High Risk Payment Processing and Credit Card Processing Solutions
DEFINING HIGH RISK MERCHANTS
If you run an online business with a higher risk of chargebacks and want to process credit card transactions, you need a high-risk merchant account. But what is a high-risk merchant account and how do you know you need one?
There are many traits that define a high-risk merchant. The landscape of high-risk e-commerce is ever-changing, ever evolving. With more than 15 years of furnishing e-commerce businesses with high-risk merchant accounts, we like to think we’ve remained up to date with shifts and regulations. When banks label a business high risk, it can mean several things:
- Startup business with little or no credit card processing history
- An industry tarnished by high rates of chargebacks and returns
- The high cost (such as timeshares or airline tickets)
- Subscription-based products or services, such as online dating or magazines
- A merchant who has suffered a terminated merchant account by a bank
- Flawed, imperfect credit, history of bankruptcy
- High volume businesses, such as nutraceuticals
- A country or specific region a merchant is targeting
A merchant is usually classified as high–risk if the industry has a higher risk of fraud and chargebacks.
HOW IS RISK EVALUATED?
Merchants are evaluated before receiving a merchant account to determine how much risk the business poses to the acquirer. Several variables are taken into consideration. The following are some, but not all, of the characteristics that are considered risky:
- The merchant is registered in the MATCH List database because previous merchant accounts have been terminated.
- The business is new and has very little payment processing history.
- The merchant’s industry is known to have a high rate of chargebacks or is classified with an MCC the card networks have deemed high-risk.
- The merchant sells products or services using a subscription billing model.
- The business sells to international customers in certain high-risk countries.
- The merchant sells custom goods.
- The merchant has a high average ticket amount.
- The sales model includes delayed or future delivery of goods.
- The merchandise the merchant sells poses a reputational risk to the acquirer.
There are both pros and cons of payment processing with a high-risk merchant account.
High-risk merchants typically pay more in transaction processing fees and chargeback fees to compensate for the danger they could potentially cause to the payment processor’s bottom line. They are also more likely to have money held in a reserve. However, high-risk merchants are usually allowed a higher chargeback-to-transaction ratio.
How to know your business is high risk labeled?
You wanted a merchant account for your business and decided to apply for a traditional merchant account and later got rejected by the merchant account provider and this is a very common mistake done by the majority of merchants, without knowing that their business might be flagged as the high risk they apply for traditional one and later suffer. There are various grounds why a processor might label a merchant as “high risk”.
Some of them are listed below:
- The reason can be that the services offered by you are related to safety and health concerns.
- You face the problem of high employee turnover.
- Your company deals in big-dollar transactions.
- Your company’s viability or continued profitability.
- Your business is a startup with a very little credit card processing history.
- You have a high number of returns and refunds.
- Your business is a completely new concept for the market, resulting in less room for growth.
- You are in industry with faces high chargeback ratio.
- You’ve lost your previous merchant account because of excessive chargeback in the past.
- You credit card history is unattractive.
- You provide subscription based products or services.
- You are an international merchant and deal in multiple currencies.
- Number of years in business.
- Your industry faces high rate of frauds.
Often people consider that offshore merchant account is for High Risk Businesses or for such businesses that cannot get approval by their domestic banks. But this is not the case it is only the location making difference because the bank approving the business is not a domestic bank.High-risk merchant services involve great amounts of money; therefore, the seller must have a good reputation when it comes to security. After all, they will deal with credit card transactions and need to ensure that a safe payment framework is in place. Ask for details of past customers for reference purposes before deciding. To add, talk to previous customers who were classified as high-risk businesses the same way you are.At iPayTotal, you receive precisely what you need. We provide credit card processing services, making it easy and convenient for your high-risk business.
