Payments companies are under increasing pressure to onboard merchants faster while still meeting stringent risk, compliance, and network requirements. During LegitScript’s recent webinar for the payments ecosystem, industry experts discussed provisional approvals as one possible strategy to strike that balance — exploring the operational realities, risks, and best practices of this approach.
Read our key takeaways and then watch the webinar.
January 21, 2026 | by LegitScript Folks
What Are Provisional Approvals?
Provisional approvals allow a merchant to begin processing payments shortly after initial onboarding checks but before full underwriting is complete. Instead of the traditional “verify everything, then trust” model, provisional approvals flip the sequence to “trust, but verify.”
In practice, this means:
- Initial checks (such as identity verification, basic KYB/KYC screening, and website validation) are completed up front.
- The merchant is granted limited processing access under defined guardrails.
- Enhanced due diligence continues in the background.
- After a short review window (often a few days), the merchant is either fully approved, placed under additional restrictions, or declined.
Traditional underwriting, by contrast, requires all documentation and reviews to be completed before a merchant can process their first transaction, often delaying activation by days or weeks.
Advantages of Provisional Approvals
When implemented correctly, panelists said provisional approvals can deliver meaningful benefits for both payments service providers and merchants:
- Faster time to value for low-risk merchants
Merchants can begin processing almost immediately, improving satisfaction and reducing abandonment during onboarding. - Scalability through automation
Automated checks handle routine decisions at scale, allowing underwriting teams to focus on nuanced or high-risk cases. - Maintains human oversight in underwriting
While automation plays a key role, human analysis and decision making are still present in the process without slowing it down. - Continuous learning from edge cases
Provisional workflows help organizations refine risk models by observing real-world merchant behavior early in the lifecycle.
Drawbacks and Risks to Manage
The panel emphasized that provisional approvals are not without tradeoffs:
- Risk exposure during the provisional window
If initial criteria are too permissive, bad actors may slip through before enhanced due diligence is complete. - Merchant experience challenges
Merchants may perceive follow-up reviews, documentation requests, or delayed declines as poor service if expectations aren’t set clearly. - Overreliance on automation
AI-driven outputs must still be validated by experienced analysts—especially before final decline decisions. - Regulatory and network scrutiny
Card networks and regulators continue to emphasize human oversight and pre-transaction reviews, making governance essential.
Best Practices for Implementing Provisional Approvals
Communication and operational discipline are critical to building a successful provisional approvals program. Webinar speakers highlighted several best practices:
- Use tiered provisional approval levels
Not all merchants should receive the same limits. Risk signals such as business history, credit indicators, and ownership transparency should determine transaction caps and monitoring intensity. - Automate monitoring, but keep humans in the loop
Implement real-time transaction monitoring that automatically flags unusual patterns, with people who are experienced to review those flags daily so the alerts aren't piling up. - Set clear escalation and exit criteria
Define what triggers additional review, full approval, or termination — and apply those rules consistently. - Be transparent with merchants
Merchants should understand upfront that approval is provisional, what restrictions apply, and what is required to graduate to full approval. - Ensure system integration
Website scanning, KYB/KYC, MCC detection, transaction monitoring, and case management must work together seamlessly to avoid fragmented workflows.
The Critical Role of Automation and Intelligent Tools
Across the discussion, one theme was constant: automation in onboarding and underwriting is no longer optional. The role of automation is not to remove accountability, but to compress time while preserving quality and control.
Key automated onboarding capabilities include:
- Website scanning and content analysis to identify prohibited products, services, or deceptive practices
- Accurate MCC detection, which ensures merchants are classified correctly and routed through the appropriate underwriting path
- KYB/KYC and sanctions screening, including beneficial ownership and adverse media checks
- Merchant match and negative history detection, helping prevent repeat offenders from re-entering the ecosystem
- Ongoing monitoring, enabling continuous compliance rather than episodic reviews
As panelists noted, AI-driven tools can often perform these checks faster and more consistently than manual processes, but human expertise remains essential for interpretation, escalation, and regulatory defensibility.
Looking Ahead
As the payments landscape evolves, onboarding and underwriting are becoming less episodic and more continuous. Speed will soon be table stakes, not a differentiator. What will matter most are quality data and analysis that provide confidence, transparency, and explainability for merchants, regulators, and card networks alike.
Provisional approvals can be a powerful part of that future, but only when paired with strong automation, clear governance, and experienced human oversight.
Learn More
LegitScript helps payments companies modernize merchant onboarding and merchant underwriting without compromising compliance. From website intelligence and MCC detection to KYB/KYC, merchant monitoring, and full lifecycle risk management, LegitScript enables faster onboarding, stronger underwriting decisions, and ongoing compliance at scale.
Contact us to learn how LegitScript can support your merchant onboarding and underwriting strategy.
The full webinar recording is available on demand.
