8 Signs That Indicates Your E-Commerce Business Needs a High-Risk Merchant Account

A high-risk merchant account is an online payment account designed for businesses that banks deem high risk. Due to the increased likelihood of chargebacks, high-risk companies must pay higher merchant service costs.  If a firm has a high risk of chargebacks, or if the bank’s history indicates a high rate of chargebacks and refunds, the bank may establish a rolling reserve on your account. It is the sum of money necessary to cover the risk of chargebacks or fraud.

Signs That Your Business Requires a High-Risk Merchant Account 

Why would you want to invest time and energy hoping your new firm will get guaranteed high risk merchant account approval and avoid having its merchant account application denied? These indicators point merchants in the direction of high-risk merchant accounts to meet their payment processing demands. 

1. Startup business

Banks may be skeptical unless you have an exceptional track record of commercial operations – and excellent personal credit. According to experts, at least 75% of startups fail. Additionally, eCommerce, in general, carries a heightened risk of fraud due to the built-in CNP (card not present) payment environment. 

2. Personal credit history is lacking

Personal and business credit histories, criminal records, and other reputational dynamics all play a role in determining if you are a reasonable risk. Are you a timely payer of personal and commercial bills and do business lawfully and responsibly? Are your credit report and unique background check evidence of this? If not, anticipate reading the merchant account application refused in the letter you receive. 

3. You sell high-ticket items

Standard processors are concerned about large lump-sum transactions due to the likelihood of fraud, for which they may eventually be held accountable. Similarly, chargebacks frequently target regular payments. Both types of transactions will signal a conventional merchant account, but high-risk payment processors are more adaptable and accepting with the proper preparation.

4 You want a higher level of security

While all merchant account providers include some level of fraud protection, high-risk payment processors anticipate a higher rate of fraud in the transactions they process and hence advocate using stricter security measures to validate both the card and the trade. This higher level of monitoring safeguards the payment processor and the merchant and the cardholder, giving your consumers greater peace of mind while shopping.

5. You do not possess a financial history

If you’ve ever had a regular merchant account canceled or an application for a standard merchant account rejected for any reason, your odds of being approved for another standard merchant account are slim, making a high-risk merchant account your best option. High-risk payment processors will not be put off by a less-than-ideal credit score or a brief history of higher-than-average chargebacks.

6. The sector of industry selection

Specific verticals those with complicated or dynamic business models that traditional banks do not fully understand — are labeled “high risk” and are thus prohibited by certain banks, processors, and credit card brands. Due to financial and reputational risk, certain types of websites are entirely restricted (for example, adult-oriented, and casino, gambling, or gaming websites). Additionally, highly regulated sectors may be looked upon (cosmetics, wellness, and tobacco products). 

7. Businesses that operate on a subscription basis

While the subscription economy is thriving, subscription-based e-commerce enterprises are hazardous. Online dating services, financial newsletters, book clubs and journals, movie and music subscriptions, and software are just a few examples. Additionally referred to as “recurring billing models,” these organizations endure higher than usual chargeback and online fraud rates, earning them the moniker. 

8. Expensive items

Travel products such as airline tickets, vacation packages, timeshares, and travel agents, in general, are considered high risk. These products are frequently purchased long before use, resulting in a high percentage of cancellations, returns, and refunds. Small travel agencies collapse and close their doors, leaving banks and payment processors liable for repayments in the event of reservation cancellations.

Consider the following while searching for a high-risk merchant account:

There are numerous high-risk credit card processors on the market, so do your homework before selecting a payment partner

• Responsive support. 

Believe me when I say that you need someone to assist you if anything goes wrong with payments on your website or in-app. Ascertain that a credit card payment provider guarantees that all issues will be addressed for your high-risk organization. 

• Customization and adaptability. 

Consider a high-risk processor that enables you to execute various payment scenarios customized to your firm’s specific needs, mainly if you operate a complex business model. Ascertain that you may modify every aspect of the payment form and negotiate rates, terms, and features specific to your organization. 

• Pricing transparency. 

A payment processor’s pricing structure should also be readily available on its website. Conduct a thorough investigation of the fees and potential additional expenditures. Ascertain that there are no extra or hidden costs for guaranteed high-risk merchant account approval. 

• Technology.

Whether the payment gateway you’re considering offers multiple accounts is what you are looking for. Additionally, request the payment platform’s APIs so that you may maintain complete control over the setup and payment processes. What’s equally critical are user-friendly onboarding and payment processes that are free of downtime and surprises. Avoid payment processors that use outdated technology and lack expertise. 

• Indicators of security. 

As a high-risk merchant, you require a payment partner that adheres to stringent security standards and offers a suite of anti-fraud solutions that protect your business from fraudsters. Ascertain that they provide an adequate chargeback protection system and a multilayered security approach. 

• Expertise.

Conduct research to determine how long a payment company has been in business and the backgrounds of its executives. Their experience and in-depth understanding of particular sectors establish them as market leaders in guaranteed high-risk merchant account approval. Additionally, it assures that the payment platform with which you wish to operate is reputable, ensuring the safety of your funds. 

• Website of a high-risk payment processor 

Visit the processor’s website to ascertain its layout and whether it maintains current information. A dated or rudimentary website that transports you back in time can be a red flag that something is amiss with the business you are considering. 

Business models that are widely accepted.

Before applying for a high-risk guaranteed merchant account approval, verify that the credit card processor supports the industries in which your business operates. The same is true for countries that have been approved. It’s worth noting that reputable payment processors maintain an online list of supported business formats and countries. Take time to thoroughly read their contract. Generally, you will not find a sample contract online, but if you receive a copy of the payment company’s conditions, properly read them.

There are many reasons why you can be deemed high risk. However, if you open a high-risk merchant account with a reputable payment provider, the process will be painless. Some firms are more prone to conflict, and as a result, their rules are more stringent. However, by accepting payments through a reputable high-risk payment processor that places a premium on security, you can be confident that the chance of chargebacks and fraud is minimal.