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.

Setting up a High Risk Merchant Account for Your Risky Venture

A merchant account is an important account that you required in order to accept online credit cards. If you are planning on running a website that allows you to collect fees from those who visit your site, then you cannot start without merchant account payment processing agreement. If you are running a high-risk merchant account, it is most likely that you will have a hard time in finding out a credit card processing options. As there are only a limited number of providers who are willing to accept such clients and if they do, their rates are often quite high. High-risk accounts include the adult websites, online casinos, and pharmaceutical merchants etc.

It is essential but to have a merchant account that is tailored to fix a business which is deemed high risk or operating in an industry that has been deemed as such. As merchant carries high-risk business such as adult services providers, it is difficult and hard to obtain a merchant account. This is because due to the risks of credit card frauds increment and fake holders with of the high risk is involved. The result is that banks concerned on providing Internet accounts to merchants person, who can then turn to private acquiring institutions to provide them merchant account services.

With the use of merchant accounts, the online companies are able to accept transactions via credit cards. And because of the convenience of having to pay through a credit card, they are able to become profitable quickly and efficiently. However, getting a merchant account is not easy especially if you are considered “high risk.”

With International Bank Services (IBS) we provide standardized and customized High-risk Merchant Account solutions for your Risky Business venture.