- September 18, 2017
- Posted by: ipaytotal
- Categories: Finance & accounting, High Risk Merchant Accounts, International Bank Accounts
The high-risk merchant accounts serve businesses or organizations that are classified as high risk. The credit score company often does the classification of businesses, creating the low-risk and high-risk businesses.
If you operate a high-risk business, the process of applying and getting an approved high-risk merchant account can be tedious and overwhelming. This is especially if you are working with the regular payment processors.
At iPayToTal, our team of experts can get you secure an approved low to high-risk merchant account. We serve B2B businesses, retail clients and eCommerce owners, ensuring custom solutions that provide an easy connection to your bank. With iPayToTal, you will no longer experience difficulties trying to get your account placed. We help customers begin accepting payments, regardless of the type of business, or risk profiling. Our solutions are available at a reduced rate.
Our experts will help you through the challenging and often overwhelming process of applying for the payment processing solution. At iPayToTal, our commitment is ensuring that you are pre-qualified and approved for the high-risk merchant account in the UK, US, including international banking. We provide our customer’s solutions that are suitable for their businesses.
What are the categories of high-risk businesses?
When it comes to business risk profiling, it is important to understand that, it is the payment processor, who decides to categorize a business as high-risk or low-risk. Owing to that, when applying for the merchant account, you fall under either the low-risk profile or the high-risk profile. The criterion used while profiling the businesses is a preserve of the payment processor and so, difficulty to understand.
Some business types are categorized as high-risk, examples including those in Pornography, and drug suppliers. However, for other business types, the classification depends on the processor’s perception of the industry in which the business operates.
When deciding on the high-risk statuses, providers of merchant accounts hold some exceptionally strict rules. For others, the criterion is somehow loosened, making it easier to be approved. If you want the services of a specific payment processor, iPayToTal provides credit card processing service, making it easy and convenient for businesses categorized as high-risk.
Generally, the profiling of businesses as high-risk can differ from one merchant account provider to another. Some of the merchant account providers, and especially those offering low-cost services, do not acknowledge these high-risk businesses. This is so that they avoid falling victims of fraud while lowering the expense incurred by their current customers.
On the other hand, there are merchant account providers who approve high-risk businesses merchant accounts. However, the service comes at higher rates and fees, owing to the elevated risk level, that the payment processor is accepting hence giving you the merchant account.
The third category of payment processors is the experts who help in the approval process of the merchant accounts for high-risk organizations. For this category, their rates and fees is not a good deal for none high-risk merchant accounts. This category of processors primarily targets the high-risk businesses that have been turned away by their providers.
What is the accompanying factors characterizing high-risk businesses?
Now, we have seen that the right criteria for deciding the high-risk status differ from one processor to another. It is important that we analyze the characteristics defining high-risk businesses. Here are some definitions:
- Characterized by a high fraud rate: if you operate in an industry that has a history of a high rate of risk, the possibility is that the processors will define your business as high-risk. This is based on the behavior pattern of the customers, and not that of the business directors.
- Businesses that operate inside of the US but are headquartered outside of the US: In the case of an offshore business that operates in the US and sells to customers in the US, payment processors might flag you as a high-risk business. However, the potential for fraud is the major defining factor, not forgetting the banking regulations in your mother country.
- The products or services are questionable: This is a common reason why businesses are categorized as high risk. For instance, if you are selling illegal drugs or distributing pornography material, the business will most likely be categorized as a high-risk business.
- You practice dubious sales and marketing practices: If your business is often thought of as a high-risk, business, and payment processor will categorize your business as high-risk.
- You have a bad credit history: This profiling criterion focuses on the individuals who own the business, and not the business, or type of products. Therefore, if your credit score is poor, you will experience high-risk profiling.
- High average ticket sales: if your business is routinely acknowledging unusual high-cost buys, you can be classified as a high-risk business.
