Banks play a significant role in the back-end of credit card payment processing and have a say on which groups of merchants they’d like to work with. So much that a merchant account provider won’t accept your application if their banking partner says no.
When applying for a merchant account, certain characteristics (that are naturally built into your business model) may lead to a high-risk classification.
While some of these risk factors are obvious— such as a business posing financial or reputational danger—others are hidden and may not appear to you until an underwriter highlights it.
Merchants fear high-risk labeling for many reasons;
- Difficulties getting a merchant account unless you apply with the high-risk merchant account vendors.
- Stringent underwriting procedures and low acceptance rates
- Higher fees. You’ll likely pay higher in merchant account and payment processing fees.
- You may suffer sudden account termination in case of a slip-up.
But these obstacles shouldn’t stop you from running your perfectly legal and profitable business. High-risk merchant accounts are just as useful and beneficial as their low-risk counterparts. Most of these risks are also manageable, so there’s no need to panic.
Why Would Underwriters Consider Your Business Risky?
As hinted earlier, your business could be termed high-risk for a dozen reasons, including;
- High chargeback rates. Firms that risk accumulating excessive reverse charges or chargebacks (requested by dissatisfied shoppers) are a no-go-zone for banks.
- Handling restricted products. Selling highly-regulated items or services like Cannabis, adult entertainment, and e-cigarettes welcomes a high-risk naming.
- High-fraud risks. Businesses that involve fraud-prone payments like Card-not-present transactions are seen as risky.
- Bad Personal Credit. Poor personal credit can also lead to high-risk labeling.
- High-Ticket Sales. If you receive a massive amount per sale, then chargebacks can be expensive. Banks are often unwilling to welcome such huge risks.
- Running an offshore company. Operating an offshore company heightens risk factors because it’s difficult to guarantee and monitor full compliance.
A bank could consider your company risky for many other reasons, but these 6 are obvious red flags.
Partner With a Supportive Payment Provider
In such a challenging payment environment, partnering with a supporting merchant account provider & payment processor gives your business an edge.
High-risk merchant account providers will help you right from the application process and continue this support throughout the relationship.
The best services also customize services to fit your business needs and offer protection from fraud and chargebacks.