Online High-Risk Merchant Account – A Complete Guide
If you are planning to sell products and services online that fall within the high-risk industries category, you need to set up an online high-risk merchant account. High risk businesses are typically those with a higher risk of disputes and returns. Businesses in this category often experience irrecoverable losses due to chargebacks and fraud.
Some of these industries include medical marijuana dispensary & delivery services, gaming, dating services, tobacco sales, adult videos or streaming, and many others.
If you want to open a business that falls under one of these high-risk industries, read on to learn everything you need to know about opening a high-risk merchant account.
- Types of Merchants That Require an Online High Risk Merchant Account ?
- The Effects of Being Classed as a High Risk Merchant
- Reasons for the High-Risk Label
- Your Personal Credit Score Can Affect Your Business’s Risk Level
- Is Your Payment Processing History Making You a High Risk Merchant?
- Chargebacks Are an Area of Concern for Providers of Online High Risk Merchant Accounts
- How Can a Business Reduce its High Risk Online Merchant Status for Payment Processing?
- What is a High Risk Online Merchant Account?
- Why is there a need for a High-Risk Merchant Account?
- Why Do You Need an Online High Risk Merchant Account?
- How to Get a High Risk Merchant Account?
- How Can High-Risk Merchants Get Accepted by Payment Processors?
- How to Find The Right High Risk Merchant Account Provider
- Fraud Management Tools
- Summary – Online High Risk Merchant Account
Types of Merchants That Require an Online High Risk Merchant Account ?
High risk online merchant accounts are often needed for more niches than people expect. The list below is not comprehensive, but it demonstrates the range of businesses that can encounter credit card processing issues.
- Dating sites offering services worldwide
- Adult content
- Adult toys and accessories
- Adult merchant accounts for streaming
- Adult health and beauty products
- Gambling establishments
- Tobacco and e-cigarette retailers
- Secondhand clothing stores
- Adult entertainment clubs
- Money lending company
- Investment company
- Securities broker
- Travel agency
- Event booking service
- Online Ticketing
- Car rental
- Transportation booking services
- Health and Beauty products
- Delivery services
- Payday loans or Cash advance
- Online retail websites
- Drop shipping businesses
- Multi-Level Marketing (MLM)
- Network Marketing
- Other risk-prone businesses
The Effects of Being Classed as a High Risk Merchant
Being labeled a high-risk merchant can have a negative impact on your merchant service options.
Merchants with high-risk ratings tend to be charged higher fees and percentage rates than other merchants. This can lead to increased costs for both consumers and merchants.
Additionally, high-risk merchants may experience longer funding times for payments. This means that customers may have to wait longer for their deposits to be processed, which can lead to missed deadlines and lost sales.
High-risk merchants can also be subject to additional scrutiny when it comes to sales verification procedures. This can make it more difficult for them to successfully batch transactions and get paid. Oftentimes, they are asked to provide additional information about their customers and sales until a solid relationship has been established with the payment processor.
High-risk merchants should be prepared to spend time and effort familiarizing themselves with these procedures before they begin accepting payments online. SecureGlobalPay has streamlined this process which makes things easier for high-risk merchants.
These are just some of the many effects that come with being an online high-risk merchant account. In the end, it all comes down to weighing the pros and cons of accepting credit cards in order to determine if this type of business model is right for you.
Just because a business may require some extra work initially, or encounter higher fees, doesn’t mean that it can’t be highly profitable and successful long-term with effective high risk merchant services in place.
Reasons for the High-Risk Label
Some businesses are just plain risky, to begin with. Industries like agriculture, logging, and construction not only suffer a disproportionate share of fatal and nonfatal accidents but also top the list of industries with the most fatalities in the US. For these reasons, they are automatically considered “high-risk.” Other businesses such as casinos, adult services, cryptocurrency trading, and debt consolidation & recovery also have their share of “accidents” and are considered high-risk.
But the biggest risks come from high-volume merchant accounts that suffer from a high rate of chargebacks, fraud, and credit card disputes. Banks and payment processors can be left on the hook for a merchant’s failure to produce refunds or cover costs under such circumstances.
This problem is compounded when the buyer/seller interaction moves to online transactions via payment gateways, where there is no physical credit card present at the time of the sale.
Because there is no physical interaction, all online merchants are usually regarded as high-risk when they accept credit cards in this way.
Your Personal Credit Score Can Affect Your Business’s Risk Level
Your personal credit score can affect your business risk level. It is vital to understand the importance of maintaining a healthy personal credit rating when running a small business.
Start with a solid balance sheet, including current assets and current liabilities, in order to build a strong credit foundation.
