Some of the typical reasons why underwriters could flag your business as high risk could be the following: your business belongs to a highly regulated industry, processing CNP or card-not-present transactions, high incidences of fraud and chargebacks, and reputational risk according to banks, just to name a few.
Top 10 High Risk Merchant Account Industries
Below is a list of the top 10 biggest high risk merchant account industries. Also included are some valuable tips to decrease the risk associated with the online payment process.
- Firearms: There is great controversy over gun ownership, regulation, and safety in the U.S. and therefore banks are a bit leery to take on gun merchants.
Tip: Your best bet is to find a gun-friendly merchant service provider who knows the ins and outs of the gun industry and federal, state, and local gun laws.
- Adult Entertainment: Despite this clearly lucrative industry, most financial institutions will not serve any adult entertainment businesses. The most common reason is that they refuse to take on the reputational risk.
Tip: Consider diving into your research to find or get recommendations for a merchant service provider that specializes in the adult industry.
- Tobacco/Vape/e-Cig: With rigorous regulation, taxes, age restrictions, and history of fraud, many financial institutions are still giving this industry the cold shoulder.
Tip: The right payment service provider will be extremely knowledgeable about every state’s rules and regulations concerning tobacco.
- Liquor/Hard Alcohol: The trickiest part of this industry is managing customer satisfaction, sales, while staying compliant with all laws and regulations.
Tip: Get a payment processor who specializes in the tobacco industry and is an expert in the tobacco laws and regulations.
- Nutraceuticals: This industry is known for its use of recurring billing which inevitably leads to chargebacks.
Tip: Partnering up with the right payment processor will guide you into providing disclaimers for all your products so that they comply with state and federal laws.
- Retail Pharmacies: Online pharmacies typically fall into the high risk merchant category due to stringent drug laws dealing with authenticity, safety, and category.
Tip: The key to finding the right processor is to ensure they offer you the best payment solutions that are suitable for your business and offer risk management.
- Auction Websites: Unfortunately, the prevalence of scammers running illegal businesses has tarnished the reputation of honest online auction businesses.
Tip: Online auction businesses can still secure a payment processor by demonstrating good credit scores and a stable income.
- Large Ticket Size ($2,500+): The very nature of selling luxury items with heavy price tags exposes your business to chargebacks.
Tip: Find a payment processor that can provide you with a customized payment solution, but also banks willing to take on the risks in your industry.
- Multi-Level Marketing: Despite this booming industry, MLMs are well-known for their risks, including: high chargebacks, legal risks, and unpredictable growth.
Tip: Seek out a payment provider who specializes in MLMs and is equipped with a payment solution that is safe, secure, and offers chargeback mitigation.
- Biz Ops(Business Opportunities): This industry sells courses to help people generate income online and it typically uses recurring billing. However, they are known to have excessive chargebacks.
Tip: This can be easily rectified by building a solid reputation and a good credit record. Refrain from making any type of “outrageous claims”. A reputable payments provider that specializes in MLMs can assist you with all this as well as chargeback mitigation.
These are just some of the most well-known and largest high risk industries that are always seeking a solid merchant account provider. Knowing the industry well can be a catalyst to finding the right merchant account provider that will help your business process payments, protect your customers, and your business.