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Guide to High Risk Online Payment Processing

What is High Risk Online Payment Processing?

High risk online payment processing allows businesses in high risk industries, and those considered high risk for reasons other than their industry, to accept credit and debit card payments online from their customers. 

A business can be considered high risk for a number of reasons, including just being a new business without much traffic. Not every payment processing provider will work with businesses that are high risk, so it is important to find one that has plenty of experience working with high risk businesses. 

Businesses that accept payments online are usually automatically classified as high risk because they process “card-not-present” transactions. This means a merchant doesn’t physically see the customer’s card, and there is a higher risk for fraud and chargebacks.

Being considered high risk shouldn’t discourage a business, as they can still operate like a business that is considered low risk with the help of a high risk payment processor. 

Who Needs High Risk Online Payment Processing?

Being labeled as a high risk business can seem like a scary thing, but it isn’t as bad as it sounds. A business can be labeled high risk for any number of reasons and doesn’t limit success.

A few reasons a business might be high risk include:

Business Industry

There are several business industries that are automatically labeled high risk simply for operating. Some of the most common high risk business industries are:

Financial services. This includes credit counseling, debt consolidation, debt collection, and other services that require debts. It is considered high risk to work in this industry because it is hard to distinguish if customers will actually pay or not.

Online gambling/casinos. There is a long list of regulations online casinos need to comply with, making them a high risk business to work with. 

Cryptocurrency. Cryptocurrency is very unstable, making it hard to estimate how much it can be worth at any point. 

eCommerce stores. All online ecommerce stores are considered high risk because they process “card-not-present” transactions, which make it easier for customers to use stolen credit cards or request chargebacks.

Age of Business

In most cases, any new business is considered high risk because they don’t have any financial history. This means most online payment processing providers will use the business owner’s personal credit and financial history, labeling the business as high risk.

High Transaction Volume

Businesses that process more than an average of $20,000 a month in sales and have an average transaction amount of more than $500 are considered high risk. The more money a business brings in, the higher the chances for chargebacks and fraud.

This makes high volume businesses high risk to be able to account for and cover the chargebacks and fraudulent charges they face each month.

Types of Products/Services

Businesses that sell certain types of products or services are also automatically considered to be high risk. Some of the most commonly labeled high risk products and services include:

  • Online gaming and casino
  • CBD
  • Tobacco/e-cigarettes
  • Subscription services
  • Adult entertainment
  • Consulting services
  • Computer/IT software and services
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High Risk vs. Low Risk Payment Processing

Surprisingly, there is a pretty fine line between high risk payment processing and low risk payment processing. Although there are some types of businesses that will be considered high risk no matter what they do, other businesses can try to change their risk status by making a few changes.

Businesses that are more likely to be deemed high risk process international transactions and accept multiple currencies, have an average transaction amount of over $500, have an average monthly sales volume of over $20,000, sell internationally in countries with high fraud risk, offer recurring subscription payments, experience high amounts of chargebacks, and sell high risk products and services.

Businesses that are more likely to be deemed low risk only accept one currency, have an average transaction amount of less than $500, have an average monthly sales volume of less than $20,000, only sells to countries with low fraud risk, don’t experience many chargebacks or fraudulent claims, and sell products that are not considered high risk.

How to Get High Risk Online Payment Processing

With a high risk business, finding an online payment processor can be tricky, but knowing what is needed from the business to obtain a payment processor can make it that much easier.

Keep the following in mind when looking for a high risk online payment processing provider.

  1. Know the risks the business has. It is extremely important to identify and understand the factors that labeled the business as high risk in the first place. Knowing these makes it easier to state them when searching for a payment processor.
  2. Gather all financial information. Payment processing providers will want to see what the business’s financial situation looks like before approving them for a payment processor. Having all financial information already gathered can make the process smoother and hopefully quicker.
  3. Transparency is key. It is crucial to make sure the business is as transparent as possible. If the payment processor finds a lie on the application, they can easily deny services.
  4. Check fees and regulations. Payment processing providers typically charge higher fees and have stricter regulations for high risk businesses, so make sure the business is aware of this before applying for services.
  5. Check Provider’s Reputation. In addition to making sure everything lines up in the business aspect, it is important to ensure the chosen payment processing provider has a good reputation with high risk businesses.
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Advantages of High Risk Payment Processing

As a high risk business, and even to some low risk businesses, there are several advantages to using high risk online payment processing. Some of the advantages include:

  • Advanced security. High risk payment providers want to do everything they can to ensure payment safety, so they use advanced security measures to prevent fraud
  • Higher chargeback protection. One determining factor of a high risk business is chargebacks, so high risk payment processors have a plan in place to protect the business from chargeback issues
  • Lower risk of account termination. If a high risk business tries to get a low risk payment processor, there is a high chance of getting the account terminated at any time. High risk processors won’t terminate the account for just being in a high risk industry
  • Ability to sell high risk products and subscriptions. Businesses have the ability to sell whatever products they want, even if they are considered high risk. Offering subscription payments is also a possibility with a high risk payment processor
  • International sales. High risk payment processing companies allow a business to sell to different countries and accept multiple currencies, giving a high risk business access to international markets
  • Higher volume capability. High risk payment processors do not have volume limits like low risk processors do. This gives businesses the ability to process more payments each month

Disadvantages of High Risk Payment Processing

While there are plenty of advantages to high risk payment processing, there are also a few disadvantages to be aware of.

  • Longer approval process. The application and approval process take longer for high risk payment processing because it is more in depth and the provider needs to ensure there is truly no real risk working with the business
  • Reserves may be required. In some cases, a payment processing provider might require the business to have a certain amount of cash reserves before approval. The reserve is to cover any potential losses
  • Higher fees. High risk payment processing providers offer more services and protection than a regular payment processor. To be able to provide these services and protect themselves, the providers charge higher fees to businesses

Fees to Expect

High risk payment processing providers typically charge fees in two ways: fixed fees and fluctuating fees. Fixed fees remain the same regardless of risk level. Fluctuating fees increase as risk level increases.

Fixed fees include:

Refund fees. Costs associated with refunds, not chargebacks.

Security fees. Costs associated with security and fraud prevention.

Termination fees. Costs associated with terminating the contract early for any reason.

PCI Compliance fees. Costs associated with breaking PCI compliance.

Fluctuating fees include:

Chargeback fees. If the business experiences a high amount of chargebacks, this fee will be higher.

Transaction fees. Expect transaction fees to be higher for businesses with a higher risk level.

Monthly fees. High risk businesses need to pay monthly fees, and this fee can change at any time unless stated differently in the contract.

Reserve requirements. Businesses with a higher risk level might need a higher reserve to cover any potential losses.

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Use EMerchantBroker for Your High Risk Online Payment Processing Needs!

If your business is considered high risk, head over to EMerchantBroker to get started with high risk online payment processing today!