If they take delivery of an SSL cert from the CA themselves, I don't see why it'd be an issue. A simple GUI app can be produced that let's you open the CA cert files and spits out the ExtendedCert file, which you then send to the PP.

However, for small businesses like local shops, yes we don't expect them to have a CA cert at the moment. Many of them do have small websites but for those that don't, I don't think any great solutions exist yet. A virgin market waiting to be tapped, perhaps ...

 

What is "the merchant identifier" exactly, and what does it mean? If this question is left unresolved, then it doesn't mean anything and as such it's equivalent to putting the merchant name in the memo field, which is fine and what I expect to happen for now. 

If it's resolved, then it makes payment processors into certificate authorities themselves. I think such a solution would be spiffy, but it can be done within the same framework we have today by just having wallets add some Bitcoin specific roots to their trust store before PKI verification. For example, BitPay could become their own CA that doesn't issue SSL certs but rather "local business certs" that contain a verified street address. Indeed X.509 certs include X.520 names, that's one reason they're so damn complicated, and that's already got ways to express organisation names.

Actually setting such a scheme up requires real work though. If we want a wallet to display something like:

   "Pay to:  Room 77, Graefestraße 77, Berlin"

then the question is, how is that verified and what does it mean when a payment processor issues a cert containing it? Did someone physically visit them? Did they just check on Google Maps? Does it mean it's a real incorporated business or could it just be the address of a childs lemonade stand?

My inclination would be to say that the ID requirements should be low and cheap; for our primary use case of making hardware wallets secure, you don't need robust ID verification, you just need to ensure a MITM can't issue themselves duplicated ID's on the fly. Just posting a postcard with a nonce on it would be sufficient IMO (or making a phone call to a number obtained from a previously verified business listing).

Alternatively, a bitcoin payment processor CA could make visiting a business, gathering photo evidence and issuing a cert into a kind of microwork task with the PP/CA acting as a broker.