Your eCommerce business needs to take card payments online in order to be successful. To accept payments online, you need to obtain a merchant account either through your bank or through a merchant account provider.
When you apply for merchant processing, the banks or payment service providers may classify you as a high risk merchant. What are the factors that can cause your business to be considered high risk?
Understanding what these factors are can help you work your way around them. And collaborate with a bank or merchant account provider who is open to offering you favorable terms and conditions to support your business.
Many banks and merchant account providers protect their interests by having a list of industries that historically have a greater risk of chargebacks & fraud. If you conduct business in any of these sectors, you may be classified as high risk even if you present a good processing history along with your application.
You can also expect to pay a higher than standard processing fee to cover the risk. Some of the criteria and types of industries that account providers might identify as high-risk businesses can include, but certainly are not limited to:
If you have had your merchant processing account terminated for any reason, banks and processors canplace you on a blacklist called a Terminated Accounts List or Match List. Since all account providers have access to this list, being put on it puts you in the high-risk business category. Thus, you might find it challenging to get approval for a new merchant account. The typical reasons why the providers might choose to turn down your request are:
Chargebacks occur when the buyer disputes a transaction with their card issuing bank. Chargeback requests are usually made when:
If you allow your customers to pay online without actually swiping the credit card, you could be considered a high-risk business. That's because any transactions conducted by using stolen cards cannot be identified without an alert that the card is lost.
To safeguard your company from the possibility of fraudulent transactions, accept only 3D Secure Transactions. Get tools like Mastercard Securecode, Verify by Visa, and other similar systems to protect you.
Keep in mind, though, that the more steps you add at checkout, the more shopping cart abandonment you will experience.
Merchant account providers will check your personal credit score before approving your application. If you have any unpaid business or personal tax liens, you might want to pay them off before applying for a merchant account.
Aside from the issues mentioned above, several other factors could place your business on the high-risk list. They are:
Even if you are classified as a high-risk business, you can still find many companies willing to provide processing for you. High risk processors have systems in place that can help mitigate the processing risk both for you and the processor. Over time, you can build a solid processing history and have your business transferred to the low-risk category.
How are you handling your high risk processing?
Tina Brandon is SVP for PaynetSecure.net. With over 20 years in high risk processing, she has helped thousands of high risk merchants successfully establish payment processing accounts. Contact Tina on Skype at tibrandon. Or email her at firstname.lastname@example.org.