Operating in a high-risk sector can be incredibly frustrating. Not only is there usually a stigma involved in working for a “high-risk industry, but,” it’s also challenging to do “business as usual.” High-risk businesses can’t open a bank account, get a loan, or accept standard card transactions. Considering most people nowadays only use credit or debit cards, high-risk merchants need to find a way to simplify the shopping experience.
The best way to solve this common “payment pain point” is to work with a high-risk processing partner. There are now dozens of payment processing companies that can help high-risk industries thrive despite the prejudices of major PSPs and card providers. However, since there are many high-risk processing services to choose from, merchants need to know how to make a wise choice for their needs.
It may seem like defining a “high-risk business” would be self-explanatory. And, in some cases, it’s pretty easy to spot a company that fits the “high-risk” niche. For instance, if merchants deal with items like cannabis, firearms, or kratom, it’s understandable why mainstream card processors wouldn’t want to get involved.
However, every PSP has unique criteria for gauging a business’s “riskiness.” Sometimes, a merchant may fit the “high-risk” label even if they’re not dealing in questionable industries like marijuana.
In some instances, a company’s financial reports may signal a heightened risk versus other businesses. Most notably, payment processors often have significant issues with higher-than-average chargebacks. Companies that have offshore accounts may also face higher scrutiny from payment processors.
If you’re in doubt about your company’s risk profile, it’s best to peek at a payment processor’s “banned list” to see if you fit the bill. You could also talk with a team like Shark Processing that has experience recognizing high-risk businesses.
After you’ve determined your business is in the “risky” category, it’s time to consider getting a high-risk processing account. But how are these payment partners any different from more mainstream offerings?
The key benefit of using a high-risk processor is providing an extra security layer. Since these processing partners know the intricacies of high-risk scenarios, they take proactive steps to provide essential financial services with a low risk for account closures. This means you can deliver seamless payment options without worrying about suddenly getting blocked out of your bank account.
However, there is a higher fee for this service. While you should focus on the history and quality of your processor, you also have to ensure you know the facts about their costs. Generally, there are higher transaction fees when using a high-risk merchant account, and special restrictions like volume limits and high cash reserves may exist.
Also, since high-risk processors are putting themselves in “hot water,” they often demand far more financial documents than a typical business would. Even if you’re approved for high-risk payment processing, you usually won’t enjoy the flexibility of a short-term contract. High-risk account terms are almost always for over a year, so you must feel comfortable making a long-term commitment.
Since high-risk payment accounts require so much time, effort, and cash to set up, some new merchants may be tempted to download a popular PSP and start accepting payments.
No question that setting up an account on Stripe, PayPal, or Square is simple, fast, and straightforward. However, there’s a cost for this convenience — especially if you’re in a high-risk field.
Please remember that these PSPs have unique Terms & Conditions, and they can change these rules. Even if you review a company’s standards one day, there’s no telling how they may modify them on a future occasion.
High-risk merchants should also remember PSPs like PayPal accept multiple businesses under one payment umbrella. This means you may be “guilty by association” if other companies have issues such as fraud.
Unfortunately, it’s common for mainstream PSPs to give businesses the boot without a formal warning. Companies like PayPal and Square have an image to maintain. If your business isn’t squeaky clean — or if the PSP doesn’t feel it is up to snuff — it can legally terminate your account.
So, even though it’s easy and relatively cheap to use many hot PSPs, the odds are that you won’t be able to stay on that platform for all that long.
Nowadays, everyone goes to Google to find out, well, everything! So, it’s no surprise the most straightforward place to start searching for the best high-risk payment accounts is on Google.
While you should find many results on mainstream search engines, you may also want to snoop on other businesses in your field. If you’re trying to establish a presence in e-commerce, why not see what similar stores are using for their payment portal?
You may also consider getting involved with industry-specific conventions online or in person. At professional events, you can often find many high-risk payment providers specific to your market.
Merchants who are nervous about their high-risk status must know they have options. Payment processor partners are willing to lend a hand to high-risk businesses. While not every high-risk payment provider works in every market, it’s getting easier to find payment services that work with many industries.
For more info on choosing a high-risk payment account, you should speak with a professional team like Shark Processing. Our merchant providers know how payment processing works in many prominent high-risk sectors. Please visit this webpage to set up a no-commitment consultation.
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