Why many financial institutions are rethinking SMB onboarding

When onboarding works smoothly, conversion and activation often improve, which can allow SMB relationships to begin generating value sooner. When onboarding creates unnecessary friction, legitimate businesses may abandon the process before a relationship is established, which can slow growth and delay revenue opportunities.

Historically, many SMB onboarding and Know Your Business (KYB) programs were designed around compliance requirements. Today, institutions must balance growth, customer experience and risk management simultaneously as SMBs expect digital-first experiences, fraudsters increasingly target onboarding and account-opening stages and regulatory expectations continue to evolve.

As a result, many financial institutions and fintechs are rethinking how trust is established during onboarding.

Increasingly, they are exploring risk-based onboarding approaches that can adapt verification requirements based on business, identity and risk signals, helping legitimate SMBs move through onboarding more efficiently while maintaining appropriate controls.

Onboarding is becoming more than a compliance checkpoint. It is becoming part of a broader trust framework that can influence conversion, activation and long-term relationship value from the very first interaction.

Traditional onboarding models can create friction at the wrong moments

SMB onboarding is inherently complex. Financial institutions and fintechs often need to verify not only the identity of an applicant, but also the legitimacy of the business itself, its ownership structure and, in some cases, the individuals who ultimately control it.

That complexity can increase significantly across different jurisdictions, entity types and regulatory environments. A sole proprietor operating in a single market may require a different onboarding approach than a multi-owner, cross-border corporation. In some markets, business registration data may be readily available. In others, obtaining reliable verification information may be more challenging.

To address these requirements, many institutions rely on multiple systems, data sources and workflows that were implemented over time to address specific onboarding needs. Business verification may occur in one system, screening in another and risk assessment somewhere else. Manual reviews and handoffs are often introduced to bridge the gaps.

While these approaches can satisfy compliance requirements, they may also contribute to:

• Longer onboarding timelines
• Increased application abandonment
• Delayed customer activation
• Greater operational burden on onboarding, underwriting and risk teams
• Inconsistent customer experiences

For SMBs, delays can be especially frustrating because onboarding often represents the first interaction with a financial institution or fintech. For institutions, every additional step can introduce the potential for customer attrition, slower activation and delayed revenue realization.

The challenge is no longer simply gathering more information. It is determining how to gather, validate and apply information efficiently enough to help drive SMB portfolio growth while maintaining appropriate risk management practices.

Why risk-based onboarding is replacing one-size-fits-all approaches

Historically, onboarding programs often relied on standardized processes that treated most applicants similarly. Additional documentation and additional reviews were frequently viewed as prudent safeguards.

Today, that assumption is becoming increasingly difficult to justify.

Fraud risks can emerge during onboarding, exploiting weaknesses in identity, business verification and account-opening processes. At the same time, many legitimate SMBs increasingly expect onboarding experiences that mirror the convenience and speed they encounter in consumer applications.

Additionally, not every applicant presents the same level of risk.

Consider two SMB applicants. One is an established local business with a documented operating history, verified ownership structure and strong supporting records. The other is a newly formed business operating across multiple jurisdictions with limited available information and more complex ownership relationships. Applying the same onboarding journey to both businesses may create unnecessary friction in one case while providing insufficient scrutiny in the other.

Recognizing that not every SMB presents the same level of risk, many institutions are exploring more risk-based approaches that align controls with the circumstances of each application. Increasingly, the objective is to apply the right level of verification, review and monitoring based on the information available and the risks presented.

Building trust in near real-time

The shift toward risk-based onboarding reflects a broader change in how financial institutions and fintechs think about trust.

Building trust in near real-time is not about creating certainty instantly. Rather, it is about helping institutions establish a clearer understanding of SMB risk earlier in the onboarding journey by combining business, identity and risk signals within workflows that can adapt to different business types, risk profiles and onboarding scenarios.

This approach can help institutions establish confidence in legitimate businesses more efficiently while maintaining appropriate controls. It also creates opportunities to reduce unnecessary friction, accelerate onboarding decisions and improve customer experiences.

Delivering these more adaptive onboarding journeys requires more than access to data alone. Financial institutions and fintechs increasingly need the ability to coordinate verification, screening, decisioning and risk-management activities in ways that can respond to the circumstances of each application.

Bringing it all together

Together, these capabilities can help financial institutions and fintechs move beyond fragmented onboarding processes and toward more coordinated approaches for evaluating prospective SMB customers. The goal is not simply to complete verification requirements more efficiently. It is to better understand risk, apply appropriate controls and create onboarding experiences that can help drive growth.

What to look for in an SMB onboarding partner

As institutions evaluate onboarding modernization initiatives, several considerations may help guide partner selection:

• Support for multiple SMB entity types and ownership structures
• Access to a range of regional and market-specific verification sources
• Adaptable workflows, decision rules and verification requirements
• Support for risk-based onboarding approaches
• Governance, auditability and reporting capabilities
• Integration flexibility across verification, screening and data services through a unified onboarding framework
• Adaptability to evolving regulations, risk requirements and business priorities

The most effective solutions may be those that strengthen existing onboarding processes while giving institutions greater flexibility to respond to changing market conditions.

How Visa can help

Adaptive onboarding journeys require coordination.

As onboarding requirements grow more complex, workflow orchestration is becoming an important enabler of risk-based onboarding strategies.

Institutions may want to consider onboarding frameworks that connect multiple verification, screening and data services through a unified workflow, helping reduce operational complexity while maintaining flexibility. Applications can be routed dynamically, additional checks can be introduced when necessary and manual reviews can be reserved for situations where human judgment may provide additional value.

Importantly, orchestration is not simply about efficiency. It can help institutions apply trust-building activities more consistently across the onboarding journey, supporting both customer experience and operational effectiveness.

Confidence that supports growth

SMB onboarding has often been viewed primarily through a compliance lens. Increasingly, however, financial institutions and fintechs are recognizing it as a strategic capability that influences customer acquisition, activation and long-term growth.

The institutions best positioned to succeed may not be those that apply the most controls or those that expand risk appetites. They may be the institutions that can better understand SMB risk while minimizing unnecessary friction for legitimate businesses.

As the SMB marketplace continues to evolve, onboarding approaches that combine risk-based controls, adaptive decisioning and workflow orchestration may help institutions create stronger customer experiences, accelerate activation and build more scalable growth strategies.

Sharper insights, stronger growth

The financial institutions that best position themselves to win in SMB credit may not be the ones taking the most risk, but rather those that understand SMB credit risk more clearly.

Strong, data-rich underwriting workflows can help issuers and fintechs improve how they assess SMB risk — helping portfolio teams approve more of the right SMBs, assign appropriate credit limits, reduce manual friction and strengthen relationships across payments and financial services.