What is KYC and KYB?
KYC (Know Your Customer) and KYB (Know Your Business) are regulatory and compliance processes that SaaS platforms—especially those offering embedded payments or financial services—must follow to verify the identities of their users or the businesses using their platform.
Why KYC and KYB Are Required for Sub-Merchants Using Embedded Payments
When your customers begin the onboarding process to accept payments through your SaaS platform, it’s not uncommon for some merchants to pause at the merchant application. “Why do you need my Social Security Number? My business address? Why all this information?”
This is a common question from businesses new to embedded payments. What many do not realize is that opening a merchant account is a form of credit. Just like applying for a working capital loan, processors and financial partners must verify who they are working with to manage risk and protect the payment ecosystem. Ironically, most businesses provide even more data for a loan without question.
If they are willing to provide this information to borrow money, they should feel just as confident doing so to get paid.
1. KYC and KYB Are Required for Payment Compliance
Embedding payments means operating within a regulated financial ecosystem. Payment processors, sponsor banks, and card networks are required to follow strict anti-money laundering (AML) and counter-terrorism financing (CTF) laws.
These requirements are not just good practice. They are based on legal precedent. The Bank Secrecy Act of 1970 (BSA) requires financial institutions to detect and prevent financial crimes. The Customer Identification Program (CIP), which is part of the USA PATRIOT Act, mandates that institutions verify the identity of anyone opening a financial account.
As a result, Know Your Customer (KYC) and Know Your Business (KYB) protocols are essential. When your SaaS platform embeds payments, you participate in this regulatory framework. Not adhering to these standards can lead to compliance violations and reputational risk.
2. Reduce Risk with Strong Merchant Onboarding
Omitting KYC and KYB checks opens the door to fraud, chargebacks, and potential legal consequences. Bad actors, fake companies, or high-risk entities can threaten your entire payments infrastructure.
Think of a merchant account as a credit arrangement. If a payment is processed and later disputed or refunded, the liability often falls back on the platform. That is why it is critical to perform identity verification and business validation up front.
3. Build Sub-Merchant Trust Through Secure Onboarding
It is natural for users to hesitate when asked for sensitive information. But a secure and transparent onboarding experience builds trust. Sub-merchants want to know they are part of a stable and legitimate system, especially when handling large transactions or customer payments.
KYC and KYB practices reassure your customers that:
- Their payments will not be delayed or blocked by compliance issues
- Their data is being handled securely
- Your platform can scale with them safely
Just like a loan approval process adds credibility, a professional merchant onboarding process shows that your platform takes security seriously.
4. Modern KYC and KYB Flows Improve User Experience
There was a time when compliance slowed down onboarding. That is no longer the case. With API-driven KYC and KYB flows, platforms can deliver a fast, user-friendly experience without cutting corners on compliance.
Today, embedded payments providers can collect and verify necessary data in the background, enabling merchants to start accepting payments quickly while satisfying legal and regulatory standards.
5. KYC and KYB Help Protect Revenue from Fraud and Loss
Improper onboarding leads to financial risk. Fraud, chargebacks, and non-compliance fines can directly affect your revenue and ability to operate.
In this context, KYC and KYB serve as protection for your platform. The same way a lender verifies a borrower’s creditworthiness, your platform must verify merchants to prevent downstream losses and keep the system safe for everyone involved.
How Payabli Supports KYC and KYB for Embedded Payments
Payabli helps SaaS platforms embed payments securely and efficiently. Our underwriting engine evaluates merchant applications against a range of regulatory and risk criteria to ensure compliance from day one.
We customize the onboarding process based on business type and transaction profile. For example:
- A platform serving fitness studios processing $50 per month will have lighter requirements
- A platform serving roofing contractors processing $5,000 per transaction will require more extensive verification
Here is what we collect during the onboarding process:
KYB (Know Your Business):
- Legal business name and address
- Employer Identification Number (EIN)
- Website and service description
- Business type and structure
KYC (Know Your Customer):
- Full name and date of birth of beneficial owners
- U.S. residential address
- Social Security Number or Individual Taxpayer Identification Number
- Driver’s license or government-issued ID
If automatic verification fails, we request additional documents such as an SS-4 or Articles of Incorporation to continue the process. Our goal is to help you onboard merchants with confidence while staying compliant.
Why KYC and KYB Are Essential for SaaS Payments
Embedding payments means taking on the responsibilities of a financial services provider. That includes regulatory compliance and risk management. KYC and KYB are not just best practices. They are legal requirements grounded in laws like the Bank Secrecy Act and the Customer Identification Program.
By treating merchant onboarding like a form of credit underwriting, your platform can protect its revenue, earn trust from customers, and scale securely.
And next time a sub-merchant hesitates to fill out an application, you can simply say:
“If you would give this information to get a loan, why not to get paid?”
Ready to Embed Payments Securely?
Payabli makes it easy to embed payments while staying compliant.
Contact us to learn more or explore our developer docs to see how our KYC and KYB workflows can integrate with your platform.