Searching for a reputable and reliable payment gateway to handle transactions from your customers is not an easy task, especially if you’re a high-risk merchant. But before we dive into the issue, let’s start from the basics and define the payment gateway.
A payment gateway is a technical middleman between a merchant and a payment processor. It’s a piece of software that transfers the encrypted credit card data and transaction information from the merchant’s checkout to the payment processor, enabling secure online payments acceptance and transaction processing.
Respectively, a high-risk payment gateway is the same service but a type that works with merchants who are considered to run a risky business. Actually, there are even some specialised solutions for high-risk merchants.
Any business assumes certain risks, and e-commerce is not an exception. Moreover, the exposure to failures or different profit-lowering factors may vary for two companies of similar sizes and from one industry. Given this fact, who and how can say that a particular company is a high-risk one?
The answer is a bank and a credit card processor. Acting as payment service providers to merchants, banks and card processors assess the risks associated with payment processing for a particular business client before offering them a merchant account. They evaluate various factors, from products a company sells and its sales volume to lousy credit card processing history, chargebacks, and fraud rates. That’s because payment processing is also a business, and its owners want to avoid unexpected losses and problems, or at least to charge more for providing services to potentially troublesome businesses. Moreover, payment providers are responsible for what they process, and they may face problems with issuing banks if fraud or chargebacks soar.
Each provider decides which factors to take into account when determining if the industry is high-risk. Hence, the list of industries falling under this category varies from one processing provider to another. Still, there are certain types of businesses that many payment services call high-risks:
Airline and event tickets
Dating and adult
Auctions, credit collection, crypto, pawn shops
Attorneys and brokers
Gambling, betting, gaming
Smoking-related or CBD products
Health and wellness products
Membership or subscription-based services
Companies assisting in offshore business activities
Real estate, furniture retailers, etc.
Again, this isn’t an exhaustive list, and each provider has its criteria for identifying the merchants that belong to the high-risk industry. One PSP can deny your merchant account application, while others may approve your merchant account. In the next part, we’ll dig a bit deeper into the issue.
What’s tricky in terms of accepting online payments as a high-risk business is securing a merchant account. We already know why banks and payment processors are cautious when it comes to working with such companies. However, the increased demand drives supply, so numerous companies are currently claiming to offer high-risk merchant accounts, sometimes even with so-called instant approval. Be careful when trusting such claims, as even low-risk businesses can’t get approved instantly. The average approval duration is no less than a few days. And, of course, take some time to do your research and read reviews on payment processors before applying for a merchant account with them.
The good news is that finding a payment gateway is a piece of cake once you have an account. That’s because payment gateways only encrypt card data to transfer it to the processor securely, so they don’t take on any merchants' risks.
If banks or payment processors consider your company or the industry you’re in risky, getting a merchant account will be quite a challenge. And when you’ve got one, the fight is not over: you’ll face some restrictions and will have to pay higher fees than usual. Moreover, your merchant account can get blocked if you break the conditions, resulting in lost sales.
There’s nothing we can do about it: payment providers charge more for processing high-risk businesses’ transactions. That’s because they want to recoup the risks. Most commonly, companies are charged 3-4%, and the types of fees applied vary greatly. Still, there’s always a chance for negotiating better terms.
As a high-risk merchant, you have to maintain a rolling reserve. It’s when a particular share of your transaction volume (up to 20%, but usually less) gets kept on hold for a specific period and is released and settled afterward. This mechanism allows banks to protect themselves from anything that can possibly go wrong with a risky business.
High-risk industries statistically have a higher average chargeback rate than others. Moreover, providers may set monthly thresholds. We recommend looking for chargebacks prevention tools and strategies to avoid facing high chargeback fees and tarnishing your reputation.
Same as consumers, online businesses are fraudsters' targets. There is a myriad of fraud schemes that are constantly evolving in response to technological solutions aimed at preventing them. Still, an advanced anti-fraud is a must for high-risk businesses. Isn’t it better to pay for the handy tool than face losses due to not having it?
Payment orchestration platform Corefy is very appealing for high-risk merchants, as one of its fundamental benefits is the opportunity to work with multiple providers conveniently. By connecting merchant accounts at different PSPs, you can manage all your accounts in one place. The more PSPs you work with, the more features they support are available for you, and the more methods you can use to accept payments internationally. Another perk is continuity of operations. Sometimes high-risk accounts get blocked by PSPs, so the ability to quickly forward your traffic to another vendor is invaluable. Get in touch with us to see what’s more in it for you!
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