High Risk Accounts

Business Insights

Libby James, Co-Founder of non-biased and advice based website www.merchantadviceservice.co.uk speaks to BBP Media about the issues some companies have in finding a suitable credit card processing solution due to the ‘high risk merchant account’ label within merchant services.

When searching for the best merchant account for your business, it’s important to know the facts – many companies are deemed as ‘high risk’ by account suppliers, yet they are unsure of why and how to find suitable credit card processing. Some new businesses start applying for business banking and card processing through their personal bank – thinking the process will be straight forward. However, this is not always the case.

Our short guide covers the basics behind high risk accounts and payment gateway’s – what to know, and how to secure the most suitable card processing for your business now and in the future.

What makes a company ‘high risk’ in the world of merchant accounts?

Companies can gain the unwanted title of ‘high risk merchants’ for a number of reasons. The most common of which include;

  • High levels of chargebacks (refunds granted by the merchant bank meaning the retailer has to refund disputable transactions). These can occur in circumstances such as non-delivery of items (genuine disputes) or fraudulently.
  • Industry levels of fraud – an example of this is in tech support companies, where fraud is commonly experienced surrounding subscription-based products.
  • Location based issues, some countries are considered more high-risk than others – especially when the transactions are online rather than face-to-face.

Lots of businesses are unaware they carry the high-risk title, examples of this are travel or furniture businesses – the reason being that the date between order, therefore card payment, and receiving the goods or physically going on holiday can be months or in some cases years – anything can happen to the business within this time frame.

Sourcing high-risk payment providers can be tricky, although not impossible. Some merchant account suppliers specialise in more complex businesses. Each provider has an ever-changing attitude to risk, therefore high-risk companies in certain niches have varying chances of the application being accepted. Using a broker could help this process be more efficient, as good brokers will have hundreds of banks to choose from and know the ones most likely to accept new high-risk business.

Despite falling under the high-risk category, it’s vital that companies look at all options available to them. Not all merchant account providers will charge eye wateringly high rates, especially if the application is packaged well before being submitted to the bank. If the company is new and has little or no transaction history, presenting an accurate business plan with justifiable future projections can aid merchant applications.

As briefly mentioned before, merchant account providers and banks are constantly assessing their attitude to risk – therefore it can mean that what was once accepted, subsequently might not be. If a company has been terminated by its current provider, there will more than likely be alternative options available. Searching for a company with a manual and more flexible underwriting application process can increase the chances of having the application accepted.

Firms looking to accept high-risk payments online will need a merchant account and also a high-risk payment gateway, the payment gateway encrypts customer payment data and ensures the transaction is secure. High-risk businesses ordinarily struggle to obtain a merchant account, however once this is in place – finding a gateway is much easier, sometimes this can be arranged through the merchant account provider.

As with all services, it’s important to review costs on an annual basis. Shopping around regularly will ensure that you do not pay over the odds for credit and debit card processing. This is especially important for newer businesses, who often experience higher rates in the earlier years of trading before building reliable transaction history.

Finding credit card processing for high-risk businesses doesn’t have to be impossible, ensuring your application is with a provider who has the appetite for the industry you work in, and packaging your application to a good standard will give you the best chance of finding a suitable provider. Within merchant services, the more information provided at application stage the better. Transparency is key.

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