A pawn shop is a business that offers loans to clients in exchange for valuables such as gold, electronic gadgets, or jewelry. Typically, the customer gives the valuables as collateral for the loan they receive. The nature of the pawnbroker business model makes it high-risk and, therefore, difficult to obtain pawn shop merchant processing payment services.
The pawnshop industry is well-established in the United States, with a market valued at $3 billion as of 2021. The industry is rapidly growing and is expected to reach $4.12 billion by 2028. It, therefore, presents great opportunities for new investors and entrepreneurs alike.
Several factors underline the growth achieved in the sector. The first is the unpredictable economic shifts currently experienced, which drive households to seek short-term loans. The sector is also attractive to lower-income earners who seek smaller loans for various purposes.
The government has also put strict rules in place for pawn shop owners, enhancing customer trust. If you are looking to invest in the sector, you should be assured of profits.
Why is Pawn Shop Merchant Processing Considered High Risk?
A pawnshop merchant account falls under the category of a high-risk merchant account due to different reasons. First, pawnshops serve low-income customers who need money urgently and are generally regarded as high-risk by mainstream financial institutions. Pawnshops also transact in high ticket items which can present a considerable risk of fraud and potential chargeback opportunities on credit card purchases.
Pawnshop merchant services are also faced with stiff regulations, which may include additional requirements for consumer protection. Most merchant account underwriters prefer to avoid pawn shop merchant processing rather than face legal trouble and possible financial losses.
There is also a general perception that pawnshops often deal in stolen goods. The assumption is no longer founded because the government has established stricter licensing requirements and tighter regulations for pawnshop owners.
Many traditional credit card payment providers will not provide pawnbroker merchant services on the basis of these flawed perceptions.
How to Get Approved for High-Risk Pawnbroker Merchant Services
Whether you operate a high-risk merchant account online, or a brick-and-mortar retail pawn shop, you will require a high-risk merchant account to process credit card payments from your clients. Credit card and debit payments are the most common form of payment in the United States.
Most banks and other mainstream merchant service providers, such as PayPal, will not provide merchant accounts for pawn shops. Some credit card processing solutions specialize in high-risk industries but will likely charge higher rates and give you unrealistic terms and conditions.
Other common limitations you will likely encounter in your quest to get a high-risk merchant account include the following:
- High charges
- Limits on monthly processing volume
- Lack of chargeback prevention
- Unfavorable terms
- Limited transaction options
- Interruptions in payment processing
Interruptions in payments, holdbacks for various issues, or volume caps to your approved processing volume will affect your business. In addition to the huge impact on your bottom line, the limitations will affect your ability to provide seamless services to customers.
It is only prudent that you get a high-risk payment service provider that will not negatively affect the growth and profitability of your business. Take your time and investigate various payment providers to help ensure that you are not putting your business operations in jeopardy.
Some of the features and benefits you should insist on include the following:
- Chargeback and fraud prevention
- Multiple partnerships across various financial industries
- Website integration
- Intelligent payment rerouting services
- Low rates and fees
- Unlimited transaction volume
- Secure payment environment
Luckily, SecureGlobalPay will save you time and money by offering you top-rated, seamless, high-risk payment gateway solutions to meet all your payment processing needs.
SecureGlobalPay Pawn Shop Merchant Account Solutions
SecureGlobalPay has 25-years of experience processing online payments for merchants in high-risk sectors. We have extensive acquiring relationships, which help us provide expert high-risk payment solutions for high-risk businesses including pawn shops. We can also help you if you have bad credit or have been previously declined.