You should also be aware that your personal credit score will affect your business’s overall risk level.
A low credit score can make it harder for you to secure financing and potentially increase the cost of borrowing money.
By understanding how merchant underwriting works and the impact your personal credit rating has, you can take steps to improve it and increase your chances of approval. Being able to successfully manage your small business finances will help expedite the approval process when applying for a merchant account.
Is Your Payment Processing History Making You a High Risk Merchant?
It’s important that you carefully review your payment processing history before you start accepting online payments. If you find any red flags in your past, address them as soon as possible so that you can avoid getting blacklisted by payment processors.
Payment processing can be a high-risk business, but it doesn’t have to be if you take precautions and stay on top of things.
Quality payment processors will provide you with many of the tools needed to avoid these issues.
Chargebacks Are an Area of Concern for Providers of Online High Risk Merchant Accounts
While fraud is a major concern for any merchant, chargebacks can be even more damaging to a business’s reputation and one of the reasons for needing the extra protection of online high risk merchant accounts.
High-risk merchants are those whose chargebacks tend to account for a disproportionate amount of the total number of payments received by a given merchant.
The higher the chargeback ratio of a high-risk merchant, the greater the chance that their customers will file more chargebacks against them than average in the future.
To avoid this type of situation, it’s important to conduct thorough research into each prospective customer’s reputation before processing any orders. Additionally, it is helpful to better understand how chargebacks work to help prevent disputes from happening in the first place.
For example, with business-to-business sales, this can be done by contacting the merchant risk council aks (MRC), an organization that collects publicly available data on all types of merchants, including information on chargeback levels and other factors affecting their creditworthiness.
For business-to-customer sales, credit details, address information, fraud checks, and more can be used to reduce these issues.
How Can a Business Reduce its High Risk Online Merchant Status for Payment Processing?
Payment processing is a field with many risks, especially for high risk online merchants. The most common risks are chargeback fraud, cardholder disputes, and malware. To help prevent and reduce chargeback and fraud, businesses must implement a number of steps.
Payment processing is a business risk that can be reduced by increasing the company’s understanding of the credit process.
To avoid payment processing risks such as fraud, chargebacks, and chargeback disputes, businesses should implement strategies to reduce fraud risk and manage chargebacks.
By implementing these strategies, businesses can reduce the risk that they will be subject to a payment processing risk.
The strategy options include having a strong customer relationship management (CRM) system that is able to collect and process customer data in real-time; engaging third-party service providers to handle chargeback disputes, and increasing transaction volume by offering additional services or products.
To minimize the chance of chargebacks, businesses should ensure that customers have authorized their credit cards before making any purchase. They should also consider using a risk assessment tool to analyze their payment processing operation for vulnerabilities.
Moreover, businesses should also consider their payment processing infrastructure. This includes assessing their current systems to identify gaps that could increase their overall risk status for payment processing.
By identifying these gaps and taking steps to close them, businesses can reduce their overall risk status for payment processing.
What is a High Risk Online Merchant Account?
Online high risk merchant accounts are a type of account that allows you to accept payments from credit or debit card users.
High risk online merchant accounts are designated to cover merchants that are considered to be riskier or have a higher chance of chargebacks or fraud. It is important to note that the designation of high risk is a factor of the business, not the credit card itself.
An online high risk merchant account will help you to accept alternative payment methods, such as prepaid debit cards, e-check for high risk businesses, ACH, and crypto payments, which are not accepted by standard merchant account prpcessors.
This will allow you to continue doing business even in high-risk markets.
Why is there a need for a High-Risk Merchant Account?
A high-risk merchant account is necessary because businesses that fall within the high-risk category experience a higher level of chargebacks.
Chargebacks are when a customer cancels a transaction and requests their money be refunded. You are charged a fee by your credit card processor as a result of a chargeback. The fee is typically $20 or more per transaction.
If you have a high number of chargebacks, your merchant account provider could shut down your account. To help prevent this from happening, you may want to get a high risk online merchant account.
These types of accounts are designed for businesses that have higher chargeback rates, high fraud rates or a large amount of non-revenue generating transactions.
It is important to note that all high risk online merchants accounts are not created equal. Certain credit card processors are better equipped to handle these types of businesses. For example, PayPal is not an ideal payment processor for high-risk merchants.
Why Do You Need an Online High Risk Merchant Account?
A high risk online merchants account is necessary for businesses that sell products or services that fall into the high-risk industries.
Credit card companies have created a list of guidelines that they use to determine which companies should be designated as high-risk. If you are selling products and services that fall under one of these industries, you will need to open an online high risk merchant account.
