If you are going to be selling online to a global audience you need to have a merchant account that gives your business the facility to process card payments, and get paid in other ways online.
Certain types of business are deemed to be more high risk than others. If you are running a business that fits one of these categories there is considered to be a higher risk of encountering issues such as a high level of chargebacks, and more fraudulent transactions than usual.
In that scenario you would be wise to search out the best high risk merchant account around. A good provider understands all the inherently risky aspects of trading in an environment fraught with regulatory and compliance issues, which are never far from the surface when you operate a business such as online gambling, or adult entertainment, for instance.
Here is a look at what you need to know about how high-risk merchant accounts operate, and what you need to know.
A good starting point would be to have a clear understanding of what type of business and industry is considered to be high risk from a merchant services provider perspective.
Classic examples of industries that are considered high risk for the purposes of providing online payment processing services would be pharmaceuticals, gambling, and even travel services. The reason for falling into a high-risk category is mainly due to the fact that these are industries that tend to suffer from a high level of chargebacks, refunds, and fraudulent transactions.
These are the sorts of issues that can be challenging for merchant account providers, which is why they seek to categorize certain businesses as high-risk, based on their industry and general profile.
Another key criteria for defining a high-risk category would be when you are operating an online business within an industry environment that is highly regulated and subject to ongoing legal challenges.
It stands to reason that if you are running an online firearms business, for instance, there will always be ongoing compliance and legal risks to address. Clearly, payment providers need to keep up to date with these changes, and your business has to fall in line too. This impacts the costs and risks associated with running a so-called high-risk business. It’s also a clear reason why it makes sense to open a high-risk merchant services account so you are fully aligned with all of these potential challenges.
If you run a business that is modeled on a recurring payment or subscription model, this is also considered high risk.
The primary reason for this is that these types of payments often create a higher level of disputes and chargebacks than usual. Naturally enough, this risk is reflected in the type of payment provider you should choose. You will need a high-risk payment provider who understands and tolerates this level of chargebacks, by adjusting their services and rates accordingly.
Even if you are not operating within an industry that is generally considered to be a high-risk category, there will still be scenarios and conditions where your business would still be considered a riskier payment processing proposition.
One example of this would be when your business regularly processes transactions that are higher in value than the average level. A good benchmark for falling into this category would be when you consistently process transactions of $100 or more. This amount of money for each transaction raises the risk profile and that means there is a greater prospect of chargebacks and fraud.
Another key consideration when a merchant services provider is profiling your business and risk profile is your trading history and personal financial standing.
If your business only has a short history of trading and is yet to establish a track record, this will likely mean that you are considered to be in a high-risk category, regardless of the type of industry you trade in. It can also make a huge difference if you have a poor or weak credit history. These are factors that will count when your application for a merchant account is being assessed and processed.
Understandably, given the risks outlined, you should be prepared to undergo a more rigorous and forensic examination of your credentials and trading history when applying to open a high-risk merchant account.
It helps if you have a clear understanding of your personal and business risk level. This will help you to apply to the most suitable payment provider. It also helps greatly when you prepare in advance of making your application by having all of your relevant documentation ready to submit. Once you are asked for relevant information and documents, being able to provide these in a timely manner will enhance your application prospects.
Take the time to search out a provider who has experience in your sector and specialises in providing high-risk accounts. It should go without saying that these niche providers are much more inclined to accommodate your needs as they understand the risks and challenges and are more comfortable with them than a typical mainstream provider.
Last but not least, it is absolutely imperative that you are honest and transparent about every aspect of your business when applying to, and subsequently trading with, a high-risk merchant services provider.
If you are found to withhold key information or misrepresent any aspect of your business it is highly likely that your account request will be refused. It could even be terminated after opening if adverse or alternative information comes to light.
Bottom line, a high-risk merchant account provider knows and understands the risks and challenges you will have to negotiate. They will be completely transparent when it comes to outlining how they can help you, and what terms they are prepared to offer, based on your individual risk profile.
As long as you understand the rules of engagement, there is no reason why you can’t find a suitable high-risk merchant services account provider who will give you what you need and allow you to focus on growing your business.