Most businesses that are labeled as ‘high risk’ may be put off by the constant rejection by some of the familiar merchant account providers. Well, it is obvious that dealing with payments involving these high-risk businesses is very tricky and most service providers prefer to avoid them entirely instead of biting the bullet. However, if you own such a company that has been denied a merchant account severally, do not lose hope as you could still get a suitable payment option. You might not be aware, but some providers are specialized in high-risk merchant accounts, and they might approve your business payment solutions for cannabis. However, even if a conventional processor does not specialize in high-risk payments, they might still be able to accept your business. The trick is not to ignore the traditional service providers since the primary determinant is how much of a threat you pose to them financially at the end of it all.
What Defines High Risk?
For your business to be regarded as a high risk one, there must be some things that characterize its operations and location among other things. Typically, a processor might think of your business as high risk if the following situations apply to it;
- The industry your business is in has a high probability of fraud cases.
- Bad credit.
- Firms that are located offshore.
- Companies that are questionable.
- Business involving commodities that are partially illegal.
All industries are molded differently, and you need to discover a processor that is willing to work with you, especially for the high-risk businesses. Read below and find out how these high-risk payment options work;
When it comes to this phase, the risk factor is used as the primary determinant as to whether a payment processor will approve or deny your application. The analysts take a keen look at the business’ financial records and try to see whether it may show any signs of an insecure investment. For the high-risk companies, these analyses may lead to conclusions that the applying business has poor business strategies that may allude that the firm might not meet the qualifications required for a business to become approved. Usually, when dealing with the traditional service providers, the presence of a company on an industry blacklist, records of chargebacks and shady financial records might indicate a risky investment and will force the provider to reject the application.
However, that does not signify the end of everything since some risky businesses have a very impressive financial viability. Other issues such as chargeback rates and fraud cases depend on the industry a company is based in, and some risky businesses manage to keep them under control. These firms must clear some other issues out first before they can be allowed to process debit and credit transactions. In a nutshell, there is very little that a high-risk business can do but just to find a suitable payment processor that accommodates them.
How Does The Payment Processing Work?
It is vital to understand how these transactions work before even applying for one. The process all begin when a customer tries to purchase a product and enter their account information either manually or through a point of sale machine where they swipe their debit card. When they do this, the merchant terminal sends this account information to a processor which passes through a specified security gateway to ensure that malicious internet users do not intercept the data.
When the customer’s account information gets to the processor, they transmit it to the credit card company which can either approve or deny the payment based on a couple of factors. The first determinant is usually the amount of money available in the account and whether it is sufficient to complete the payment. The other factor is whether the payment request seems legit, as cases or repeated payments that look suspicious can easily be rejected. Once the approval is generated, it is sent back to the merchant’s terminal, and this is where the role of the customer ends.
The merchant does not receive their money right away, and they have to wait for them to receive the payment from the customer’s bank. The disbursement is sent through the same channel and goes through the processor before arriving at the merchant’s account. If a customer challenges the payment, the card processor withdraws the amount until the matter is settled and this is the most common case seen with chargebacks.
Why The Strict Yardsticks?
One of the main reasons why you might find it hard to find a suitable high-risk merchant account provider is that they are liable for your risk. In the event of any chargeback or fraud cases, these merchant service providers are the most affected parties, even though these cases affect every member of the chain. This explains why the rates for your high-risk business will always be higher than those charged for the normal business, but if you are stuck between a hard place and a rock, what other option do you have?
Selecting A Suitable Merchant Account Provider
Keep in mind that you should strive to find a suitable high-risk merchant who can always be characterized by a few defining factors. First, they should be specialized in dealing with high-risk businesses which gives them the experienced required to deal with your case. They should also be open top negotiating reasonable and flexible pricing plans that won’t strain your business a lot. They should offer the required e-commerce support such as payment gateways that are proven and secure. They should provide you with the needed hardware support such as the point of sale credit card processors. Lastly, they should offer you continuous support since the issues that surround these high-risk business operations come about regularly.
High-risk businesses face huge challenges trying to get a suitable merchant account service provider, but all is not lost as several new providers are getting into the fray, offering amazing services to these kinds of businesses. Your business options are not completely limited, and you can be sure to find a suitable payment option if you do your homework well and analyze the existing ones carefully.