What Are High Risk Transactions

Oct 26, 2021

When a business has been determined to be high risk, it means that credit card processors have deemed this business prone to a higher than normal rate of chargebacks and an elevated risk for financial failure. 

Payment processing is also at a higher risk, especially in the e-Commerce space. Merchants have assumed this risk, however, payment processors and acquirers stand to lose as well. The answer for most acquirers and processes is to outright deny the business a high-risk merchant account or elevate their prices in order to cover their risk. 

Fraudulent transactions and scams are simply part of the package when it comes to operating an e-commerce store. Yet, merchants are well-advised to implement effective controls and protection to shield themselves from these illegal activities. 

High-Risk Transactions Defined 

High-risk transactions are generally those that are more susceptible to returns, chargebacks, as well as fraud. Depending on the specific vertical of the business, the issues will largely look the same. If there are any issues with the transaction, the merchant’s funds would be placed on hold until the problem is resolved. 

Types Of High-Risk Transactions

As the online payment space continues to evolve, e-Commerce merchants must pay careful attention not only to the amount of revenue they are able to generate but the types of customers they are encountering. Here are some examples of high-risk transactions to look out for:

  • First-time customers
  • International customers
  • Card-not-present transactions (which include Telephone order/Mail order, IVR authorization as well as settlement, and Internet)
  • Manual transactions without authorization
  • Manually keyed transactions
  • All transactions a customer keys into the terminal

Bolstering Security Is Key

High-risk transactions require enhanced security as well as compliance. Determining the customer’s identity is at the forefront of the innovation of identity verification solutions. 

More businesses are adopting an enhanced digital identity as well as authentication solutions to strengthen their security. Another critical reason to beef up security is to protect valuable customer and employee data. 

Biometric authentication protects user accounts from account takeover. This security process verifies a user’s identity using one’s unique biological traits including irises, retina, facial characteristics, voices, and fingerprints. The biometric authentication system then stores this data for the future when the user tries to access their account. This information is used to confirm the user’s identity.

Using unique biological traits means that they will use data specific only to that individual. This makes biometric authentication more secure than using traditional multi-factor authentication.

Authentication Faces Push-Back

With account takeover on the rise and the shady practices within the dark web, verifying the identity of users has become an ongoing challenge. 

On one side of the authentication issue, consumers demand convenience as well as speed. They don’t want to wade through an intricate, labyrinth type of verification process. They certainly don’t want a convoluted login system either. On the other side of the coin, security regulations are such that there is an increasing requirement to include authentication. 

The traditional ways of authentication by using a username and password have become largely archaic due to its massive security vulnerabilities. Phishing, account takeover, and social engineering are just some of the attacks. As a result, many IT departments are hard at work, researching new, powerful authentication methodologies to mitigate any potential for fraud and theft. 

In Summary

Although merchants may want to break into a high-risk business due to its potential for and opportunity for great growth and revenue, it is always a wise business move to have all the safety features and monitoring features at the ready to mitigate any potential risks and fraud.

Let us help you get a high risk 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.