Operating a business in a “high risk” industry creates a number of problems when it comes to payment processing. Visa and MasterCard categorize certain organizations as high risk depending on the risk they would impose on a card processor or bank. Other reasons why a processor might consider a company high risk would consist of their previous processing history. Normal low risk businesses that have not been operated properly are able to be labeled as high risk.
Numerous high risk industries are considered higher risk than others. These industries will need to obtain an offshore account. Other industries that could be considered medium high risk might be able to secure a high risk domestic merchant account instead of going offshore. There are a couple different reasons why this might take place including; large per transaction size, large monthly volume, selling methods of the business or operating in an industry prone to fraud or chargebacks.
High per ticket merchants become considered high risk because after a chargeback occurs the amount charged back for a single transaction might be ten times what the average transaction amount is for a small to medium ticket transaction. The merchant must have ten times more money in reserves to be ready for these potential situations. Since there is no guarantee the merchant will have these funds available they are categorized as high risk.
Large volume merchants can be considered either high risk or low risk depending on the products or services they are selling. The majority of high volume merchants operating online are considered high risk mainly because these businesses have third party affiliates selling their products/services for them. Companies with affiliates are usually considered high risk.
How a business sells their services is a huge determining factor on what type of account that merchant will be eligible for. Outbound telemarketing merchants are examples of merchants that are considered high risk because of their selling methods. These businesses use hard sell practices or scripts that promise unrealistic results from their products or services.
Industries that are prone to chargebacks are also grouped in the high risk category. These industries would include adult, debt consolidation and loan modification. Problems that arise from these companies are the fact that they are prone to high chargebacks. Some because of fraud and stolen credit cards and others because of low customer satisfaction.
Businesses with a poor previous processing record will also be deemed high risk by credit card processors and banks. A high number of customer complaints and disputes or chargebacks will cause a merchant’s processing history to be affected negatively. A weak previous history shows a higher risk to processors. There is a higher chance of the merchant defaulting and not being able to cover chargebacks and refunds.
High Risk Merchants is able to place most high risk merchants in almost every industry. Contact one of our helpful customer representatives to assist you with your application for a High Risk Merchant Account or ach processing account.
