Low Risk vs High Risk Merchant Account

Are you a business owner and thinking of having a merchant account for online payment processing through credit/debit cards? Please go through this information before taking the next step.

There are categories of Merchant Accounts viz. High Risk Merchant Account and Low risk Merchant Account. So before you apply for merchant account you need to have proper information regarding which category your business falls in. Here we will tell you the difference between both the categories.

Apply for a Instant Approval High Risk Merchant Account

If your Business satisfies the following characteristics then you are applicable for a low risk merchant account.

Less than $20,000 is processed by you in monthly period
Very low preferably zero chargeback rate
The country that you operate from is low-risk
Average size of your ticket is less than $50
Your Operations are based in low risk industry

Following Characteristics push you in High Risk Merchant Account category:

If you are a Brand new business with no business history
High Ticket Size and chargeback ratio
Low reputation
You as the owner of the business has low credit score
Time limit of the service provided is very high

There is no need to worry in case your business comes under high risk category, you can always lower down the risk and become a Low Risk Merchant by reducing the ticket size to a lower prize and reduce the ratio of chargeback and prevent frauds in transactions.

The approval of low risk merchant account is quicker as compared to the approval to high risk merchant account.

In case you come across a financial institute offering Instant High Risk Merchant Account approval, stay alert as there no such term in Merchant Account Market.

Why are High Risk Merchant Account Fees so High?

If your business has already been identified as high risk, you might be aware of the difficulties you are going to face while approaching a decent merchant account provider. The probability of a risky business getting rejected by regular banks and processors is high. In fact, if your business deals with products and services like CBD Oil, Forex, Online dating, Adult content, Gambling, etc then you may as well forget about acquiring a regular merchant account.

This leads to businesses then opting for the next best choice – High Risk Merchant Account Solutions. A high risk merchant account is mostly similar to a regular merchant account with the most notable exception being, the rates associated with the former.

When approaching a processor for a merchant account, you may either get outright rejected or your high risk business will be charged higher than what is charged for any other regular business.

Why, then, are High Risk Merchant Account rates so high?

The simple reason why you are charged higher than regular is because of the risky nature of the business you operate. A merchant account is essentially a credit given to you by your processor. When a customer purchases an item and makes the payment, the bank or acquirer deposits the amount to your merchant account and collects it from the customer’s card at a later date. This means a merchant has access to funds before the payment is actually made by the customer.

Apply for High Risk Merchant Account Solutions

Now, after the funds are deposited into the merchant account and when the payment is collected from the cardholder, a lot can go down in between like frauds or chargebacks which puts the processor at a risk. High Risk businesses especially are notorious for racking high chargebacks.

In such cases, processors will obviously look after their interests first to try and avoid any chances of losses. Hence, merchant account providers raise their rates to balance out the risk posed by your business. This is why high risk merchant accounts are so expensive.

While finding a merchant account for high risk business might prove to be a task, you still have the power to negotiate before settling for the right one. Always do your research and ask questions to a merchant account provider. Read the terms and conditions of your contract before signing on the dotted lines and check for any unnecessary hidden fees. Go for a high risk merchant account that fulfills all your requirements at a fair rate.

Why Do I Need A High Risk Merchant Account For Fantasy Sports?

Millions of young die-hard sports enthusiasts are hooked to fantasy sports. Baseball, Football, Hockey, Cricket, Soccer being the most popular fantasy sports websites.

What better way to make yourself a part of a sport you absolutely love? It only gets better with your friends and family joining in the virtual game.

This recreation sport may have only begun as a means of fun among friends but is now a booming billion dollar global industry. Billions of dollars are being invested in virtual game platform across various sports pursuits and last checked, the industry is generated $7.22 billion revenue according to a research conducted by Ipsos Marketing.

Fantasy sports are played both on a desktop as well as on smart phones. With a demographic consisting of largely young players, the use of mobile phones to play the game has increased significantly in the past years. Online platforms being the primary source of fantasy sports, it becomes vital to provide online credit card processing services to its participants.

Although with the industry being categorized as high risk, obtaining regular merchant services for credit card processing is an uphill task for fantasy sports merchants.

Why is Fantasy Sports considered as a High Risk Industry?

Despite being a flourishing money making industry, financial institutions refuse to engage with these merchants and are quick to decline their applications.

Fantasy sports business is also known as the most popular type of virtual sports betting. With the games being largely viewed as form of gambling, its nature of business becomes controversial and hence placed under the high risk bracket by banks.
Another major issue being the industry is plagued with customer-initiated chargebacks due to its high ticket price.
Recurring billing or subscription-based billing results in a lot of cancellations and refunds.
As with games, there are winners and losers. While some are a good sport about being on a losing team, merchants also encounter a significant percentage of defeated players who file fraudulent chargebacks after losing to avoid paying.
Betting is a greedy game. In an attempt in rack in more, players end up with a huge bill and then try to cheat the chargeback system to play for free. This is called friendly frauds.
With the industry being heavily regulated, ensuring strict compliance of rules by merchants puts tremendous burden on the underwriting team processing the application.
Sponsor banks follow a strict policy against high chargeback ratio. If a merchant’s chargeback exceeds a certain limit, the bank is quick to shut down the account as well as charge the processor a heavy fine.
When chargebacks go unpaid by the merchants, it causes a huge financial risk to banks and credit card processors making them extremely cautious about accepting businesses with a possibility of high chargebacks.
The payment methods that fantasy sports merchants heavily rely on are online, virtual terminals or MOTO which are susceptible to fraud.
Excessive liability coupled with uncertainty makes it a high risk industry.

How do I obtain a High Risk Merchant Account for Fantasy Sports Business

You have your fantasy sports website up and running but no way to accept payments since you have discovered that the industry you operate in is considered high risk. What are your options now?

Instead of running pillar to post searching for a decent bank or credit card processor to take on your business or getting accepted and later having your account frozen during the reviewing process by online payment aggregators like PayPal or Stripe, start seeking reliable merchant account providers offering high risk merchant account solutions.

Now, you may have a long list of providers to offer their services but it is important to scope out and pick one who knows the ins and outs about fantasy sports business and have experience with the industry at large. Those being familiar with the nuances of the industry certainly help during the underwriting process of your business. Processors with a long-standing relationship with their sponsoring banks are an additional advantage.

When determining risk, an underwriter will study various factors and seek reassurance that the processor will not be saddled with the responsibility of clearing chargebacks caused by the merchants. High chargebacks and faulty business with questionable practices is the recipe for quick merchant account denial.

Reputable, law-abiding and a smooth functioning website with regular updates are the basics required from a merchant’s end for a smooth merchant account approval process.