In business, risk is defined as an action that promises a great reward while bearing great threats. These threats are what first comes to mind when a processor evaluates businesses, and still, some processors strive for risky ventures, aware of the mentioned award.
In this article, we’ll introduce you to the payment processors of businesses labeled as high-risk, and show you that it is not just a place where troubling businesses go, it’s a world of its own, providing great opportunities not just for the processor, but also for merchants.
What makes a business low or high-risk?
With the rise of ecommerce and card-not-present transactions, new risks were involved in doing business. In time, some types of business ventures got recognized as high-risk, and payment processors imposed great fees and restrictions on these businesses.
High-risk business accounts are a set of services that make it possible for merchants labeled high-risk to accept credit card payments from their clients. Payment processors evaluate merchants as high or low risk, based on the following factors:
- Average monthly sales amount (more or less than $20,000)
- Average credit card activity (more or less than $500)
- Single or Multiple currencies accepted
- The offering of recurring payments
- Chargeback history
- Main product and services offering
- Sell to a high-risk country/region or based in one (any location outside the US, Canada, Australia, EU, or Japan)
High-risk credit card processing comes at a higher price. Here are the two most important things being labeled “high-risk” brings to your payment processing account:
- Higher fees, terms, and restrictions (providers specialized in businesses labeled as high-risk charge fees that are almost always higher than the average, and require rigorous contract conditions)
- Reserves that limit revenue (this is what payment processors use to secure themselves if a merchant suffers a failure) There are three different reserve types:
- Upfront reserve (where processor withhold all account funds until reserve balance is reached)
- Rolling reserve (where revenue percentage is withheld on a daily basis)
- Capped reserve (different than a rolling reserve; the acquirer will not withhold funds once the reserve cap is reached)
Benefits of going high-risk
To the banks, you the merchant are little more than an investment. It sounds awfully impersonal, yes, but we’re all out to make that money; banks are no different. Some banks will only process low-risk merchants because it’s easier to justify to their shareholders. But like all risky investments, high-risk merchants can potentially deliver higher returns. So while being “high-risk” sounds bad, there are actually some decent advantages to reap from working with banks that will have you.
High-risk merchants pay more for their processing, but they also get more. In general, you should expect a higher processing volume and the ability to transact in multiple currencies. Also, as a high-risk merchant, it’s expected that you will process chargebacks from time to time. While chargebacks can put a low-risk merchant out of commission quickly, high-risk has a little more leash to run with. If you’re expecting to process high volumes, foreign currencies and chargebacks, high-risk merchant accounts will make a better fit for your business.
It’s All About You
Our biggest problem with presenting you a blind list of high-risk processors is that implies you click the links and you’re on your own. That’s just not how we do it over here at ChargebackHelp. You need a wingman in your corner!
We’ve been merchants ourselves, and have now worked with a broad variety of clients across many industries. Each merchant has unique credit card processing needs; understanding those needs is in our business DNA. If you’re looking for processing, or things aren’t working out with your current merchant services, help is right here.