Merchant Underwriting: What They Are Actually Assessing

What Visa's rules require

Visa's Core Rules (18 April 2026 edition) set Merchant Qualification Standards: before entering into a merchant agreement, an acquirer or payment facilitator must ensure the prospective merchant is financially responsible, not engaged in any activity that could harm the Visa system or brand, operating within an allowed jurisdiction, and not misrepresenting its merchant outlet locations. A separate rule requires an adequate due diligence review before contracting, including a site visit to the business premises if applicable or a suitable alternative, to support the acquirer's obligation to submit only legal transactions. In the US region, the rules require an acquirer's board to approve an underwriting, monitoring and control policy for its merchants.

Why banks ask about owners

Under 31 CFR 1010.230, covered financial institutions must have written procedures to identify and verify the beneficial owners of legal entity customers when a new account is opened. The rule defines beneficial owners as each individual who owns 25 percent or more of the equity interests, and a single individual with significant responsibility to control, manage or direct the entity, such as a chief executive officer, managing member or general partner. The institution may rely on a certification from the person opening the account unless it knows facts that call the information into question. How this applies to a particular merchant account depends on the institution and the account, but it explains the ownership questions on many applications. FinCEN's guidance on the Customer Due Diligence rule describes the covered institutions as US banks, mutual funds, brokers or dealers in securities, futures commission merchants and introducing brokers in commodities.

What reviewers look at

Visa's rules do not publish a scoring formula, and each acquirer sets its own policy. Common application questions follow from the standards above: what you sell and how, where you operate, who owns and controls the business, how long before delivery customers pay, expected monthly volume and ticket size, refund policy, and past processing history. Paying months before delivery, as with deposits, pre-orders or travel, means more cardholders could dispute charges if the business stopped delivering, which is the risk underwriters look at when they discuss reserves or delayed funding.

Reserves and terminated merchant listings

Visa's US rules say an acquirer must hold and control reserves accumulated from merchant settlement funds or used to guarantee a merchant's payment system obligations. The rules also require acquirers to add a terminated merchant to the Terminated Merchant File by close of business on the day after the merchant is notified of termination, for reasons including card fraud convictions, excessive counterfeit or unauthorized transactions, laundering, and an excessive number of disputes. A prior listing is something an underwriter is likely to ask about, so be ready to explain it.

What changed in the rules on 18 April 2026

The terminated-merchant check moved in the April 2026 edition of Visa's rules, and the older wording is still quoted in a lot of secondhand material. Section 5.2.1.4, Terminated Merchant File Query — US Region, is now marked effective through 17 April 2026; that was the rule requiring a US acquirer to query the Terminated Merchant File before entering into a merchant agreement. From 18 April 2026 the requirement sits in Section 10.10.1.2 and is no longer US-specific. Under that section an acquirer must use an externally managed common terminated merchant database; must list the merchant on that database for three years, concurrent with the closure of a merchant outlet, where the merchant violated the merchant agreement and was terminated for cause; must retain merchant agreement termination information for three years; must query the database before entering into a merchant agreement with a prospective merchant; and must use the data only as an informational tool in the decision-making process. Where a query returns a possible match, the acquirer must verify that the merchant identified is the same merchant the inquiry was generated for, and contact the listing member directly to determine why the merchant was added to the file. Section 10.10.1.1 adds that a terminated merchant, sponsored merchant or third-party agent must also be added to the Visa Merchant Screening Service if the VMSS listing criteria are met. For a merchant the operative words are three years, informational tool, and contact the listing member: a listing is not an automatic decline, and the acquirer looking at it is required to go and ask why it is there.

The file the acquirer has to keep on you

Underwriting does not end at approval. Visa's Core Rules (Section 1.5.2.2) require an acquirer or payment facilitator to keep a complete, well-documented file containing merchant records, including any information connected to an investigation, for at least two years after the merchant agreement is terminated, and to notify Visa when a merchant undergoing a forensic investigation terminates its agreement. Section 10.10.1.1 lists what the file on a terminated merchant must contain: the merchant agreement and addenda, deposit history and monitoring reports, details on the number, total amount and reasons for any disputes received, all acquirer and merchant correspondence, all Visa Acquirer Monitoring Program and Visa Integrity Risk Program reports relating to the merchant, names and identification numbers of suspect employees, written notification of termination or intent to terminate, the business name, the names and identification of principals, and any other supporting documentation itemising the details behind the decision to terminate. Reading that list backwards is a useful exercise before you apply anywhere. It tells you what a later acquirer can ask a listing member for, and which of your own records are worth keeping in a form you can hand over: statements, dispute history and correspondence with a former provider. This is general information, not legal advice (September 17, 2026).

How to present your application

Illustrative example only, with made-up round numbers: a furniture maker that takes a 50% deposit on a $4,000 order and delivers in 10 weeks should say so up front, with its refund and cancellation policy and typical delivery times, rather than letting the underwriter find it later. Provide recent processing statements if you have them, business formation documents, ownership details matching the beneficial ownership certification, a clear description of what you sell, realistic volume and ticket estimates, and a website with visible refund, shipping and contact information. This is general information, not legal advice (September 17, 2026).