Absolutely, a combination of Stripe with a specialized chargeback prevention solution such as ChargeFlow can definitely present a very appealing idea for high-risk merchants. This is because it addresses the critical issue of payment disputes. This kind of setup is fundamentally a good option. However, it fails to solve the core problem. The core problem here is the inherent risk, which lies not just in chargebacks but in the very nature of your business, which falls outside the risk tolerance of mainstream processors like Stripe or PayPal.
When it comes to industries such as CBD, Kratom, and Nutraceuticals, they all face regulatory challenges. Many of these businesses operate in the grey area, and that is why most of the low-risk payment processors shy away from them. Similarly, for travel agencies, event-ticketing companies, and subscription box businesses, they all have high refund rates that can trigger alerts to the payment processors. Adult entertainment, gaming-adjacent services, and financial technology startups are often categorized as high-risk because of their potential for attracting fraudulent transactions and exposing the bank to reputational challenges.
Even software-as-a-service (SaaS) platforms and crypto companies are all considered high risk because they offer monthly subscriptions. All this can increase the volatility for the payment processor.
When you’re using Stripe for such business models, you can consider it as if you’re building a house on a foundation that basically prohibits the material you’re using. Even if you solve the problem by plumbing it with charge flow, the entire structure still remains vulnerable.
If you’re looking forward to getting genuine stability and to avoiding the devastating freezes and holds on your account, I would suggest that you should go for a dedicated high-risk merchant account, which will put your business on a superior path.
These providers definitely offer solutions that are perfect for CBD businesses, vape and head shops, and even travel businesses. The underwriters follow full transparency from the start. They know how to manage high-risk merchants, and they implement various tools, including the CDRN solutions. Most of these providers utilize CDRN solutions powered by Verifi and Ethoca, which are the world’s best solutions.
Along with that, they also have AI-driven fraud detection and prevention tools that identify various footprints, such as the IP address, bookings, and the banking identification numbers. However, you have to keep in mind that such solutions may come at higher fees, and they may also ask for a rolling reserve, which generally stays between 5% and 10%. The cost might be slightly higher, but you will have your account stable for a long time.
However, if you continue to work with a low-risk processor while knowing that you operate in a high-risk industry, today or tomorrow, your account will either get frozen or limited or may get shut down. You’ll be lucky till the time your account stays active. So it’s better to find an alternative solution and use both the solutions at the same time, which will help you to reduce your credit risk as well.