Payment Processing for High-Risk Merchant Accounts

It’s often said that high-risk industries are harder to lead. They often carry greater risks of fraud or chargebacks. And if your business falls into this category, you may struggle to find the right payment processor. In this article, let’s search what specifics these projects have and dive into payment providers’( crucial role in protecting them.

High-Risk Projects Explained 

Each business, before signing an agreement with a provider, should pass an assessment, and if your business meets at least two criteria: operates in a high-risk industry and there is a chance of financial failure, it is classified as a high-risk business.

Engaging in high-risk business activities does not necessarily mean it is illegal or dangerous. Such a venture can be profitable, promising, and, most importantly, within the law. Also, just because your business is classified as “high risk” does not mean that your financial institution will automatically refuse to cooperate with you. High-risk businesses typically have support from payment providers willing to work with them, but likely at higher fees for payment processing services. And this is because of their features.

High-risk projects features

High-risk projects have several distinguishing characteristics that distinguish them from traditional ventures.

  • High-risk projects are conducted in industries and markets with unpredictable dynamics and changes in demand, competition, and regulation that are difficult to predict.
  • These projects may be subject to rapid changes in consumer preferences, technological advances and economic conditions, which could significantly impact their feasibility and success.
  • High-risk projects are often subject to complex regulatory frameworks and require careful compliance efforts to reduce legal risk and ensure business continuity.
  • These projects may employ innovative or untested business models, disrupting traditional practices and creating additional uncertainty regarding market acceptance and revenue generation.
  • Due to their novelty or niche market, high-risk projects lack sufficient historical data for accurate performance evaluation, increasing inherent uncertainty about outcomes.
  • Starting and maintaining high-risk projects typically requires large financial investments, including research and development, marketing, and operating costs, increasing potential financial risks.
  • Many high-risk projects utilize cutting-edge technology or pursue ambitious technical goals, increasing complexity and potential implementation and execution challenges.
  • Despite the inherent risks, high-risk projects offer opportunities for disruptive innovation and market leadership for entrepreneurs willing to embrace uncertainty to achieve significant returns.

When assessing risks, payment companies are guided not only by the above factors. You may also be considered a high-risk business if:

  • You have lost your previous merchant account or received TMF status (terminated merchant file)
  • You work in countries with a high level of chargebacks (almost everywhere except the USA, Canada and the European Union, Japan and Australia)
  • Have little or no history of card processing
  • Operate on a recurring billing or subscription model
  • Accept multiple currencies
  • Have more than $20,000 in sales per month and accept more than $500 per transaction.

Since the acquirer and PSP are responsible for processing all your transactions, it is very important that they understand that you are not causing them any financial harm and that your cooperation will be mutually beneficial. Finding a solution is difficult for high-risk companies because not all providers are willing to take the risk.

Examples of high-risk businesses:

  • Cryptocurrency and Forex
  • Betting
  • Gambling
  • Tech-support
  • Escorts/Adult
  • Dating
  • Online Pharmacy
  • Travel & Accommodations
  • Consulting/Counseling
  • CBD (Cannabidiol), e-cigarettes, and vape
  • Stun guns and tasers
  • Credit repair
  • Multilevel Marketing (MLM)
  • Pawnshops
  • Search Engine Optimization (SEO) services
  • Telemarketing
  • Real estate
  • Software

What is the best way for high-risk businesses to accept and make payments?

It is important for high-risk businesses to carefully consider high solutions that meet their unique needs while appropriately managing risk.

 Choosing a reliable payment platform that seamlessly integrates the features and options you need is paramount to enable smooth transaction processing and ensure business profitability.

 Helix payment processing company, as an example, ensures secure payment processing, central management of operations with a unified interface, multi-currency compatibility, and diverse payment options suitable for different types of businesses, including high-risk industries.

As our merchant with high risk, you will go through several stages of processing, which may include:

  • Submit Application: Merchant submits an application for a high-risk merchant account to the payment processor. This application contains information about the company, its owners, financial data, processing history (if any), and industry or business model-specific details.
  • Underwriting and Risk Assessment: The payment processor evaluates the application to assess the level of risk associated with the merchant’s business. This includes analyzing factors such as chargeback rates, industry regulations, financial stability, and fraud potential.
  • Approval or Rejection: Based on the underwriting evaluation, the payment processor decides whether to approve or reject the merchant account application. If approved, the merchant will be informed of the terms and conditions of the account, including fees, reserves, and processing limits.
  • Implementation and Integration: Once approved, the merchant integrates the payment processor’s services into its business operations. This may include setting up payment gateways, APIs, or other technical configurations to facilitate payment processing.
  • Transaction Processing: Merchant begins processing a transaction in a high-risk merchant account. This includes receiving payments from customers, approving transactions, and depositing funds into merchant bank accounts.
  • Risk Monitoring and Management: Payment Processors continuously monitor merchant accounts for signs of fraud, excessive chargebacks, or other risk factors. The following steps can be taken to reduce risk: holding reserves, setting trading limits, or implementing fraud prevention tools.
  • Account Maintenance: Merchant and Payment Processor maintain ongoing communication and cooperation to resolve any issues or concerns that arise with high-risk merchant accounts. This includes updating account information, resolving disputes, and meeting compliance requirements.
  • Termination or Adjustment: In some cases, a payment processor may decide to terminate a high-risk merchant account if the risk becomes too high or if the merchant does not comply with the terms of the agreement. Alternatively, adjustments may be made to the account terms and conditions, such as changes to fees or reserves, to effectively manage risk.

In conclusion, we would like to say that finding a secure payment processing solution for high-risk merchants can be challenging, but a properly selected payment processor can not only safeguard all funds but also unlock potential for growth and innovation.