Introduction
If you are an online merchant whose business is categorized
as high-risk by banks, financial institutions, or merchant service providers
(MSPs), this blog is for you. This blog will discuss why businesses are
labelled high-risk, what payment solutions they are left with, and how high risk merchant
solutions benefit them. So, let’s start with the first question: why?
Why Are Online Businesses Labeled High-Risk?
For various reasons, payment
processors, banks, and financial institutions sometimes label online businesses
as high-risk. They use the "high-risk" label to assess the level of
risk associated with providing services to a particular industry. Here are some
common reasons why online businesses may be considered high-risk:
..i.
Chargeback Risk:
Online businesses are more
susceptible to chargebacks, which occur when customers dispute a transaction
with their credit card issuer. This can lead to financial losses for payment
processors and banks. Certain industries, such as gaming, gambling, forex,
adult entertainment, tobacco, and e-cigarettes, have higher chargeback rates.
..ii.
Fraud:
Online businesses are often
targeted by fraudsters who use stolen credit card information or engage in
other fraudulent activities. This can result in financial losses for payment
processors and banks that may have to cover these losses.
..iii.
Regulatory Compliance:
Some online businesses operate in
industries that are subject to strict regulatory requirements or still
unregulated, such as gambling, fantasy games, CBD products, forex, adult
entertainment, or tobacco. This increases the perceived risk for financial
institutions.
..iv.
Reputation Risk:
Certain industries, such as adult
entertainment or online gambling, may carry a higher risk of damaging a
financial institution's reputation if they become associated with such
businesses.
..v.
International Transactions:
Online businesses that conduct a
significant portion of their transactions internationally may be considered
high-risk due to the complexities of cross-border high risk payment,
currency exchange, and varying legal frameworks.
..vi.
High-Ticket Transactions:
Payment service providers consider
businesses that sell high-value items or services as high-risk because they
carry larger transactions and have a greater potential for financial loss in
cases of fraud or chargebacks.
..vii.
Subscription-Based Models:
MSPs can see subscription-based
businesses, especially those with free trials or recurring billing, as
high-risk because customers may forget or dispute recurring charges.
..viii.
Startup Status:
MSPs may view new online
businesses, particularly those without a substantial financial history or
creditworthiness, as high-risk simply due to their lack of track record.
..ix.
Marketplace and Platform Businesses:
Usually, acquirers categorize
online platforms and marketplaces as high-risk because they enable transactions
between multiple parties, which makes it difficult to evaluate the risk of each
transaction.
..x.
High Volume of Transactions:
Processing a large number of
transactions daily can make businesses look high-risk because it's harder to
detect fraud or unusual patterns in a high-volume environment.
What Are the Best Merchant Solutions
for High-Risk Online Businesses?
High-risk online businesses face
unique challenges when it comes to payment processing and risk management.
Banks and traditional financial institutions do not offer payment gateways for
high-risk industry merchants. But merchants need not worry because many
merchant service providers are available to provide tailored-made, high-risk
payment solutions to high-risk industries. They provide high-risk businesses
with specialized payment solutions such as high-risk merchant accounts,
high-risk business payment gateways, fraud and chargeback prevention systems,
and risk management systems. Here, we will discuss the most essential ones that
high-risk merchants need to thrive in the online business regime.
High-Risk Merchant Account
Top high-risk merchant accounts are a specialized type of bank accounts that allow
high-risk businesses to accept payments online. It is essential for businesses
operating in industries like adult entertainment, online gaming, or forex.
High-Risk Business Payment Gateway
A high-risk business payment
gateway acts as the bridge between your website and the payment processor,
securely transmitting transaction data. It is also responsible for securing the
payment details while transmitting them.
High-Risk Credit Card Processing
High-risk credit card processing
services are essential for businesses that rely on credit card payments. It
allows businesses to accept international credit card payments.
How to Choose an Ideal High-Risk Payment Processing Provider?
Choosing an ideal high-risk
payment processing provider is crucial for businesses that operate in
industries or markets considered high-risk by traditional financial
institutions. Here are some simple steps to help you choose the right high-risk
payment processing provider:
• First of all, identify the specific needs of your
high-risk business, such as the type of products or services you offer, your
target market, and your expected transaction volume.
• Communication clearly with a merchant service provider
(MSP) about your business, whether it is regulated or unregulated.
• Check MSP’s experience with your business.
• Evaluate strong security measures, such as encryption,
tokenization, 3-tier authentication, etc.
• Assess the chargeback management system.
• Analyze the pricing structure, compare it with other
providers, and go with a transparent fee.
• Carefully review the contract terms, including contract
length, cancellation fees, and any hidden clauses.
• Reliable and efficient customer support is crucial.
• Assess payment options and choose one that offers a
variety of payment methods, including credit cards, ACH, and international
payments.
• Make sure the payment processor is compatible and offers
seamless integration.
• Consider MSP’s global reach, ask about multiple-currency
and offshore merchant account support.
• Verify regulatory compliance, such as PCI-DSS and GDPR.
• Check the online reviews and ratings of the merchant
service provider.
By following these steps, you can
make an informed decision and select a provider that best fits your
requirements while mitigating the inherent risks associated with high-risk
businesses.
Conclusion
In this high-risk online business
environment, choosing an ideal high risk payment
processing provider is crucial for the success of your business.
High-risk business payment gateway, merchant accounts, and credit card
processing are some of the most important payment solutions for online
high-risk companies. By following the above steps, you can select the best one
to align with your business. However, we also researched several payment
service providers and found WebPays the best choice for all sizes of
high-risk companies. They have all the features, including top-notch security,
fast processing, timely settlement, global reach, multiple currencies, and APMs
support, etc. They offer their solutions to regulated and unregulated merchants
and help them grow in this vast online market. So, what are you waiting for to
acquire WebPays and elevate your business to new heights? Apply Now.
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