Banks Rethink Blanket Merchant Bans as Regulatory Guidance Evolves

Watch: Why technology enables smarter merchant acquisition

Merchant acquisition has become both an opportunity and a strategic pressure point for banks, sitting at the intersection of growth ambitions and regulatory accountability.

In a PYMNTS TV interview, Maverick Payments Vice President of Bank Strategy and Partnerships Kyle Becker framed the challenge in practical terms: risk appetite and onboarding are closely linked operating decisions that determine which merchants enter a bank’s ecosystem and how quickly they can begin doing business.

Moving Past Fear-Based Assumptions

Historically, Becker noted, merchant acquiring has operated under layers of inherited caution, shaped by what he described as “fear, uncertainty and doubt.” Those assumptions, he said, often led to blanket exclusions of entire merchant categories rather than nuanced assessments grounded in controls and data.

That posture began to change in 2025, when regulators removed reputational risk from formal exam criteria. Becker described this as a meaningful tailwind that allows banks to focus more directly on safety and soundness controls, rather than defending why they serve certain industries.

“What I think this allows the banks to do is focus on what controls they have in place from a safety and soundness perspective, rather than having to explain why they were in certain merchant verticals,” Becker told PYMNTS.

Risk Appetite Meets Onboarding Reality

At its core, Becker said, risk appetite statements give financial institutions a structured way to define the level and type of exposure they will accept, both in aggregate and within individual business lines such as merchant acquiring.

Regulators expect those boundaries to be documented, and Becker emphasized their operational value. Clearly articulated risk tolerances enable consistent decisions and allow banks to communicate expectations to partners responsible for underwriting and onboarding.

“Having these clearly defined risk appetites allows for more efficient, consistent decision making,” Becker said, adding that it also lets banks convey their tolerance directly to providers that carry first-line responsibility for merchant underwriting and onboarding.

Once that alignment is in place, Becker said, banks and partners can agree on which merchant industries are permitted, how underwriting should be conducted and what enhanced due diligence is required. Tight coordination helps ensure that a bank’s risk appetite remains intact as new merchants are added.

He added that regulators are also signaling openness to alternative payment methods, promoting real-time rails and taking a more inclusionary stance toward FinTech partnerships. Together, those shifts encourage banks to reassess overly restrictive postures and replace them with frameworks based on applicable laws, card brand rules and measurable risk.

Frictionless Onboarding and the Limits of Conservatism

Becker argued that some banks remain more conservative than necessary, often because they doubt their ability to manage risk at scale. That skepticism, he said, is frequently rooted in manual processes.

Technology changes that equation. Becker outlined how automated know your customer (KYC) and know your business (KYB) checks, non-documentary validations where permitted, real-time transaction monitoring and emerging artificial intelligence (AI) tools can give risk teams sharper visibility while accelerating underwriting decisions. These capabilities, he said, help move onboarding from days or weeks to minutes, without compromising oversight.

In his view, regulatory bodies and card brands increasingly see technology-enabled oversight as favorable, particularly when it supports continuous monitoring rather than episodic reviews.

Third-Party Risk Management Sets the Pace

Speed alone, Becker cautioned, is not sufficient. Effective merchant acquisition starts with rigorous third-party risk management (TPRM), which governs how banks evaluate and onboard service providers.

He described TPRM as a structured “dating period,” during which banks and partners assess alignment on risk appetite, organizational readiness and operational support. That process includes validating underwriting policies, reviewing merchant agreements, confirming due diligence practices and ensuring Bank Secrecy Act (BSA) and anti-money laundering (AML) controls are in place.

For Maverick, Becker said, this translates into a prescriptive onboarding framework that collects full merchant agreements, verifies entity and beneficial ownership, runs KYC and KYB checks, screens for sanctions, validates deposit accounts and assesses creditworthiness to manage chargeback exposure. Higher-risk merchants undergo enhanced due diligence, including industry-specific licensing and additional contractual requirements.

Failing to complete this groundwork, Becker warned, can expose banks and providers to chargeback losses, card brand penalties and regulatory actions that disrupt operations on both sides.

“This is definitely not a set it and forget it business model,” Becker said, adding that “merchant acquiring requires frequent collaboration between sponsor bank and the provider.”

Where Maverick Fits

Within that structure, Becker positioned Maverick as a full-service provider that supports banks through technology, compliance and operational transparency. He pointed to the company’s internally developed dashboard as a central tool for collecting merchant information and documentation, enabling faster underwriting while maintaining auditability.

The platform also supports merchants after onboarding, with tools for cash flow management, dispute and chargeback handling, and reporting. Becker noted that these capabilities sit alongside built-in BSA and AML controls, supplemented by third-party technologies for transaction monitoring and merchant compliance. Maverick’s API-enabled architecture, he added, allows integration with external systems to provide a comprehensive view of merchant activity.

“Our process can get underwriting decisions in matter of minutes versus several days or weeks with others in our space,” he said.

And, he added, “if we’re reading the regulatory tea leaves properly, use of FinTechs  and technology platforms to aid in the day-to-day oversight of this business is being viewed favorably by regulatory bodies and card brands alike.”

A More Deliberate Path Forward

As banks recalibrate risk appetites under evolving regulatory guidance, Becker sees partnerships and technology as the connective tissue that makes frictionless onboarding workable at scale. The objective, he said, is not to loosen standards, but to replace static, paper-heavy workflows with continuous, data-driven oversight.

Merchant acquiring, Becker emphasized, demands ongoing collaboration between sponsor banks and providers, with clear communication and shared accountability to regulators and card networks.