Banks Try to Find Room for High Risk Businesses

Mar 23, 2016

For years, banks have uniformly rejected and hassled high risk merchant accounts, even those that yield large profits. In fact, some banks have decided to stop serving entire industries. However, a clarification in banking guidelines has reassured banks that they can and should be in business with high risk merchants. If banks can create and enforce strong compliance programs, they can keep a portfolio full of high risk clients.

Rewriting the Rules

Many entrepreneurs and investors are concerned that their businesses will be rejected by traditional lenders and have turned to alternative lenders for loans. Some bank officials are concerned that the proliferation of high risk industries will mean a major loss of profits in the coming years. As a result, many financial institutions are focusing on taking the risk out of high risk industries through monitoring systems.

Steps for Defending a BSA Decision

To start a solid compliance program, apply the BSA/AML risk assessment. The assessment must be complete and updated regularly. Ensure the risk assessment clearly defines the levels of risk in the customer portfolio, as well as the risk appetite set by the board. Afterwards, the board defines the guidelines for the customer’s account.

There should also be a process to determine the high risk activities that merchants participate in. Plus institutions should gather information about merchants to evaluate the risks before forming a partnership. After this initial assessment, a comprehensive plan for monitoring merchants should be established.

Use BSA Software

There is a variety of BSA monitoring software available to monitor merchant transactions. Develop a clear understanding of how the software works and perform regular data and model validation. Banks must document any potential suspicious transactions. Ultimately, there is no reason for banks to deny high risk merchant accounts. If banks stick to a BSA compliance program, they can have successful relationships with high risk merchants.

High risk businesses are extremely lucrative, but many financial institutions forego them because of the strict guidelines associated with monitoring these merchants. eMerchantBroker.com specializes in forming profitable relationships with high risk merchants. Our agents will protect your transactions and increase your profits. Start your merchant account today.

 

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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