If you are attempting to open a high risk online merchant account, make sure you understand the specific reasons why you have been deemed high-risk. If you have been given a legitimate reason that you can work towards fixing or managing the risk effectively, you can apply for a high-risk account.
Many high risk online merchants attempt to apply for a standard account and are rejected because they have not done their research and do not know why they have been deemed high-risk. It is often better to apply for an online high risk merchant account from the beginning and avoid rejections.
How to Get a High Risk Merchant Account?
Before you can apply for an online high risk merchant account, you need to understand which high-risk industries you fall under. Once you understand the reason for being high-risk, you can begin the application process.
If you are a new business, you may need to complete the application process for a high-risk account, regardless of your niche.
How Can High-Risk Merchants Get Accepted by Payment Processors?
Payment processors have a lot of different criteria for which merchants they will accept. They look at the overall business model and how well the merchant is able to reliably collect payments.
Some minimums must be met before a merchant can be approved. The minimum may include things like having enough funds in the merchant’s bank account or verified information about the business such as its address, phone number, and other details about ownership.
Other factors may affect whether a merchant is approved or not. These include things like the merchant’s past payment history and the number of chargebacks that have been filed against it.
Another thing that payment processors look at is the amount of risk associated with accepting high-risk merchants. A high-risk merchant processor will generally only approve a high-risk merchant if it thinks that it will be able to cover any losses from chargebacks.
So, high-risk merchants need to think about how they can reduce the risk before approaching a payment processor. It’s also important for them to make sure that they meet all of the minimum requirements before applying for approval.
How to Find The Right High Risk Merchant Account Provider
There are many credit card processors that specialize in online high risk merchant accounts. The first thing you need to do is create a list of potential providers.
Next, you should decide on which criteria are most important to you. You may want to choose the company that charges the lowest fees.
Alternatively, you may want to choose the company that offers the most features or want a company that has the most reliable service. You may also want to choose a company whose customer service is available 24/7.
It is important to create a list of criteria that is specific to your business before you begin your search. Simply choosing the cheapest often isn’t the best choice long-term. Once you have completed your list, use it to find online high risk merchant accounts that meet your criteria.
Then, when you have found providers that meet your criteria, you need to conduct more research on each company. You will want to read online reviews from other businesses to see what their experience was like. You may also want to contact each company by phone or email to ask any questions you may have.
Fraud Management Tools
There are many different types of fraud management tools that are utilized by online high risk merchant accounts.
Real-time transaction monitoring – This is a tool that allows the credit card processor to view all of your transactions as they happen. This allows them to flag potentially fraudulent transactions and either stop or reverse those transactions.
Real-time daily account analysis – This is a tool that allows your credit card processor to view all of your account activity for the previous day. This allows the processor to flag potentially fraudulent transactions and either stop or reverse those transactions.
Reversal analysis – This is a tool that allows your credit card processor to view your reversal history. This allows the processor to identify whether your chargebacks are increasing and if there is a pattern to those chargebacks.
There are many other systems also used, such as fraud protection tools and PoS systems as we mentioned earlier. The key is to combine and use the best tools for your business.
Summary – Online High Risk Merchant Account
If you are a high-risk merchant, you need to open an online high risk merchant account.
High-risk accounts are designated to cover merchants that are considered to be riskier or have a higher chance of chargebacks or fraud.
A high-risk account will help you to accept alternative payment methods, such as prepaid debit cards, phone payments, and eChecks, which are not accepted by standard merchant accounts. This will allow you to continue doing business and manage the risk of your niche
The first step is to select an online payment services provider that specializes in working with “high-risk” businesses. SecureGlobalPay has a strong track record of providing custom solutions and quality services to merchants in traditionally high-risk fields.
We welcome your inquiry. You can begin the process by completing our easy online application form.
Completing an application does not guarantee acceptance. However, pending approval by our underwriters, you can usually begin processing online payments in as little as 24 – 48 hours. Apply now!
Additional steps for fast approvals
Maximize your chances of a favorable evaluation by SecureGlobalPay underwriters by doing the following:
- Pay all outstanding debts and bills
- Provide proof that you have some capital in the form of bank savings
- Nominate a principal in the business with a sound credit history to apply for the merchant account
Underwriters seek to ensure that merchants do not have a history of suspicious or questionable activity so that risk is not passed on to the credit card processor. Resolving any such outstanding issues before the application will receive faster approval.
High-risk merchants seeking to succeed in an online environment must recognize the limitations they face when seeking relationships with banks and online payment processors. These can be overcome with effort and preparation.