experienced. The World PaymentsReport 2026 found that 78% of banks struggle with manual verification processesthat can't scale. Merchant servicing providers face the same constraint:experienced underwriters become bottlenecks. Less experienced staff make moremistakes. The business grows faster than your ability to train people who canaccurately price complex merchant accounts.
The Categories of Setup Errors ThatCost You Money
Pricing errors take multiple forms. The most obvious is simpleunderpricing: quoting a merchant 2.5% when they should be at 2.8%. But othererrors create revenue leakage too.
Incorrect fee applications mean merchants aren't being charged forservices you're providing. Missing fees that should apply to their MCC. Gatewayfees that never get added to the setup. Statement fees that don't getprogrammed into the billing system.
Wrong volume estimates create pricing that made sense for a $500,000 permonth merchant but falls apart when they actually process $20,000. Withoutautomated monitoring, you don't catch the variance until quarterly reviews, ifthen.
Tax ID errors, wrong business names, and incorrect ownership informationcreate compliance exposure. These mistakes might not leak revenue immediately,but they create risk that your sponsor bank will eventually flag, requiringexpensive remediation or offboarding.
Then there are the setup errors that lose you the merchant entirely.Pricing that gets entered wrong after the deal is closed. Merchants who startprocessing and immediately see discrepancies between what was sold and whatthey're being charged. Those merchants leave, taking their processing volumeand the agent commission you already paid with them.
What Actually Fixes This
The solution isn't training, and it isn't spot-checking harder. Thesolution is removing the manual work that creates errors in the first place.
Automated verification extracts data from statements and documentswithout human transcription. Systems that cross-reference business informationagainst corporate registries and fraud databases flag mismatches instantly.Interchange-accurate pricing calculations based on actual transaction dataeliminate math errors.
The ISO that found errors in all ten merchant setups isn't uniquely badat underwriting. They are good at spotting errors. But they just haven'tautomated the verification and extraction work that stops systematic errorsbefore they happen. Organizations that automate this work report setup accuracyimprovements of 90%+ while processing significantly higher merchant volumes.
This isn't theoretical. PayFacs using automated onboarding have reducedmerchant time-to-live from 24 hours to under 5 minutes while improving setupaccuracy. They're not hiring more underwriters. They're removing the manualdata entry and verification steps that guaranteed errors.
The Compounding Cost of Waiting
Revenue leakage from manual onboarding gets worse the longer you wait tofix it. Every month you process applications manually, you create moreincorrectly priced merchants. Every quarter those merchants process volume atthe wrong rate, you lose more margin.
The World Payments Report found that 40% of small and mid-sized merchantsplan to switch processor within a year, driven primarily by faster onboardingexperiences. ISOs and acquirers competing on speed while maintaining manualprocesses face an impossible choice: move faster and create more errors, ormaintain quality and lose competitive deals.
Organizations that automate merchant onboarding solve both problemssimultaneously. They process applications faster while reducing setup errorsthat leak revenue. Their existing underwriting teams handle 3-5x more merchantvolume without hiring, and the merchants they board are priced correctly fromday one.
Manual merchant onboarding made sense when your portfolio was smaller andyour team could personally review every setup. At scale, manual processes don'tjust slow you down. They systematically create revenue leaks that compoundmonth after month across your entire portfolio.
The question isn't whether you have pricing errors in your merchant base.The question is how much revenue you're losing to errors you haven't found yet.
