Assuming credit card processors view them, numerous unexpected industries like debt consolidation, document preparation, life coaching and ecommerce as high risk, these merchants typically pay higher fees to offset this increased risk and may require upfront or capped reserves be set aside as security deposits.
High risk merchants face higher chargeback rates and may need to submit more documentation.
Chargebacks
Your payment processor could potentially classify your ecommerce business as high risk based on industry specific risk. Chargebacks have historically been prevalent within certain sectors; thus putting businesses operating within those industries at greater risk than others for chargebacks.
An elevated chargeback rate could be the result of various issues. For instance, it might occur if a customer doesn’t receive their product due to issues in your billing system or delivery delays; additionally, having such a rate of chargebacks can severely damage your brand and reputation.
There are solutions available to high risk merchants looking to reduce their chargeback rates, including dispute management solutions that allow you to track disputes end-to-end, including concessions and uploading evidence against chargebacks. Furthermore, it’s wise to find a provider with experience working with businesses within your industry to build a compelling case that helps lower risk ratings.
Fraud
Businesses operating within certain industries or who experience high levels of fraud may be classified as high-risk by payment processing companies and banks, and this designation can have a dramatic impact on how merchants handle payments and chargebacks.
Businesses considered high risk may face higher fees for credit card processing and may need to set aside money in a reserve account in case there are chargebacks on credit cards. This is because processors, acquiring banks and card networks seek to avoid servicing businesses that might experience excessive chargebacks as this can lead to significant financial losses for them.
There are various aspects of business that could classify it as high risk, including its industry, how transactions are processed (card not present or in-store), whether international sales are conducted and even sales volume. But being considered a high-risk merchant doesn’t have to reflect negatively on products, services, reputation and credit scores of the business itself.
Recurring Billing
High Risk Merchant Highriskpay.com accounts provide businesses in the high risk category with access to accepting credit and debit card payments from customers, an essential requirement of any serious, profit-minded online merchant that sells products or services online. Merchants operating under such risk exposure face an increased risk of fraud and chargebacks which could incur high payment processing fees or worse yet be dropped by aggregate payment processors without notice.
High-risk merchants can benefit from recurring billing if they partner with an experienced payment processor that understands their unique needs and offers competitive rates. Finding a vendor with global expertise in payment processing technology to assist scaling is essential, while transparent fee structures that list monthly service costs should also be sought after as these will avoid hidden charges or addendums in their monthly costs and boost lifetime value more than one-time transactions do.
International Transactions
International card payments may be more susceptible to fraud and chargebacks than domestic ones due to disparate security measures, banking regulations and fraud prevention strategies across countries. Furthermore, it can be more challenging for businesses to deal with disputes or refund claims that arise abroad.
High risk merchant classification lies with sponsoring banks and payment processors; however, the reasons a business may be classified as high-risk are often obscure and have nothing to do with credit scores, reputation or quality products sold by merchants.
Therefore, it is vital to select a payment processor who understands the unique requirements of high-risk merchants and is prepared to assist their growth. In particular, ensure your provider offers a reserve account (a subaccount attached to your merchant account where a portion of sales goes toward paying chargebacks and other fees) and is flexible with refund ratios and chargesback thresholds.