Any business here and now would do well to open up a merchant account. These specialized business bank accounts open the doors for businesses wanting to accept credit and debit card payments, whether in-store or online. And while these accounts might be handed freely to most merchants, the playing field isn’t precisely leveled. Financial institutions naturally have a low risk appetite. That means they’re usually wary of partner merchants that might have a higher risk of fraud or chargebacks. So for a high risk merchant looking to set up a merchant account, the application process might not be relatively as straightforward. But today, there are solutions available for even the highest risk merchants.
Merchant accounts are essentially bank accounts intended for businesses. These accounts are conjoined with Visa, Mastercard, and Discover credit card processing companies that let you accept payments from branded cards. The main benefit of opening one up is that you can accept credit and debit card payments through a physical terminal, a digital terminal, or online. There are high risk merchant accounts for merchants with more substantial chances of fraud and chargebacks.
High risk merchant account services provide the same opportunities for businesses that would otherwise get turned down by traditional, conservative merchant account providers. While high risk merchant accounts might come with higher processing fees and penalties, they can serve a pivotal purpose for businesses who aim to stay relevant in today’s competitive commercial market.
How do financial institutions and merchant service providers determine if a business is a high risk or not? Providers follow no single framework for the record to determine a merchant’s risk. Instead, financial institutions and banks will often have certain criteria to determine how risky a merchant might be. However, despite the discrepancies, there are still some common qualities among all high risk merchant account providers. These characteristics can add to a merchant’s risk and make them harder to place with traditional high risk merchant services.
Businesses that operate and deal in specific industries can be considered high risk because of the nature of the product or service. In general, these high risk industries are more prone to fraud and chargebacks, which may cause traditional merchant account service providers to shy away from starting partnerships with them. What makes these kinds of high risk merchant accounts high risk? In general, businesses that operate in these industries are at a high risk of financial failure. And that’s not just because banks think that way; these assumptions are based on years of industry trends.
Another reason an industry might be considered high risk isn’t because of the actual risk. Reputable, long-standing financial institutions with clean records might not want to deal with businesses that operate in questionable industries like adult entertainment or weed simply because it doesn’t compliment their image.
In general, businesses located in the United States, Canada, Japan, and Australia come with lower risk because of the more business-friendly ecosystem that they operate in. Generally, these locations are also associated with a lower chance of fraudulent activity because of the strict laws protecting businesses and customers from potential threats. That said, a Canadian high risk merchant account is relatively easier to open than a merchant account in the Philippines or Italy. However, location is just one part of the risk assessment process. Even if your business were located in a low risk location, that doesn’t necessarily guarantee smooth sailing through the application process.
Modern technology makes it possible for buyers to pay online purchases through digital or virtual terminals. This entails entering card details into a digital form and submitting the information to a payment gateway. These are called card-not-present transactions — payments made without a physical card. Of course, this payment method proves to be one of the most convenient from the buyer’s end.
However, because it’s easy to use someone else’s card information, identity theft and fraud are significant risks for these transactions. So if a business operates strictly online and most of the payments they receive come from card-not-present transactions, they tend to have a higher risk rating.
Modern technology makes it possible for buyers to pay online purchases through digital or virtual terminals. This entails entering card details into a digital form and submitting the information to a payment gateway. These are called card-not-present transactions — payments made without a physical card. Of course, this payment method proves to be one of the most convenient from the buyer’s end. However, because it’s easy to use someone else’s card information, identity theft and fraud are significant risks for these transactions. So if a business operates strictly online and most of the payments they receive come from card-not-present transactions, they tend to have a higher risk rating.
Recurrent billing is yet another win for businesses that want to ensure revenue for the future. When a buyer subscribes to a service or product, they give the merchant the authority to charge their account on a routine schedule to continue enjoying the same service without paying manually. This is the standard payment structure for MLM-type businesses.
And while that might be a great way to guarantee an inflow of payments, it does come with its fair share of drawbacks. The most noteworthy is that some customers might not remember they were subscribed in the first place. This leads to considerable potential for chargebacks as buyers are billed for services and products they no longer wanted but forgot to cancel.