If your business lies in the category of a high-risk business type, you know how hard it is to open a merchant account. This can add great strain on businesses owners such as not being able to accept credit card payments from clients, which kills their ability to profit. Usually, it is the payment processor who categorises business into high or low-risk types. Banks and financial institutions are careful about businesses that may affect their public image. So, if the merchant has a history of high chargebacks or fraudulent transactions, it will end up categorised as a high-risk business. Our team of experts can obtain a secure and approved merchant account for your business, whether you’re a low or high-risk business owner. We serve B2B businesses, retail clients and e-commerce owners, with customised solutions to offer you an easy connection to your bank.
Compared to other merchant accounts, the ones for the high-risk businesses will cost more, that’s a fact. This means that the business owner will pay higher fees and rates. Besides that, there’s a risk of becoming stuck in a long contract. Unfortunately, high-risk merchant accounts won’t be flexible when it comes to negotiating. Contract terms will include a clause that allows you to terminate a contract, with a fee to be charged. So, you should anticipate a recurring fee, especially when it comes to the monthly account charges. iPayTotal has extensive experience and speciality with high-risk merchant accounts and offers a wide range of bespoke options to suit your high-risk business perfectly.
Why High Risk
Offshore Merchant Account
What Factors Qualify a Merchant Account as High Risk?
Merchant service providers usually determine if a business is a high or low risk by assessing the following:
- Personal credit history
- Finances of the company
- Number of years in business
- Merchant account history, if applicable
- Type of business or merchant category code.
When it comes to merchant accounts and the risk you pose to payment processors, there are some risks that make your business stand out. Any one of the following could identify your business as a greater risk.
Businesses that Never Actually See the Card
This includes online business, home-based businesses, online dating sites, online auctions, and a variety of other businesses conducted over the world wide web. Even businesses that offer real products but manage the payment processing for the products online.
Reputation for Abundant Chargebacks
If you’ve experienced a huge number of chargebacks in the past, whether by mistakes made in the payment processing, a bad batch of products, or any number of other possible reasons, you could find that you’ve been identified as a high-risk merchant account and need to work a little harder to prove yourself in the future.
Industry, Location, and Clientele
Some industries represent a greater risk than others. Some from the nature of the business and others based solely on the reputation of the business. For instance, stores that offer adult products are just as likely to be rated as high-risk enterprises as those who deal with firearms. The same holds true for travel services, telemarketers, bail bonds businesses, online auctions, and dating websites.
What are my options as a high-risk merchant?
The best option for a high-risk merchant is to partner with a high-risk merchant account provider, such as iPayTotal. We deliver payment solutions and products to help you grow your business and make the process of opening a merchant account easy and affordable.
Our experienced team can offer you custom-made solutions to help you increase profitability and expand your business.
At iPayTotal, you can accept multiple currencies and accept payments from customers worldwide. We have a clear perspective of high-risk businesses and understand the needs of the merchant.
Other factors that increase the risk
- Company Financials and Merchant Account History : The other thing you need to do to avoid being listed as a high-risk merchant account in the future is to manage your account wisely today. This means avoid getting an account that provides more services than your business needs at the moment and staying up to date with all requirements of the merchant service provider you’re currently working with.
- How Long You’ve Been in Business : This is one that has a greater impact than many business owners realize. Newer businesses often need to prove themselves before they’ll receive preferred rates and status designations from payment processors and other merchant services providers. The longer you’re in business, the less risk many providers feel you pose.
- Other High-Risk Designations : In addition to particular industries, individual businesses may be considered high risk for factors including poor personal credit; inclusion on the Terminated Merchant File (TMF or MATCH list) for processing misconduct, non-payment, or fraud; high dollar value transactions with no business history; high dollar custom products; large number of international transactions.
Rates for High Risk Merchant Accounts
High Risk Merchant Accounts are most of the times subjected to a setup fee . The higher the risk associated with your industry, the higher the fees and charges for credit card processing.
Keeping in mind that the actual rates and fees you’ll pay depend on a number of factors, high-risk businesses should expect credit card processing fees to start around 3.5% for an established business in a “less risky” high risk category. From there, costs can rise to 10% or more, with the highest rates coming for those in the riskiest industries or businesses using “offshore” merchant service providers.