High risk payment processing

What's a high-risk payment processing?

Even though all businesses are equal in the right to accept debit/credit card payments from their customers, it may be difficult for some companies to set up payment processing. Why do some businesses face more limitations and restrictions than others? The answer is quite simple. The higher the level of risk in your industry, the less willing payment companies will be to cooperate with you.

In banking terminology, a high-risk business is a business with a high level of chargebacks — cancelled payments and refunds. Since banks and payment service providers take on all the risks associated with processing transactions, not all want to work with high-risk companies. Thus, if your company falls into this category, you'll seek a payment service provider willing to handle high-risk payment processing.

Setting up high-risk payment processing is typically associated with a more thorough check of your e-commerce business before obtaining a merchant account, as well as higher service fees. It is because the entity responsible for processing your transactions does not want to bear reputational risks and losses. However, running a high-risk business does not mean that you won't be able to accept and process credit card payments from your customers. Many third-party payment service providers and processors will gladly help you with this. Before you get worried, let's determine what kind of business is considered high-risk.

Factors that make your business high-risk

When determining a low-risk or high-risk business, banks and other financial institutions are guided primarily by two factors — your industry and how you're doing business. The first point concerns merchants selling high-risk products such as weapons, pharmaceuticals, CBD vapes, etc. The second aspect includes many specific factors: credit history, overall profitability, annual processing volume, billing model, level of chargebacks, currency, location, and total time in the market. For example, suppose you're a startup with minimal credit card processing history. In that case, predicting how your business will develop and operate can be difficult, which is also a good reason for refusal.

Some factors may seem subjective, but they are all crucial for companies planning to cooperate with merchants. For example, a business with a poor credit history and many chargebacks can't be considered trustworthy. A partnership with such a company may damage the reputation of a PSP. Plus, there are countries with a high chargeback risk (almost every country except the USA, European Union, Canada, Japan, Australia, and South Corea). So, even if your company is in a low-risk industry but you have more than 1% chargebacks, banks and third-party companies may classify you as a high-risk merchant due to potentially significant losses.

Each processor has its own terms of cooperation and preferences in industries they're ready to work with. But fraud and chargebacks aren't welcome anywhere. That's why setting up high-risk payment processing usually takes more time and effort than a traditional one.

Types of high-risk businesses

E-commerce is full of unpredictability and hazards. However, some businesses are still more prone to financial failures and have a greater chargeback level. Here's a list of specific industries that may face some difficulties with obtaining a merchant account:

  • Betting

  • Gambling

  • Dating

  • Gaming

  • Exchanges

  • Forex

  • Tourism

  • Nutraceuticals & Supplements

  • Alcohol & Tobacco

  • CBD vapes & E-Cigarettes

  • Telemarketing

  • Adult entertainment

  • Subscription-based applications

  • Software products

Thus, any online store that sells these types of products via the internet should meet specific standards established by payment processors. However, regardless of the industry, the company can be stable and have a good reputation, dramatically increasing the ability to get a merchant account with minimum effort. But still, if your business falls into one of the above categories, be prepared for more extended verification and careful examinations of your credit history, chargeback rate, and other weighty parameters.

What's a high-risk merchant account?

In today's world, accepting card payments is a must for any e-commerce business, and merchant accounts make it possible. But opening it is problematic if your business falls into a high-risk category. Most banks and financial institutions don't want to be involved in problems such as fraud, chargebacks, or losses. Even if your business performance is satisfactory, some PSPs may categorise your company and the products you retail as a high-risk industry and refuse to provide processing services. But don't be discouraged if you haven't received approval from a processor. You probably just need a high-risk merchant account.

The main difference between a traditional and a high-risk merchant account is that the latter has higher fees and processing limits. It can be explained by the fact that a payment service provider wants to cover possible financial losses from high-risk companies rather than attracting attention with suspiciously large volumes of transactions processed. However, slightly inflated fees are often justified because, besides having a merchant account, you can also benefit from a wide range of functions and services that will become excellent assistants in doing business. Among them are dedicated customer support, fraud monitoring, etc.

How to open a high-risk merchant account?

As we can see, opening a high-risk merchant account is a tough row to hoe, but with it, businesses can accept funds from their customers. To sell products under your brand worldwide and accept online or credit card payments, every company needs a trading account (MID) and a gateway — a processing technology designed for online transactions. The most convenient way to get them is to cooperate with a third-party company offering processing services even for 'risky' industries.

It is an indisputable fact that there are no businesses that can guarantee stable and profitable activities permanently. But still, there's a large number of companies that are ready to provide all types of businesses with MID, gateway, and other necessary tools for trouble-free accepting and processing transactions. The road to successful sales is open when your high-risk merchant account application is approved. All you need to do is carefully choose the solution that suits you best.

How to choose a high-risk payment processor?

Reliability and security should work mutually beneficial in the relationship between a high-risk merchant and a PSP. When choosing a high-risk payment processor, we recommend taking into account several criteria:

  • Experience and reputation of the provider

  • The ability to remotely agree on the terms of a contract, including conditions for connection and launch

  • Pricing and fees

  • The ability to customise the checkout page for the overall design of your website

  • Support for multiple currencies and various payment methods

  • Chargeback processing

  • The ability to track and manage transactions

  • High level of card data protection

  • 24/7 customer support

Your belonging to a high-risk category does not limit you from receiving a first-class payment processing solution. At Corefy, we provide all types of businesses with a secure and efficient one-stop payment orchestration platform allowing you to connect multiple PSPs and accept as many payment methods and currencies as you need. Plus, we are entirely PCI DSS L1 compliant, which means maximum security for your and your customer's sensitive data. Get in touch with us to find out what we can offer you!

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