All businesses must have a way to accept payments from their customers. Especially when your business is an e-commerce or online business. If your business is entirely online, then that means that you will be completely dependent on card-not-present transactions. And this means that you are going to need a merchant account to process those credit and debit card payments.
But what happens if you have been categorized as a high-risk merchant? You won’t be able to open a merchant account via a traditional bank or low-risk merchant account provider. What then?
Fortunately, you do have options. The rise and success of many high-risk businesses and industries have opened the doors for more high-risk merchant account providers to offer high-risk merchant accounts to resolve the lack of payment processing services for high-risk merchants.
High-Risk Merchant Accounts: What Are They?
A high-risk merchant account is a special payment processing account for businesses that have been categorized as high-risk by traditional banking and payment processing institutions.
High-risk merchant account providers, those that provide high-risk merchant accounts, have already agreed and are prepared to work with those businesses prone to high-risk activity. They have built-in systems and strategies that keep high-risk merchants from going over the edge in that risk and avoiding merchant account termination.
Because of this, most high-risk merchant account providers will have entirely different terms and conditions on their provider contracts, ensuring that both parties are equally protected.
Some of these terms involve paying higher fees, and others can pose some inconvenience to the merchant, but in the end, these are small issues compared to the advantages and gains that the merchant can enjoy.
Who Needs A High-Risk Merchant Account?
Before we dive further into high-risk merchant accounts, you need to know if they are right for your particular business. In order to make that determination, you will need to ask yourself if your business has experienced the following events. And if you have, chances are high that you will require the services of a high-risk merchant account. Let’s take a look at these characteristics:
- Not the best financial history
Ask yourself if you have had a merchant account application rejected or if you have ever had a merchant account terminated for any reason. If so, chances are slim that you will receive approval for another traditional merchant account.
This is why high-risk merchant accounts are ideal. They will not turn you away if you do not have the best credit score or if you have experienced a high level of chargebacks.
- Your industry is high-risk
If your business falls under the category of high-risk, it usually means that you have higher than average incidences of chargebacks and fraud. Or it could just be that your industry has a bad reputation and that banks and other payment providers do not want to be associated with this type of business. Some of the businesses that are normally categorized as high-risk include adult entertainment and vaping/e-cigarettes.
- You offer recurring subscriptions
If you offer recurring payments, these can also experience high incidences of fraud as customers simply forget that they signed up for a subscription service.
- You sell high-ticket items
If your businesses sell high-ticket items, processors generally steer clear of these businesses as they are regularly targeted for fraudulent activity.
- You want more security and protection
You know your industry well and you are fully aware of the risks involved within your particular vertical. That is why you want the best protection a merchant account provider and the processor can offer. This will benefit both your customers and your businesses. If customers know that their sensitive credit card information is safe, they will continue doing business with you.
What Are The Benefits Of Having A High-Risk Merchant Account?
If you find that your business has experienced the aforementioned characteristics, then it is clear that your business would greatly benefit from the processing services found in a high-risk merchant account.
Let’s take a look at a few benefits that opening a high-risk merchant account with a reputable provider can offer:
- Lower risk of account termination
With any other traditional provider, if you experience any of the above issues, especially exceeding their chargeback ratio, then you run the risk of having your merchant account terminated.
With a high-risk merchant account provider, they expect you to have chargebacks since you do operate a high-risk business in an equally high-risk industry. One thing is for certain, they will never terminate your merchant account.
- Enhanced chargeback and fraud protection
Most high-risk merchant account providers come equipped with the best security tools to combat fraud and chargebacks. You don’t have to worry about trying to fend for yourself, these providers will support you with all the resources necessary.
- Access to international markets
Traditional providers tend to shy away from any foreign markets. They don’t want to deal with transactions that are overseas or multiple currencies. On the contrary, high-risk merchant account providers are more adept and at ease with this.
- Higher volume caps
When you have a low-risk merchant account, providers typically put a “cap” on how much a business can earn. The reason for this is that banks tend to see a consistency in earnings in line with the “stability” of a business. Luckily, with a high-risk merchant account, there are no volume caps and merchants are free to sell more each month.
- Subscription services
If your business happens to have the subscription-based model, you are in luck. This highly profitable model is gaining popularity in many industries and high-risk merchant account providers want to accommodate this opportunity for merchants.
Will You Open A High-Risk Merchant Account?
Just because you are labeled as a high-risk business does not mean that you are running an illegal operation. It simply means that your industry requires a more specialized service that only a high-risk merchant account provider can offer.