High risk payments, most people who deal with selling online have heard about high risk payment processing for sure. However, only a fraction of them understand what high risk payments mean.
Business owners who partially understand what high risk payment processing actually means will tell you that you shouldn’t get involved and to avoid these industries.
Some entrepreneurs are so illiterate on this topic that to them, high risk payments mean you shouldn’t get involved in that industry.
Even though some industries deal with high risk payments, it should not be the reason to back out from it, especially when the industry has a lot of potential.
High Risk Payments, How did it come to be?
First of all, you need to know how the term came to be in use.
It started with the bank’s involvement with businesses.
Acquiring banks or Acquirers classify a business as either a low risk industry or a medium risk industry or a high risk industry. This is where the terminology originated.
Now how did the “high risk industry” generate “high risk payments”?
Actually, it happened the other way around.
Even though banks started to categorize business as low, mid or high risk businesses, the risks itself, in a way, gave birth to the need to categorize the business in the first place.
These “risks” come in different forms.
As we already know, electronic payments and credit or debit cards are now more popular than ever. Due to their simplicity and accessibility, people are almost forced to use these forms of payment. This decreases the hassle for sure. But along with simplicity, these payment methods add risk of fraudulent activities, which led banks to categorize the industry based on the risk score.
Surely there are other measures and reasons for the categorization. But we can all agree that high risk payments have heightened the chances of financial loss for the banks and processors.
Factors that Banks & Payment Processors Consider before approving a business for a High Risk Merchant Account.
Getting approval for a high risk merchant account comes with a number of challenges. No acquirer or payment processor will approve you without considering the following factors.
1. Industry regulations:
Some industries are endorsed by the government and others are under the constant surveillance.
Alcohol vendors, firearm merchants, the vape industry, etc. are the most noticeable industries where government keeps a close eye.
2. Online Businesses or eCommerce Stores:
One of the major issues with eCommerce stores or any online business is there is no sales representative to ensure the card user’s identity. That’s why eCommerce stores and online businesses are one of the main sectors where fraudulent debit and credit payments are made.
3. Bad Credit:
As far as strict goes, banks are at the top of the chain.
Banks hardly believe in giving second chances and to be honest, almost every business owner has suffered for their bad luck when dealing with bankers.
Maybe it’s not bad luck, maybe it was the downturn of the economy. Whatever the reason is, banks are not likely to give a business owner a second chance. But thankfully, there are some payment processors like GlobalPay LTD who believe mistakes can be redeemed.
4. Reputational risks:
Apart from the industrial regulations, there are some industries that have a bad reputation among the people in general.
These businesses or industries are not illegal in any sense. But when people hear about them, eyebrows frown.
Apart from the vape industry, firearm merchants, alcohol vendors, there are adult film industries, casinos etc. that have a bad reputation of being risky.
5. Recurring billing methods:
Some services require monthly, weekly or annual billing. It’s like paying your rent. You need to pay after a set period of time.
Most of the shopping and membership clubs, subscription boxes, background checks & credit monitoring services fall under this.
The users are often unaware that they are being charged after every cycle because they thought they were just signing up for one billing. In these cases, banks and payment processors are more careful in approving recurring billing merchant accounts.
6. High Ticket Size Chargebacks:
Some industries have higher than usual ticket size chargebacks compared to others. These industries are travel agencies, high-ticket coaching, SEO service providers, business consulting, web design companies etc. They are the most common in this category of high risk payment processors.
Don’t Hold Back
As I have indicated before, there are a lot of business owners who turn their head just because of the complications in getting a high risk merchant account approved.
But this is not the approach that you should take as a businessman.
If everyone in the high risk industry thought they shouldn’t be involved in it due to high risk payment processing, the vape industry wouldn’t have become a billion dollar industry and millions of people wouldn’t have signed up for Forex sites.
So, if you were thinking of getting involved in one of these booming industries, the complications of receiving payment processor approval should not worry you.
Before you start
However, before you start making the strategies and develop the business format, you should consult with someone who has experience with such situations. Also, you can talk to the payment processors directly and explain what you are thinking of doing. This way, they will offer you sound advice on the issue which will help you get the merchant account approved quickly.
Also, some processors or payment solution providers like GlobalPay LTD offer tailored solutions according to the need and discussing with them will make your work much easier as you’ll be guided through the whole process. So, go ahead and approach them. Don’t hold back because of the fear of being declined.