If you run a high-risk business, you’ve likely faced challenges when setting up payment systems. Traditional processors often shy away from working with businesses deemed “high risk,” making it difficult for you to accept payments seamlessly. This is where high risk merchant accounts become essential. They’re the key to handling transactions securely and efficiently, even in industries with complex requirements or a higher threat of chargebacks.
What Are High Risk Merchant Account?
A high risk merchant account is a type of payment processing account tailored specifically for businesses that may face higher risks due to their industry, transaction volume, or chargeback rates. These accounts are designed to help businesses accept credit and debit card payments while mitigating the risk exposure for both the business and the payment processor.
This classification often comes from banks and payment processors that evaluate factors like fraud risk, operational risks, and compliance requirements. Ultimately, high-risk merchant accounts allow businesses flagged as high-risk to operate smoothly, even when traditional banking solutions aren’t an option.
Which Businesses Are Considered High Risk?
Certain industries and business types are more likely to fall under the high-risk category. If you’re in any of these industries, securing a high-risk merchant account is often essential for processing payments without disruption. Common examples include:
- Ecommerce Businesses: High transaction volumes and card-not-present transactions increase fraud risks.
- Adult Entertainment: Adult content providers face legal and reputational challenges from traditional payment processors.
- Travel Agencies: Cancellations and refunds are common, leading to higher chargeback rates.
- Subscription Services: Continuity billing models carry an increased risk of customer disputes.
- Online Gambling & Casinos: Regulatory scrutiny and fraud risks play a role in high-risk classification.
- CBD and Vape Stores: Sales of regulated or restricted products lead to higher compliance needs.
Payment processors often classify businesses as high-risk due to factors such as large transaction sizes, chargeback history, or operating in industries that historically face higher fraud rates.
Benefits of High Risk Merchant Accounts
While being labeled as high-risk can feel like a challenge, having a high-risk merchant account can offer many benefits tailored to your specific needs. Here’s why it’s a game-changer for businesses operating in high-risk industries.
1. Greater Flexibility with Risky Industries
Unlike traditional banks that are hesitant to accommodate businesses they perceive as uncertain or “too risky,” high risk merchant account providers specialize in working with your industry. They understand your unique operational challenges and offer tailored solutions.
2. Chargeback Mitigation
Since chargebacks are a primary concern for high-risk businesses, many high-risk payment processors include tools and systems for dispute management. These systems minimize financial losses and maintain your merchant account in good standing.
3. Support for High Transaction Volumes
Many high-risk businesses need to process significant transaction volumes, especially during peak seasons. High-risk accounts are equipped to handle higher monthly processing caps, ensuring uninterrupted service.
4. Global Payment Acceptance
High-risk merchant accounts often allow you to accept payments internationally, expanding your reach to a global customer base. Whether your customers shop with local credit cards or alternative payment methods, these accounts ensure seamless payment acceptance.
5. Improved Fraud Prevention
Advanced fraud prevention tools come standard with many high-risk accounts, safeguarding both you and your customers from fraudulent transactions.
How to Secure a High Risk Merchant Account
Obtaining a high-risk merchant account involves more steps than a traditional payment processor requires. That said, the process is relatively simple when you prepare ahead of time. Here’s how to secure one for your business.
1. Understand Your Business’s Risk Profile
Before searching for a service provider, understand why your business is classified as high-risk. Whether it’s industry-specific regulations, chargeback history, or transaction volume, being clear on your risk factors helps you prepare documentation and choose the right provider.
2. Compare Providers
Not all providers are created equal. Look for high-risk merchant account providers with experience in your specific industry. Reputable providers typically offer customizable tools, responsive customer support, and transparent fee structures.
3. Prepare Documentation
You’ll likely need these documents for your application process:
- Valid business license.
- A financial history, including tax records.
- A breakdown of your chargeback rates.
- Business bank account details.
- Proof of compliance with industry regulations.
4. Evaluate Fees and Contracts
High-risk merchant accounts often come with higher fees than traditional accounts due to the increased level of service and risk management. Look carefully at the pricing structure, including setup fees, transaction rates, and any early termination fees.
5. Integrate the Solution
Once your merchant account is approved, work with your provider to seamlessly integrate the payment gateway into your ecommerce website or point-of-sale system.
What to Avoid When Choosing a Provider
While high risk merchant accounts are invaluable, not all providers offer reliable services. Here are a few red flags to look out for and avoid when choosing yours.
- Hidden Fees: Some providers may not disclose all the associated fees upfront, leading to unexpected costs.
- Poor Customer Service: Your payment processor should offer consistent and accessible support to resolve payment glitches or disputes promptly.
- Low Authorizations Rates: A poor authorization rate can harm your sales and frustrate customers. Focus on providers known for high transaction approval rates.
- Lack of Fraud Tools: Fraud threats require robust prevention tools. Don’t compromise on providers who fail to offer advanced security measures.
