By Amanda Molinaro
Imagine you are like many aspiring eCommerce entrepreneurs and are researching the next best business to make the most of your investments and business efforts. During your research, you come across a series of lucrative businesses that show promising growth but learn that these businesses deal in “high risk payments.”
Should you turn tail and run, even if these businesses are booming? First, it’s important to understand what causes a business to be considered a high risk processing industry, what challenges a high risk business faces when accepting credit card payments, what a high risk merchant account is, and what eCommerce payment processors are all really about.
What Makes a Payment High Risk?
When acquiring banks—the banks that approve and accept credit card payments for a business—categorize a company as a high risk business, what they’re really talking about is an elevated risk in credit card payment processing.
With credit card and other kinds of electronic payments rising in preference and popularity among customers, banks become overly wary of the dangers related to these high risk payments in certain businesses.
High Risk Factors
There are a couple variables banks and payment processors take into consideration before approving a business to get a high risk merchant account. Here are a some of those facets that getting banks flag throughout their underwriting process.
Ecommerce Firms: These are exclusively”card-not-present” retailers. With no sales representative taking active steps to guarantee the identification of a client, these eCommerce business are rife with deceptive high-risk payments from debit and credit card transactions.
Industry Regulations: These types of companies deal with goods which are under constant government regulations and scrutiny. For instance, the vape industry, firearms merchants, and alcohol venders.
Reputational Risks: Though not illegal, these industries have reputations in mainstream society as taboo. Clearly the adult entertainment industry falls into this class together with vape companies, guns, and multi-level marketing companies (or MLM) are a few examples of businesses that frequently accept high risk payments.
High Ticket Size Chargebacks: These companies face greater than usual or high ticket size chargebacks compared to other businesses. These companies are typically travel booking companies, high-ticket coaching, business consulting, and web design/SEO services.
Continuity or Recurring Billing Designs: Consumers often forget about or are unaware of a continuity billing account as soon as they’ve signed up for a one time service. When they forget about their billing agreement and start seeing the monthly charge, they start calling their credit card providers for a chargeback of these funds. Common businesses are subscription boxes, shopping & membership clubs, background checks, and credit monitoring solutions.
Poor Credit: No one is perfect, and some companies and business owners have a history of dealing with bad luck or even a downturn in their market. Banks seldom believe in second chances, but some payment processors, believe in salvation.
No Risk, No Reward
Many of the top-grossing global businesses can be labeled by payment processors as higher risk. The vape sector alone is projected to boom to $61 billion by 2025 and the adult entertainment industry takes in tens of billions of dollars every year.
But before choosing to set up your high risk business, you want to make certain you can get approved to take debit and credit card payments through a high risk merchant account. Seek out a payment processing solutions provider. They are third-party payment processing experts who have extensive knowledge of high risk industries and have relationships with many acquiring banks. They will work on your behalf to negotiate the best rate on your high risk merchant account.
So if you decided to launch a business in a high risk processing industry, make sure you ensure your success by starting with the right kind of high risk merchant account.