Merchant accounts exist solely as alternate payment solution options for the sale of products and services. Merchant services for businesses being conducted in most standard retail environments are easily attainable. If your business model happens to fit into one of the higher-risk categories, merchant accounts become a bit more difficult to acquire. It’s for this specific reason that merchants need to work with high-risk merchant services UK. These high-risk businesses merchants UK can now work specifically with seasoned acquiring banks and payment processors to help facilitate payment methods for these high-risk industries.
More About Merchant Accounts in General
A high-risk merchant account is a bank account that operates only to accept payments via debit cards, credit cards, and other electronic payment options. Companies located in the UK need a merchant account if they are looking to accept payments via electronic transactions and compete in today’s marketplace. High-risk merchant services UK provide these solutions to business types that have various risk factors preventing them from standard approvals.
A high-risk merchant account UK accepting UK high-risk payments can complement a business bank account, but it cannot entirely replace it.
Merchant accounts only exist to offer alternate payment methods. Most low-risk retail businesses are able to get approved instantly to accept payments. High-risk merchant accounts are a bit more difficult to approve and often come with higher processing fees, rolling reserves, and slower funding times.
What is the Difference Between a Low Risk and a High-Risk Merchant Account?
Before applying for a high-risk merchant Europe account, it’s important to know whether you’re considered a low-risk or a high-risk business. Merchant account providers and underwriters have specific criteria for classifying businesses in terms of their potential risk. However, there are some common traits for both merchant categories that are important to understand.
What is a Low-risk Merchant?
The general characteristics for low-risk merchants are as follows:
- Below $20,000 processed monthly in sales
- The industry that a merchant operates in is considered low risk (these tend to include clothes, shoes, household goods, baby products and general merchandise)
- Average credit card transaction is less than $500
- Zero to low chargeback ratio
- The nation a business operates in is classified as low risk (European Union countries, USA and Canada)
- Minimized returns and complaints about the products or services offered.
What is a High-risk Merchant?
The more chargebacks and returns a business comes with, the higher the risk. Hence, the considered key factors when deciding if one’s business is high or low risk are processing history and the industry’s overall reputation. Always ensure to keep chargeback ratios below 0.9% of the total transactions.
- Over $20,000 monthly sales volume
- Average credit card transaction over $500
- The company sells products and services that fall outside of the standard low-risk categories
- Excessive chargebacks and bad credit history.
Features of High-Risk Merchant Accounts
Running a high-risk business can seem challenging and also comes with numerous downsides if one is not careful. However, the good news is that these business types when managed properly can be extremely lucrative and yield massive returns. Below are the main features of having a high-risk merchant account.
Expansion of Business
High-risk payments uk merchant accounts can help you sell additional products or services not covered by your standard low-risk merchant accounts. An example would be adding sales of CBD products to your existing general merchandise category. A high-risk UK merchant account can give you the opportunity to sell this additional product line and earn more profit.
Additional Chargeback Protection
Additional chargeback protection implies having a better chance of keeping the merchant’s account from being terminated. For example, when a merchant has a history of excessive chargebacks and surpasses the threshold, they can get their account terminated.
It is much easier to maintain a high-risk merchant account that has a history of high chargeback ratios with a high-risk processor. However, it doesn’t imply that you can disregard numerous chargebacks as this will not end well.
A high-risk merchant can develop business operations globally by accepting different currencies from countries outside of their normal operations.
Global coverage can assist high-risk businesses UK to grow and market their business to a broader range of customers. Access to the worldwide market implies a higher exposure to risk. On the contrary, low-risk merchant accounts have more restrictions and are limited in scope.
Reduction in Processing Delays
You can access your funds with reduced processing times and minimal roadblocks with a high-risk merchant account. Running high-risk sales on your lower-risk merchant account will often result in funds being held. This is very common with payment aggregators like PayPal and Stripe.
Flexible and Customization
Another beneficial feature of having a high-risk merchant account is more diverse and flexible payment options. High-risk merchants can process high volumes of recurring payments for a greater variety of goods and services. High-risk merchants can also process higher ticket sales and higher monthly volumes overall.
Absent Volume Caps
With proper underwriting and approval, high-risk businesses UK don’t have to worry about monthly volume caps. It means they can easily accept transactions as you want, without the risk of your funds being held. This is quite the opposite for low-risk merchant accounts that have strict monthly volume caps.
Lower Chance of Account Termination
When low-risk merchants experience numerous chargebacks, payment processors and acquiring banks can terminate their accounts immediately. This is improbable with high-risk merchant accounts because both parties already know the possibility.
Therefore, fewer chargebacks will not lead to account termination. It is imperative to properly manage the number of chargebacks you’re getting.
A Higher Level of Security, Fraud Prevention and Protection
All merchant account services have some level of fraud and security protection set in place. High-risk payment providers anticipate a greater risk of fraud in their transactions, encouraging more robust security measures. The increased monitoring protects the processor, the cardholder, and the merchant, allowing clients to shop with more confidence.
Merchant Account Reserve
If your business requires a high-risk merchant account, getting an acquiring bank to take the risk can often be challenging. These financial institutions may at times request a specific, upfront deposit to act as security. This added protection layer for the bank mitigates their potential risk and can often assist with the approval of the merchant account. It is advisable to request a rolling reserve as opposed to upfront deposits.
A high-risk merchant services UK account can offer numerous benefits depending on your business type. It can help you scale and give your business the opportunity it needs to succeed. However, you’ll require a reputable service provider that explicitly sells high-risk merchant account services to set you up.