Payment processors place merchants in categories based on the risks that they pose. These risks include the industry that they operate in, their previous processing histories and geographic locations they conduct businesses from, among other things. When operating high risk businesses in the UK that require recurring billing options or subscription based payments, merchants need to apply with one of the high risk merchant providers UK.
Most mainstream merchant account providers are not interested in working with businesses that are high risk.
Luckily, there are high risk merchant providers in the UK happy to work with these unique businesses that are looking for an offshore merchant account. These acquirer’s offer both payment processing solutions and fraud prevention services. They are also able to provide credit card processing solutions for merchants with high volumes.
Merchant Account Means More Money
If you run high risk businesses in the UK and do not have any means of accepting credit and debit card payments, you are leaving 90% of the money you can make on the table.
A report estimates over 159 million cards are in use in the United Kingdom, with Mastercard and Visa being the most popular cards. And Diners Club as well as American Express the least used cards.
As of January 2021, there were 196 million credit card transactions which accounted for over £64 billion in spend.
Small businesses that make less than £2,000 monthly in card payments do not really require a merchant account. Instead, they can accept payments with iZettle or a Square card reader.
On the other hand, a business that makes more than £2,000 in a month needs a merchant account.
A merchant account allows businesses to save money in processing fees. In addition, having a merchant account gives businesses the opportunity to scale up revenue because they can accept payment in multiple currencies.
But before opening a merchant account, you need to confirm if your business is high risk or low risk. This helps to determine the type of merchant account to open.
How Businesses Are Assessed by High Risk Merchant Providers UK
Before applying for a merchant account, have your business assessed in terms of the risk it poses.
This assessment can be carried out in different ways. The major appraisals are listed below:
The way a business accepts payments helps to determine the amount of risk involved. While in a restaurant, you pay for food immediately after service. This is why the restaurant industry is considered low risk.
Almost all businesses with a time span between payment and delivery or payments taken on the phone or online are considered high risk. For example, payment for magazine subscriptions with recurring billing options would require a high risk merchant providers UK merchant account.
Industry Type and Business Sectors
Payment processing companies consider businesses high risk because they accrue sizable amounts of cancellations, chargebacks and unauthorized payments.
The travel industry falls in this category because people can change their minds about travelling or airlines can cancel flights due to bad weather.
Financial Stability & Company Longevity
The number of years a company has been in business says a lot about its stability. Start-up businesses with limited capital do not attract the interest of traditional institutions.
This belief particularly rings true when credit card transaction volume is high compared to money stored in the bank.
Integrity of Owners & Directors
If owners or top-tier management of a business have tainted credit records, the venture is considered high risk. But this could change if these individuals are honest about their bad credit histories and offer personal guarantees those days are over.
Examples of High Risk Industries
- Online pharmacies
- Ticket brokers
- Online auctions
- Investment schemes
- Debt management and collection services/agencies
- Affiliate marketing
- Adult entertainment and services
- File sharing
- Airline, tourism, travel and accommodation
- CBD oil
- Advertising services
- Debt management and credit repair
- Lender merchant account services
- Nutritional supplements and health products
- Escort services
- Bars and nightclubs
- Holiday clubs and timeshares
- Prepaid phone cards
- Web development and technical support
- Tattoo studios
- Car parts and vehicle sales
- Hosting and ISP services
- Payday loans
- E-cigarettes and tobacco
- Money transfer
- Pyramid selling and direct sales
- Online gaming
A bank is highly likely to reject an application if it falls in one of the categories above.
On the other hand, if you operate in a high risk sector and somehow manage to open a merchant account, do not get too comfortable.
Too many disputes could have your merchant account frozen or even closed down permanently.
The best approach to save yourself from hassles is to look for high risk merchant providers in the UK.
These payment processing companies are better suited to do business with you than traditional financial institutions because they understand the risks involved.
High Risk & Low Risk Merchant Accounts
Higher set up fees: High risk comes at a price and the price is that you pay more in setup fees.
Higher transaction fees: Transaction fees for high risk merchant accounts are not cheap. In the United Kingdom, it is roughly 3.95% for every transaction compared to 0.95% for normal merchant accounts.
Rolling reserve: Acquiring banks keep a percentage of card transactions to minimize losses that may arise from disputes or chargebacks. Rolling reserves are standard features with high risk businesses.
Settlement period: High risk merchant accounts process funds longer than normal merchant accounts. Funds can take over a week to process instead of the usual 3 days.
Properly Choosing High Risk Merchant Providers UK
Pick a high risk merchant provider in Britain that presently works with other merchants in your industry is an advantage.
The provider will have a strong grasp of what transactions are like and be in a better position to handle fraudulent activity.
Secondly, prompt and effective customer service is important. Every high risk business will always have issues with payments.
A phone number accessible around the clock or a live chat customer representative available 24/7 is much better than generating support tickets or having to wait for someone to respond by email.
Thirdly, the total fee structure of a high risk merchant account should be a concern to a business owner. Some payment processors charge expensive monthly fees while others charge on the cheap.
Do not choose a high risk merchant providers without knowing about all the fees you are expected to pay.
Lastly, observe how well the high risk payment provider works with payment gateways.
It is easier for criminals to perpetrate fraud online. This is why it is important to choose a UK merchant account provider with expertise and experience in accepting online payments.
These high risk providers always have secure payment gateways, 24/7 technical support and a full suite of cutting edge tools to help whittle down chargebacks and fraud.