High-Risk Payment Processors and Chargebacks

Choosing between one of the many high-risk payment processors can be a daunting task. However, taking your time and doing some research will pay enormous dividends. When ultimately deciding on the most capable credit card processor for your high-risk payment processing needs, make sure your acquirer fully understands your high-risk category and online business model. 

If your business operates in an unpredictable industry riddled with high chargebacks, it is important that you make the right choice because the survival of your business literally depends on it. 

One of the main dangers of accepting credit card payments in the United States for high risk payments is chargebacks. Specific high-risk business categories tend to be riddled with high chargeback ratio’s

Merchants would love to avoid these disputed transactions altogether, but this simply cannot be avoided. Chargebacks are a normal occurrence for businesses that accept credit cards, especially those considered higher risk. High-risk payment processors understand this and are able to help.

Chargebacks Explained

A chargeback occurs when a customer disputes a payment and wants the transaction charge reverted back to a payment card.

Chargeback rates have increased astronomically over the years for a number of reasons. High-Risk business categories are also increasing in tandem.

One major reason is because customers are well aware that the chargeback process works in their favor.

It is a problem that affects a merchant’s bottom line and questions whether high risk payment processors should retain their clients because of the risks involved.

Chargebacks are not good for business and when a business has a high percentage ratio compared to their total transactions, the account can be shut down. This can ultimately signal the end of that business because the business has no other means of processing payments.

Types of Credit Card Chargebacks

Merchant Error: These chargebacks are associated with merchant mistakes. For example, merchants billing the wrong amount, processing issues that lead to duplicate transactions or card payment deductions without customer authorization.

Credit Card Fraud: These chargebacks occur when credit cards are stolen or hacked by criminals and used for unapproved transactions.

Friendly Fraud: These chargebacks take place when customers make  purchases and then change their mind about it and want their money back. In some instances, it is simply a case of  cardholders not recognizing the charges on their billing statements.

How High Risk Payment Processors Keep Chargebacks Low

Dishonest cardholders filing payment disputes, otherwise known as friendly fraudsters, make up most chargeback claims.

These are people who want to keep a product or use a service and do not want to pay for it. According to reports, 86% of chargebacks are filed for this reason.

But merchants can contest these disputes through a process known as representment.

This process allows merchants to provide convincing evidence good enough to secure a dispute reversal and ultimately recover revenue that would have been forfeited due to a chargeback claim.

More and more high-risk business categories are warming up to the hazards of friendly fraud and taking calculated steps to address the problem by working with high-risk payment processors capable of keeping their chargeback ratios down to the barest minimum.

Since high risk businesses are more prone to chargebacks than low risk businesses, their transaction patterns as well as business activities require close scrutiny.

The best high risk payment processors do this in order to come up with the right strategy or blueprint for your high-risk business category.

An experienced high risk payment processor always needs to know the level of risk a business poses as this ultimately determines whether the chargeback ratio will be high or low.

Working with High Risk Payment Processors

Determining these hazards up-front puts high risk payment processors in the best position to work with businesses that have high risk potential.

The risks associated with high-risk business category merchant accounts are very different from the risks regular low-risk merchants go through. That is why it is important to choose a high risk payment processor that makes it easier to reach your goals for your specific type of business.

Experience and Expertise

Choose a high-risk payment processor with expertise in your specialized market and who is familiar with your products and services.

You should find out how long the company has been doing business in your market and dig into the profiles of the people at the helm. Their experience and knowledge of your niche industry is crucial to your success.

Security and Technology

Solid high-risk payment processors should use artificial Intelligence fraud detection systems that weed out suspicious activity and send out real-time notifications before they spiral out of control.

Secure Global Pay’s high risk payment gateway and virtual terminal are machine-learning processes configured to catch dodgy transactions 24/7—any time of the day, week or month.

By helping merchants diversify risk and reduce the number of fraudulent transactions that occur, accounts can remain healthy and fully operational for the long term.

Flexibility

Find a high-risk payment processor that is flexible and allows your business to adapt to different scenarios.

Does the processing platform provide nifty APIs and various plug-ins that give you complete access to the payment process?

Can you easily customize and automate the payment procedure?

The perfect high-risk payment processor offers a fast and smooth onboarding experience without unexpected surprises or downtime.

Transparent Pricing

The payment processor should have a transparent pricing structure with no hidden fees.

If a provider is not forthcoming with the information you require or does not provide satisfactory answers to your questions, this should set alarm bells in your head.

Avoid pricey and lengthy contracts with high-risk payment processors. And do not do business with any payment provider that falls short of the industry’s technological standards.

Your ultimate goal should not be defined by low costs alone, but whether the payment processor syncs well with your goals and minimizes the friction that comes with operating in a high risk industry.

Ways Merchants Can Avoid Chargeback Fees

A reliable high-risk payment processor plays an influential role in reducing chargeback rates, but there are steps merchants can also take to avoid transaction disputes.

Use Detailed Descriptors: Some chargebacks occur because customers do not recognize your business name.

To prevent this, ensure that your credit card billing descriptor is the same as your business name. If possible, include a contact phone number that is answered by a live person. 

Use Effective Security Measures: Card Verification Code (CVV/CVV2) is a 3-digit security code located on the back of all cards.

Always put filters in place to block the card if the security code does not tally with the issuing bank records.

There is also an Address Verification System (AVS) that prompts a cardholder to include their billing address to complete a transaction.

A merchant can compare this information with bank issued documentation and decline the card if the information does not match.

Quick Refund Process: Proactive refund policies prevent customers from issuing chargeback claims. Business owners should make the refund process simple for customers. 

Also process these refunds promptly as soon as they lodge their chargeback claims.

Great customer support plays a role in ensuring this works out. Your business customer service email and your business contact number should be well-publicized. 

These 3 measures go a long way in helping merchants cut down their chargeback fees.

Conclusion – High-Risk payment processors

Finding a high-risk payment processor that provides multiple payment options and reduces the risk of merchant errors is key.

Secure Global Pay’s modern payment processing permits a streamlined and accessible customer experience that mitigates credit card chargebacks.

Traditional financial institutions simply do not like doing business in high risk industries with high chargeback ratios. Long term processing history and a UBO with an excellent credit score will help the account get approved but staying approved is another story.

Fortunately, knowledgeable high risk payment processors are available to provide credit card processing solutions for high risk merchants.

These services are offered via a merchant account and payment gateway specifically designed for our business type.

With the use of a high-risk payment gateway, higher-risk business types have an opportunity to reduce their chargeback claims.

When dealing with a reputable and competent high risk payment processor, merchants are able to position themselves with the right acquirer that will help them scale their business for many years to come.