High-Risk Payment Gateways

Huynh NguyenOctober 28, 2022

If you manage a high-risk business, It’s possible that you feel as though the obstacles you’re up against are insurmountable. While the feeling is normal, it is important to know that it is generally difficult for high-risk enterprises to obtain business financing, credit card processing solutions, and company insurance; this is especially true for eCommerce business owners that rely only on credit and debit card transactions to generate revenue.

To put it another way, payment processors frequently favor larger, higher-volume businesses over smaller ones, even if the former pose a higher risk.

So, what actions should companies that are similar to yours take? The first step you should take is to become familiar with high risk payment gateways that focus on the high-risk industry.

What Makes a Business High-Risk?

Credit card processors and banks will not work with businesses that they believe have high risk. A company is considered to be high-risk by credit card processors and other financial institutions if it is engaged in a financially precarious industry that has a propensity for high chargeback rates.

The following factors are used to determine if a business is high-risk

1. Chargeback and Fraud Rates

One of the most common reasons banks and payment processors label a firm as high-risk is because it has a high chargeback or fraud rate. The patterns of behavior exhibited by your consumers are evaluated by the suppliers of your merchant account, business insurance, and business loans to determine whether or not you have a high chargeback rate.

2. Products or Services Whose Legality Is Open to Controversy

Products and services whose legality is in question, such as pornography and drug paraphernalia, may suggest that you have unreliable streams of revenue. Additionally, products and services of this nature are frequently coupled with questionable sales and marketing tactics.

3. High Average Ticket Sales

If your company consistently accepts credit card transactions for purchases that are of a high cost, then financial institutions may view you as a high-risk customer. This aspect has the most significant impact on organizations that handle a significant number of B2B (Business to Business) transactions.

4. Low Personal Credit Score

This aspect centers on you as the business owner, if you have a low personal credit score, banks and payment processors are more likely to place you in their high-risk categories.

What Types of Businesses Need High-Risk Merchant Accounts?

Casinos, Gambling, or Gaming
Marketing over the phone, telephone calling cards, voice over internet protocol (VoIP) pharmaceuticals, and internet pharmacies
Entertainment for Adults, as well as Dating Services
Itinerary, Lodging, and Meals Ticketing Agents
Legal Representation and Bail Bonding Services
Services Available via Subscription (Magazines, Collectibles, etc.)
Credit Restoration and Debt Reduction Services Counseling

The following are some examples of high-risk strategies to create sales:

Advertising that is based on impressions (pay per impression).
Advertising that is based on leads (pay for sales leads).
Paid advertising to a direct affiliate publisher or an affiliate network on a pay-per-action basis.
Outbound calling strategies or upselling methods (online or via call center).

What is a High-Risk Merchant Account?

A company that is categorized as having a greater potential for instances of fraud or chargebacks will require a high-risk merchant account. The increased processing costs that high-risk merchant accounts are required to pay are a form of compensation for the risk that the payment processor is taking on.

A high-risk merchant account is one in which higher payment processing is required to cover the cost of potential losses. The key is finding the best high-risk payment gateway that we will discuss subsequently in this article

What to Expect When You Use a High-Risk Merchant Account

Outrageous Costs and Regulations

Providers who specialize in high-risk merchants generally require stringent contract terms and charge fees that are significantly more than the industry standard. A select group of service providers has made it their niche to take on the unique challenge of supporting high-risk merchants that even other high-risk processors have declined. Naturally, the fees and contracts that these organizations demand are likely to be more stringent than those that are required for normal merchant processing.

Predatory Practitioners

Unfortunately, there are some con artists in the world who prey on business owners who are already having financial difficulties. They offer assistance, but at ridiculously high prices and on the basis of contracts that are so ironclad that it will be nearly impossible to get out of them. Be sure to do research, check recommendations, and look up updates from the Better Business Bureau and other advocate groups before signing a contract with any service provider.

Revenue-Limiting Reserves

The payment processor can reduce its risk by using account reserves as a form of insurance. If something catastrophic happens to you, your acquirer will be protected from loss thanks to the account reserve that was set up for them. There are three primary categories of reserves, which are as follows:

Upfront Reserve. The authorization to withhold all funds from credit card transactions is provided to the processor by an up-front reserve. This authorization remains in place until a reserve balance is achieved.

Rolling Reserve. When you use a rolling reserve, your service providers will set aside a certain portion of your daily revenue and keep it in escrow for a predetermined amount of time. They will then release the money to you as soon as other funds become available.

