Underwriting is a safeguard against financial, operational and regulatory exposure, however it can also become a bottleneck when companies do not fit well into defined categories. This tension has become more evident as merchants adopt new business models, operate across multiple channels, and deal with increasingly complex regulatory requirements.
Barry PrenticeVice President of Risk and Underwriting at Maverick Paymentstold PYMNTS in a recent interview that the traditional approach to underwriting has been largely based on limiting exposure through fixed frameworks and standardized valuations. Although effective in many cases, these models were designed for a market that is considerably less diverse than the one payment providers face today.
“Historically, risk and underwriting have really focused on limiting exposure rather than understanding it,” Prentice said. “Modern companies have evolved, and they are more diverse today than they were before.”
The result, he said, is that traditional underwriting processes can ignore viable opportunities. When underwriting relies too heavily on strict rules, standard business classifications and historical assumptions, companies that fall outside familiar categories can be rejected before their operating models are fully understood.
This issue is particularly important for independent sales organizations (ISOs), whose success often depends on their ability to serve merchants across a wide range of industries. As new categories emerge and existing industries evolve, ISOs are faced with work whose complexity requires deeper assessment rather than automatic dismissal.
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Complexity requires context
Prentice believes underwriting is gradually moving toward a more accurate model.
Rather than focusing primarily on what makes a merchant different, modern underwriting seeks to understand how the business operates, how it generates revenue, and how it manages regulatory obligations. The goal is to make informed decisions.
“Modern underwriting solutions are really focused on understanding,” Prentice said. “It’s about identifying unique opportunities and pursuing them to find a way forward.”
As for ISO standards, this shift could expand the scope of merchants who can follow them. Payment service providers with experience across multiple risk categories can evaluate opportunities that may be routed elsewhere or rejected outright.
Prentice noted that managing portfolios containing high-, medium- and low-risk traders requires experience and infrastructure. Experienced underwriting teams are in a better position to differentiate between work that is truly problematic and that that simply requires additional review. Consistent processes across departments also help ensure decisions remain disciplined while accommodating a wider range of merchant profiles.
The result is a more flexible operating environment for ISO standards. Instead of maintaining separate relationships and workflows for different categories of merchants, they can work within a single framework capable of evaluating a wide range of opportunities.
This approach can be particularly valuable in sectors that require additional compliance requirements. Prentice pointed to examples such as financial services companies and online pharmacies. These categories are often viewed through a high-risk lens, but he said many of the challenges stem from regulatory complexity rather than high financial risk. Understanding the rules that govern those companies is often more important than relying on broad assumptions.
Therefore, keeping up with changing regulations becomes an essential part of the underwriting job.
“Having your finger on the pulse of what regulations are and what’s changing is so important, so you know how to deal with these dealers when they come in the door,” Prentice told PYMNTS.
The broader implication is that underwriting has become less concerned with filtering out complexity and more concerned with explaining it correctly. For ISO standards, this can translate into access to new markets, stronger business relationships and a greater range of opportunities.
The greatest value is seen when underwriting, risk management and merchant support work within a unified structure, Prentice said.
“The opportunity to be able to offer the full range of risk levels to one full payment service provider is actually a huge benefit,” he said.
As business models continue to evolve, underwriting will remain a system based on caution and control. However, providers who can pair these principles with a deeper understanding may be better positioned to help international standards companies turn complexity into opportunity.