As part of the know-your-client process (KYC), banks and financial institutions will look into any and every aspect of your financial profile. That’s because high risk merchant processing and the account that goes with it are grave responsibilities, and there will be a lot of payments necessary to maintain your account. Suppose your credit score indicates that you struggle to make payments on loans and other financial products. In that case, high risk merchant account providers USA might take that to mean that you’re not financially ready to make payments on a high risk merchant account.
This potential failure to pay for these obligations will automatically add to your risk. When applying for a high risk merchant account, bad credit can be a hindrance, but it isn’t always the end game. Bad credit merchant account instant approval is possible if you work with the right fast approval merchant account provider.
Global reach is a significant upgrade for businesses that might have been mainly doing business domestically. But there is a catch. Some businesses decide to open up a high risk international merchant account to offer their products and services to offshore clients and consumers.
While on its own, international sales might not significantly increase your risk, combining the factor with others can impact the way that providers might perceive your business. For example, political and foreign exchange risks can affect how your business performs overseas, making the likelihood of a financial failure far more significant than if you were to conduct business where laws and currency values remain stagnant.
If a business is tagged as high risk, what makes their merchant account different from the standard low risk account? Several factors change how a merchant account service provider might accommodate your account. This helps mitigate the risk on their end while still providing you with the same services that others might receive.
Higher processing fees – Every time you use your merchant account by accepting credit or debit card payments, your provider will impose a fee. A payment processing expense is the per-transaction cost is the price you pay for the payment processing service made available through your merchant account. If you’re a low risk merchant, you might get a rate of about 0.3% plus interchange. However, for high risk merchants, that processing fee can inflate to well over 1.5%.
Higher chargeback rates – Banks don’t like chargebacks because it also costs money on their end. So to make a high risk business do everything they can to avoid chargebacks, banks will impose a chargeback fee. This penalty is charged for each chargeback you experience and can cost up to $100 for high risk merchants.
Longer application process – Even financial institutions and merchant service providers that work with hard-to-place merchants will still have their fair share of apprehensions when on-boarding a high risk business merchant account. So to make sure they’re not missing any potentially problematic risks, providers will take their time to dissect a business’s history and capabilities with a lengthy KYC process that requires tons of paperwork.
Reserve requirement – Several merchant account providers require a reserve. Instead of disbursing your whole revenue into your merchant account, some providers might hold on to a fraction of the total. This is kept in a non-interest earning sub-account known as your reserve. The purpose of the reserve is to give the provider a pool of funds that they can reach into in case you run into any penalties or fees. Ultimately, the reserve protects the provider and may help you meet payment obligations with less fuss.
Volume limits – To reduce the risk of chargebacks and fraud, merchant service providers will place volume limits on a high risk merchant account. These limits prevent businesses from exceeding specific amounts per transaction or in total. While that might bid well for service providers, this can significantly reduce revenue possibilities for businesses.
Today, more than a handful of high risk merchant account providers are looking to make money off of hard-to-place businesses that would do anything to open up an account. And while that makes it easier to find viable providers, that also means exercising a little extra caution as you look for the best merchant account provider for your situation. So how exactly can you choose a reputable high risk merchant processor?
Reputable merchant account providerExperience – Sure, they can provide you with their service, but how much experience do they have with businesses in your industry? Some high risk merchant service providers will focus solely on specific niches to provide targeted, specialized service to their client base.
• Charges– Shopping around for a low cost provider will make up a vast selection process. You’ll want to partner with a service provider that can offer the lowest rates possible for processing transactions and penalties and charges.
• Contract terms – Some providers will try to trap you in a restrictive contract in the hopes of keeping you around to make the most money off of your partnership. Others will bake in terms that increase charges and fees if you exceed a specific chargeback limit. Read into the fine print and check whether the contract might work against your best interest.
• Tools and solutions – What specific financial tools and solutions can they provide? Not all merchant service providers will offer the same thing, and some might provide certain solutions that can streamline your experience and improve your overall business performance.
•Availability – Are they there when you need them? Expect to run into a hiccup one way or another. And when that happens, you’ll want to work with a provider ready to address your concerns with a prompt resolution.
