This Might Be the Reason Your Business Was Flagged as High-Risk

Oct 11, 2019

You have the business, the right products and/or services, the website filled with information, and some good employees. Now you want to expand your payment options to include credit and debit card processing. That should be no problem for a legitimate business like yours, right?

Actually, many businesses are surprised to find that qualifying for an online payment gateway is not as hassle-free as they had hoped for.

While the phrase ‘high-risk business’ sounds like it should be used strictly to refer to organized crime, legitimate businesses are flagged as high-risk every day for a variety of reasons that may not be readily apparent.

Here are the four top reasons why your business may have been categorized as high-risk.

The Type of Industry Your Business is In

Your business industry is important information when qualifying for a merchant account. Unfortunately, operating within certain industries comes with different risk factors.

If your business is in an industry with an increased likelihood of fraud, chargebacks or high-value transactions, you’re more likely than not in a high-risk industry. Banks will also deny your business a merchant account if it’s in a business that has reputational risks.

Examples of high-risk industries are businesses that deal in the selling of the following products or services: marijuana or CBD products, tobacco products, insurance, jewelry, gambling, adult entertainment sites, cryptocurrency, alcohol, travel options or packages, and businesses that provide financial or legal services.

While this list isn’t exhaustive, if your company shares any of these qualities, you were most likely denied a merchant account for industry reasons.

Your Business Has a High Volume of Chargebacks

Chargebacks refer to when a customer disputes a transaction with a merchant, allowing them to receive their money back while keeping the product or services that they received. While not all chargebacks are a sign of fraud, they always result in a loss for the merchant.

If your company has a high volume of chargebacks, it could indicate that you’re in financial trouble or that you aren’t a respectable business.

Most banks only allow for a chargeback percentage of 2% of their successful transactions. This can be especially hard for online retailers or businesses that offer subscription services of recurring billing to stay below.

If you’re dealing with high chargebacks, there are methods that you can use to help reduce your number.

You Have a Poor Credit History

Just like with any other huge financial endeavor, your credit score plays a vital role. If your credit history is poor, you will be seen as a risk and banks will not want to provide you with a merchant account.

Keeping track and finding ways to increase your credit score should one of the first things you do before even applying for a merchant account. This will increase the likeliness of you being accepted and provide access to better rates.

Your Business is Too New

Banks prefer businesses with a proven track record of making sales and providing respectable services. If your company is still in the start-up phase, you’ll need to prove your worth before qualifying for some of the perks of having an established business.

Options for High-Risk Businesses

While being denied a merchant account with a standard bank may have been a blow, there are still payment processing options out there with businesses that specialize in high-risk companies. This can provide you with solutions as you improve your business standing.

Let us help you get a high risk merchant account today!

Get Started

Award winning.

  • 2012
  • 2013
  • 2014
  • 2015
  • 2016

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.

Live Chat