Set Reserve. When using a set reserve, also known as a capped reserve, the acquirer will withhold funds up to the maximum limit of the reserve. After the limit has been reached, they are not going to withhold any additional cash unless they use the reserve

A business that experiences a higher rate of chargebacks is more likely to be rejected by traditional processors. Therefore, it is possible that there will be instances when you will need to look into high-risk merchant services. However, where would one even begin? You should look for processors who have a good reputation and who specialize in providing high-risk merchant solutions. However, before you decide on a payment processor, you need to make sure that you read all the terms and conditions of the payment gateway high risk business and pay close attention to their fees. Every payment gateway is unique in its own way. It’s possible that one of them will present solutions that are more suitable to your company than what a competitor has to offer.

How to Select the Best High-Risk Payment Gateway Provider

If your company operates in a high-risk business or has been deemed high-risk in the past as a result of processing issues, or has a poor personal credit history, there are a few characteristics that you should search for in a high-risk payment gateway. These characteristics include

1. Reasonable Rates for the Processing of Credit Cards

There are certain high-risk credit card processors that do offer inexpensive rates, despite the fact that banks and many mainstream payment processors charge exorbitant rates for high-risk merchants and this is especially true of high-risk merchants. It is important to go for a high-risk merchant account that is within your financial means whenever you are shopping around for one. You can locate high-risk merchant accounts that have fees that are significantly lower than 10% in many circumstances.

2. Specializing in the Processing of High-Risk Transactions

The ideal option for payment processing is to find a company that caters specifically to the requirements of high-risk businesses and either works exclusively with them or specializes in meeting those requirements. One that does is in a better position to provide improved account management and coordination, as well as to advise its customers on how to protect themselves from chargebacks and fraudulent activity.

3. Required Tools

Additionally, your payment processor should provide you with the tools you require to run your business and accept payments online, as well as the support you require to set things up and ensure that they continue to run smoothly.

4. Assistance Available Around the Clock

You may be required to process payments at all hours of the day and night, depending on the type of business that you run. Because of this, you must have access to continuous support from the high-risk payment gateway that you use. In the event that something goes wrong, it is essential that you are able to get in touch with your processor; otherwise, you can miss out on prospective business.

5. A Powerful Community of Offshore Services and Solutions

Because offshore payment processing is the trademark of the high-risk industry, it is essential that the payment processor you select to collaborate with have a robust network of banks who are prepared to cooperate with the merchants that it signs up. Find a provider that works with a number of banks that are located in countries other than the United States if you want the best high-risk merchant account possible. The greatest high-risk merchant accounts come with the flexibility to process payments across various banks.

6. Agreements That Are Reasonable

The majority of payment processors provide a standard contract that is renewable every three years. In certain circumstances, though, you may be able to locate a processor who is able to offer you a contract with a shorter duration or one that is month-to-month in nature. It is necessary to make sure that the payment processor is supplying contracts that are at least equal to the industry standard and preferably better. It is also important to ask questions about the sort of contract that is supplied.

The fact that high-risk accounts have restricted chargeback penalties is another attractive feature that should be taken into consideration. Since excessive chargebacks are the reason why many merchants end up looking for high-risk merchant processing in the first place. Keeping a high-risk merchant account open may be more expensive, but it is a solid approach to assure the continued viability of a firm in the face of an increase in the number of chargebacks issued.

How to Avoid Predatory High-Risk Payment Processing Provider

If you run a high-risk business, you should be aware that while some service providers may give you respect and charge you costs that are in line with the market, some do not mean good. There are ready tips you can utilize to avoid them!

1. Read Over the Website of the Company.

If a company doesn’t provide a lot of information about whether or not they offer tools to streamline business for high-risk businesses, it’s possible that they want to trap you into a contract with a lot of hidden terms. Keep a watch out for processing websites that include information that is easy to understand and put into action, which shows that their business model is geared toward high-risk companies.

2. Be Sure to Check the Company’s Reputation On the Internet.

Conduct some web research to find out what others are saying about the company. If the evaluations as a whole are negative, then there is a significant chance that your interactions with that particular company won’t be unlike other customers.

3. Check The Terms and Conditions of the Company

Online samples of contracts are offered by a relatively small number of service providers; however, if you are able to obtain a copy of the company’s standard Terms and Conditions or Merchant Application, you should carefully go through it. The numerous methods in which the firm can take advantage of you will typically be detailed in the document’s legalese

Wrapping Up

The most reliable payment gateway high risk are those provided by businesses that also provide a comprehensive suite of merchant services. These services should include fraud protection, chargeback notifications, reasonable costs, and round-the-clock merchant assistance.

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