My business has different characteristics
If your business is classified under the high-risk category, you need not worry. The E-Commerce risk factors are different from one banking institution to another. In addition, there are different customized solutions available from the merchants. The defining factors we have looked at above are only considered when calculating the risk factors.
Other factors to consider
While applying for the merchant account, there are a couple of things to put into consideration. Apart from the risk factors that we have looked at, different highlights about your organization and the business, history will affect your eligibility when applying for the credit card processing solution. Here are some questions you will be required to respond to during the merchant account application process.
- Do you have previous experience using the payment processors?
- Do you have a recent payment processing history?
- Has your merchant account been terminated in the recent past?
- If yes, why what reasons led to the termination of the merchant account?
- Was the termination reason processing a higher amount than the set limit?
- Do you encounter high chargebacks?
- Is the service or the product declared illegal?
- Did you use your merchant account to process credit cards that belong to another business?
- What is your current credit score?
In the session that follows, we will have a look at some of the business types that are often regarded as high-risk. In this list, we do not cover all the high-risk business types. However, we capture those businesses that are frequently termed as high-risk. Do not forget that, the criteria of categorizing a business as a high-risk account differs from one provider to another. At iPayToTal, we have the knowledge and the experience required when it comes to processing the merchant account ensuring a working solution.
The Chargeback in High-Risk Merchant Accounts
If you have been doing business for some time and changed the payment processing service provider, you could be termed as a high-risk business. This is if you have had a high number of chargebacks with your past credit card processing service. Therefore, you belong to the “match” list owing to the excessive chargebacks.
Are you wondering why you may have encountered various chargebacks? Here are some of the reasons why.
The customer did not put a description on the credit card statement
There is purchase regret because of a big-ticket purchase
Customers did not remember they had made a purchase
An outcry from clients indicating that your services do not provide the publicized benefits
What can you do from it?
There are four approaches to use in order to change the status. Let us have a look at some of them.
Disputing the chargeback
A chargeback is when a client is demanding that the business has unjustifiably charged them. Therefore, reacting to it, you can claim that the transaction was actually valid.
For instance, if the client claims the transaction was initiated without his knowledge, you can show the evidence that it was the client who initiated the transaction. For online transactions, the client’s IP Address is good evidence to show that they actually visited the website and purchased. In case of a transaction that occurred at the brick and mortar establishment, show the customer’s signature as captured on the credit card receipt.
In case where the business chargebacks are order of the day, indicate that you made a custom product and it takes time for the customer to receive the product. Ensure you have all records of the transaction, for reference use when the case begins.
Inquire why you are in receipt of a high than average chargeback
In some instances, the problem is actually not easy to solve. This could be because of a basic descriptor on the credit card that does not match with the business name. Maybe the client does not identify that they made a purchase from the business.
Claim the low-risk reclassification
In some instances, the banks will acknowledge the business, but end up demanding a high processing rate. The reason for this is that they are taking a risk. Therefore, to be reclassified as a low-risk business, you have to maintain a positive record for at least six months. Therefore, over the six months period, ensure a low chargeback and refund rate. This is usually below 1% of the aggregate transactions.
Look for a trusted business partner
The merchant account providers might accept working with the high-risk businesses, and surprisingly, charge them a low rate on the merchant account. If classified as a high-risk merchant account, you may want to utilize their services.
The Fees and Rates Charged on high-Risk Merchant Account solutions
Compared to the none high-risk merchant accounts, the merchant accounts for the high-risk businesses will cost more, and this is unavoidable. Therefore, the holder of the high-risk merchant account has to pay more in terms of the accounting expense and the processing charge. In addition, the person is likely to get stuck in long contracts.
In addition, some none high-risk businesses will have bargaining power hence negotiate the length of the terms of the agreement. On average, this will take three years for the underlying term, and there is an automatic renewal clause that broadens it to one year. However, the extensive contracts are disliked with merchants with the trend inside of the business pushing more toward month-to-month agreement.
