If a company wants to take card payments and has certain features that increase the risk of fraud or chargebacks, they must have a high-risk merchant account. For instance, certain processors won’t cooperate with certain businesses, such as the sale of tobacco products or firearms. Many processors are leery of companies that have subscription pricing, sell globally, or don’t have a lot of cash on hand. You can nonetheless apply for a high-risk merchant account if you own a supposedly high-risk business and wish to accept card payments.
Why is a firm considered high risk?
In the payments sector, there is no centralized framework or body that decides which factors are dangerous. Instead, each bank, payment service provider, and payment processor creates its own criteria.
While some businesses explicitly indicate that they don’t work with certain industries, others accept applications from all candidates. In general, payment service providers are more picky about the kinds of businesses they accept than merchant account providers. You will be required to submit an application with information about your firm in either situation.
Each application will ultimately be evaluated by the organisation according to internal standards. Among the risk variables a business might take into account are:
What distinguishes high-risk accounts from standard accounts?
1. Higher processing costs for payments
A competitive payment processing cost could be 0.3% over the interchange rate for a regular small-business account while it could be 1.5% over the interchange rate for a high-risk account. If the interchange rate were 2.15% plus 8 cents, a typical business would pay $1.16 for a $50 charge, whereas a high-risk shop would pay $1.76. By firm, actual costs differ.
2.More drawn-out application process
You might receive approval for a typical small-business account in a matter of minutes. However, the approval process for high-risk accounts can take several days. High-risk business owners may also have their personal credit inspected and requested for more information about their company, such as bank statements.
3. Increased chargeback fees
Businesses are susceptible to chargeback fees, which can range from $20 to $100 each chargeback, in addition to receiving the original transaction amount returned.
How decision-makers at payment processors decide
The majority of the time, a business owner does not immediately apply for a merchant account. Finding a partner payment processor is the first step instead. After that, the payment processor looks for a banking partner to open the merchant account with.
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Knowing your company’s needs
Payline Data, a provider of high-risk accounts for high risk payment processing, has Andy Roth as its director of strategic alliances. He clarifies that a talk usually starts the process. According to Roth, “We want to know more about their circumstance and what puts them high risk.” “They are high risk due to a number of variables. The more information we have up front, the more effectively we can assist.”