Again, specific industries are at high risk because of their increased chances of chargebacks, their potential for fraudulent or questionable activity, and their involvement with services or products that might be in a legal gray area. Traditional financial service providers will try to steer clear of these industries, but there’s hope with high risk merchant services.
Some examples of high risk industries include:
High risk merchant accountsReady to take the next step? If you’ve found the best high risk merchant account for your needs and situation, then it’s time to file that application and register as a high risk merchant. Every provider entails a different set of application steps and requirements, but you can expect the following process more or less:
•Fill up an application form – Even a fast approval merchant account will require that you submit an application form as part of their pre-screening process. This will help them determine your high risk merchant account category based on several factors. You won’t apply directly with a merchant service provider most of the time. Applications for merchant accounts will typically course through a high risk merchant account payment gateway.
• Submit the necessary documents – Documentary requirements vary from provider to provider. However, you should have certain staples at the ready like your identification, business permits, transaction histories, and bank statements, to name a few.
• Wait for approval – After an interview and a review of your documents, your provider may ask for copies of other documents and identification. You may also be called up for follow-up interviews depending on what additional information your provider might need. If everything checks out, you can expect to get approval after a few days or weeks.
There are lots of high risk merchant service providers out there — why choose Shark Processing? Aside from having a proven track record, our services aim to put your business growth at the core. We value our clients and hope to become a proactive partner towards a brighter future for your business.
There is a load of reasons why Shark Processing might be your best match, including:
• Years of Successful Experience –
We’ve serviced some of the most notoriously hard-to-place clients in various high risk industries, providing services tailored to their unique needs and situation. Shark Processing has successfully opened high risk merchant accounts for all of our clients, and years of experience in high risk placement have made us the name to beat in the industry.
Our experience has given us the upper hand in handling complex, exceptionally high risk cases. Through the expertise of our seasoned, efficient team of financial product specialists, we’re capable of providing fast, targeted, and efficient services that produce accurate results. So it doesn’t matter how many times you’ve been rejected in the past — with Shark Processing, there’s hope for your business yet.
• Award-Winning Service –
We’re not all talk. Shark Processing has earned the trust of countless businesses, which has, in turn, earned us the privilege of being awarded several accolades in the high risk merchant industry. Our award-winning services are a testament to our dedication to actual results and have made us the best merchant account Canada offers and many other parts of the world.
Despite being relatively new to the industry, Shark Processing is recognized as one of the most trustworthy, efficient payment processors available. Our tailored solutions and years of experience have earned us countless positive high risk merchant account reviews from previous clients who received nothing but the best processing services from our team.
• Round the Clock Support –
Tired of service providers leaving you hanging? It’s not uncommon for high risk merchant account providers to leave their clients without assistance, especially once the account has been opened. Most of these providers don’t care about your welfare — as long as they’re getting paid.
With Shark Processing, though, you can expect round-the-clock support. We provide all of our clients with accessible, responsive assistance that you can rely on any time, anywhere. This makes it possible for our merchants to resolve issues as they come to keep their payment facilities up and running 24/7.
• Tailored Features and Solutions –
Shark Processing offers a range of features for clients in different industries, allowing us to provide tailored services to each of our merchants. Unlike our competitors who use cookie-cutter solutions for each of their clients, we look into your unique situation to implement features and services that you genuinely need.
We make sure to meet your clients to provide features and solutions that are relevant to your business. You won’t find one-size-fits-all high risk processing merchant account plans at Shark Processing.
• 48 Hour Approval, Tops –
Every minute you operate without a merchant account is a minute of revenue lost. We understand how important it is for you to provide your customers with payment options and services that meet their needs and preferences. And that’s why we work fast to bring you solutions in as short a time as possible. When you send your application to Shark Processing, we work rapidly to assess your situation and create a contract that fits your needs. We guarantee approval for hard-to-place merchants in a maximum of 48 hours.
• No Long Term Contracts –
Worried about getting locked into a contract that doesn’t meet your business needs? We hear you. We know how some providers will scratch up extended contracts that trap their clients in a loop of charges for years. Shark Processing is different. Our short-term, renewable contracts let you determine whether our services are right for you. This allows you to change things at the end of your contract to get better terms and adjust various elements to enjoy a more tailored experience.