Regretfully, the high-risk merchant accounts will not have much when it comes to negotiations. In that regard, expect you will most likely get stuck if you have a project that takes more than three years, with the added clause that extends the initial time frame. The contract terms also include a clause allowing early termination fee to be charged. This is if the account is closed before the contract term has elapsed. If that is not good enough, you might liquidate the damages provision in the agreement that results in the cost of breaking it further.
The processing business pushes more towards lower month to month and the annual account expenses. For the high-risk business, you will not be so fortunate and you should anticipate a recurring fee especially when it comes to the monthly account charges. These will be higher compared to the none high-risk business that has the same processing volume. If you have offered a rate that is much higher than the current one, you should consider another processor.
To sum up, as experts, our view that you audit the proposed contract before you talks to any processor. This is a basic requirement for any business, and it is significantly important for the high-risk merchant account. The agreement fine print might contain some critical signs that you are working with predatory “high-risk specialist”. The possibility is that you will be charged a considerably high fee compared to the regular requirement to pay as a high-risk merchant.
At iPayToTal, we provide our customers the following solutions:
- High-Risk Merchant Accounts
- High-Risk Credit Card Processing
- High-risk ACH Processing
- High Volume Merchant Account
What to check for when applying for services of a Merchant Account Provider
When it comes to the Client/Vendor relationship, you need to perform proper vetting. This involves examining the qualifications of the potential partner and their experience. Make sure that the financial investment is not to be misappropriated.
The merchant account is an important component in your business, and should not be overlooked. Therefore, in this article, we will look at some of the questions that should be asked before you hire a merchant service provider. Further, we also examine the qualifications to look out for, helping your business to succeed.
When it comes to the customer/merchant relationship, ensure proper screening research. This involves investigating every potential service provider, looking at his or her qualifications and also the relevant experience. This way, you will be assured that the financial investment is not wasted. The merchant services are an important factor in business, and should not be ignored in any manner. Let us look at some of the factors to consider before you procure the merchant services provider.
The factors to consider when vetting the high-risk merchant account provider
- The reputation and reliability: The high-risk merchant service involves a high amount of money. Therefore, the seller should have a good reputation when it comes to security. The provider of the merchant account will deal with credit card transactions and should ensure a safe payment framework is in place. In that regard, a good reputation is paramount. Ensure that you request them to provide details of past customers for reference purposes. Talk to the previous customers who were classified as high-risk merchant account providers.
- The experience: finding out the experience level of the service provider is beneficial. Thus, ask them how long they have been in business, which should give you an indication of the top-quality services and the client trust they have earned over that period.
- Inquire the service fee: in the past, the merchant account providers charged high rate expenses for the high-risk businesses. This was so that they could compensate for the potential mishaps that would have occurred in the future. Nowadays, the view is that the providers of the merchant account service need to work in light of the legitimate concern for the customer. This is when it comes to choosing the high-risk merchant service providers.
- The Security: You want to make sure that the online accounts and the sales systems are very secure. Therefore, the priority here is making an arrangement in the event something turns out unexpectedly. Therefore, find out the sort of security that your merchant service provider provides. There are different security levels, and priority is ensuring that you choose one that works best.
The Advantages of hiring an expert
IPayToTal is a pioneer when it comes to providing financial and business services suitable for high-risk businesses. This is with a special focus on the Cannabis industry. At iPayToTal, we believe in providing transparency, credibility, and legitimacy, while ensuring we provide high-level customer support.
IPayToTal works in collaboration with experienced and well-educated teams, with several years of experience providing merchant accounts to businesses that are classified as high-risk businesses. Therefore, our main aim is securing our customers from fraudulent transactions and we are dedicated to providing high value to our customers. If you are looking for a merchant account service provider, talk to us today. Our aim is to provide best value to our customers while ensuring that they enjoy and benefit from our services. For more details, follow the news update on our website portal. Our experts are always ready to serve you.