They say that big risks can reap even bigger rewards. But sometimes being a high risk business can mean being stopped before you even get a chance to try. A high risk merchant has been classified by the banks as belonging to an industry that has above average chargeback rates and instances of fraud. For example, a customer may make a purchase from a nutraceutical company (a high risk business) then claim that a purchase was made without their knowledge, call their credit card company which will then give them their money back and the customer can keep the merchandise. This process also charges the merchant a fee before the merchant can dispute the claim. Too many chargebacks can become a financial burden to companies, especially small independent businesses.
To combat chargebacks, companies must keep logs and records of customer visits, plus monitor IP address activity of customers who have suspicious activity.
Your business can be classified as high risk for a variety of reasons. Your business can have a low credit score, or be selling goods to individuals outside of your native country. Also if you’re breaking into a new industry, banks and traditional lenders may see it as a higher risk investment to open an account with you, than with a business in a less dynamic industry.
The following are a few major industries that are considered high risk:
- Bad Credit Assistance
- Technical Support
- Adult Industry
- Credit Repair
- Compliance Requirements
Just because you are a high risk business, doesn’t mean your business is doomed. Your company could be deemed a low risk enterprise once the bank gets more financial information, or once the business has built up a positive credit history. Sometimes it takes six months to a year before this can happen. Achieving a chargeback percentage less than 1% of total transactions will also take you from a high risk to low risk merchant.
Today high risk companies can depend on credible third party payment processors that specialize in high risk business. eMerchantBroker.com is a low cost payment processor that will partner with you to grow your high risk merchant account and give you access to credit card processing and other hard to get services.