• No Set Up Fees and Hidden Charges –
Some providers will require that you pay out a small fortune before setting up your high risk merchant account. But with all of the fees you can expect to go along with your account, we reduce the burden by scratching out those added charges.
Shark Processing requires no set up fees to get your application moving. We like to keep things as accessible as possible, especially for our smaller clients who might want to make the most out of every penny their venture makes.
Your high risk merchant account will allow you to accept credit and debit card payments made in-store or online. Depending on the features and payment processing solutions you get to go with your high risk merchant account, you can accept payments through digital terminals, virtual terminals, and physical terminals.
Again, it’s different for every high risk merchant service provider. Payment processors carefully assess each application for a high risk merchant account to determine how much risk they’d be taking if they decide to write up a contract. The process isn’t entirely as manual as you might think. Instead, these payment processors use computer-based algorithms that compute your risk based on all the information they receive through your application and supporting documents.
The most important thing you’ll want to look into is the kind of experience. Have they worked with other clients in a similar industry and niche as you? What does their client portfolio look like? Whom have they worked with in the past, and how have those partnerships worked out? You can learn a lot about a provider by looking into their history like they would look into yours before approving your application.
At the beginning of your contract, your provider will likely place a cap on the volume of the transactions you can have. This can range anywhere from $2,000 to $20,000 a month. The purpose of this is to reduce the risk of chargebacks and to keep fraudulent activity at bay. However, with time, you’ll notice that this restriction on your account can hurt the potential of your business, especially if you stand a chance to earn more than the indicated threshold. To increase your limit, you can contact your merchant account service provider and showcase the evidence that shows potential sales growth. This can work, especially if you’re in good standing with your provider and have been partners for a white.
Another way to increase your merchant account threshold would be to open multiple accounts with different payment processors. This lets you divide your revenue and cash flow across different accounts. So even if they all have thresholds, you’ll have more room to accommodate payments with a separate account once you reach the limit.
Some providers require a history of previous transactions amounting to one or two years to understand your financial health better. However, there are high risk merchant service providers out there that will gladly work with start-ups with little to no transaction history. In that case, however, they might require slightly more documents to get a better idea of your business nature and structure. On top of that, providers may place more stringent limits on your account due to the lack of transaction history. But it’s not unheard of for a start-up to receive approval from a high risk service provider.
It depends on several factors determined by your provider of choice. For instance, some providers might perceive adult entertainment businesses as significantly high risk, refusing to work with them altogether. But then again, others would gladly accommodate businesses in these high risk industries.
That said, your business risk isn’t set in stone. However, there are a few things you can consider to get a rough estimate of whether or not you’d be at high risk or not. These include your industry, average transaction cost, the kinds of transactions you most often receive (card-not-present vs. card present), and whether you accept recurring payments.
Load balancing is a strategy that involves opening up several merchant accounts to spread your cash flow across different entry points. Merchants have used the tactic to reduce chargeback rates, mitigate the risk of total merchant account suspension, and increase their volume threshold.
For exceptionally high volume merchant accounts that get many chargeback requests, load balancing helps keep credit and debit card payments an option for buyers even if one merchant account is suspended for exceeding the chargeback limit. It also helps to give merchants more legroom in terms of the transaction volume they can accommodate at a given time.
Merchant service providers will often impose a volume limit on most high risk merchant accounts to mitigate the risk of chargebacks. These limits also help guarantee that your merchant account won’t be used for large transactions that might do with fraudulent or illegal activity. For the most part, a monthly volume limit is just a provider’s way of saving their skin from potential losses and risks. However, with time, a clean record, and an established reputation, you should be able to increase your volume limit and gain your provider’s trust to bump up your limit.
There’s no need to give chances to payment processors that can’t deliver accurate results in record time — especially when there are options like Shark Processing. Our tailored solutions keep your business’s best interest at the core, allowing us to craft client-centered contracts that keep charges low.
Contact us today to learn more about our merchant account services and how we can help your business stay relevant in today’s cutthroat commercial scene — no matter what industry you might be in.