High-Risk Digital Downloads Merchant Account
Are you selling ebooks, software, or online courses? If yes, then you require a high-risk digital downloads merchant account.
Selling digital downloads seems quite safe as there is no inventory or shipping involved. But customers can download the product and still raise a dispute, and they can claim a chargeback from the acquiring bank.
Many traditional acquiring banks or low-risk payment service providers consider the digital download business to be under the high-risk category. They may first approve the merchant account application and later terminate it when they observe an elevated chargeback percentage or any other kind of risk.
To get a high-risk merchant account, digital download companies need to explain their business model properly, maintain a proper website, and use 3D secure authentication to reduce chargebacks. This increases the chances of approval for a digital downloads merchant account application.
If you still face issues, then connect with a reputed merchant account solutions provider like QuadraPay. We have done partnerships with many high-risk payment service providers across the US, UK, EU, and Australia. We even assist in preparing your applications, which makes it easy for underwriters to understand and approve your digital downloads merchant account.
Why Are Digital Downloads Considered High Risk?
Low-risk payment service providers and traditional acquiring banks consider digital downloads in the high-risk category because of the following reasons.
1. Delivery Is Instant and Irreversible.
A business can deliver digital downloads immediately after the customer makes the payment. There is no shipping and tracking number in digital downloads, unlike physical products.
Customers can claim that they have not received the product and file a chargeback. Businesses have only downloaded records or server logs as evidence. But that is not enough in chargeback cases. If an acquiring bank gets a lot of chargeback issues from a digital download business, then it can freeze funds or terminate the account.
2. No Physical Product To Return
Customers can return tangible items when they are not satisfied with the product delivered, but this does not happen with digital downloads. Customers can download a file, use it, and then ask for a refund.
3. Subscription And Recurring Billing
Many digital download businesses offer subscription billing, like monthly access to courses and software subscriptions. This is highly beneficial for business, but customers sometimes forget their subscriptions and file a chargeback when they find suspicious activities while checking their bank statement.
When a business combines both digital documents and subscription services, it raises chargeback risk. Hence, many acquiring banks do stricter checks or hesitate to give approval for a digital downloads merchant account.
The Problem With Standard Payment Processors
New e-commerce businesses use low-risk PSPs because they offer fast onboarding and do not involve much underwriting scrutiny at the time of sign-up. But these platforms work as a payment facilitator. All the businesses are grouped under one main account.
Certain business models, like the digital download business, require more specialized payment solutions with the increase in transaction volume.
The best solution is to get a dedicated digital downloads merchant account. This account is specially for your business. So you will face a lesser risk of sudden account shutdown.
You can connect with QuadraPay, and we will connect you with the finest payment processing companies that truly understand the digital download business and the risk involved in it. Our partner high-risk PSPs provide easy approval for a digital downloads merchant account.
What do underwriters check before approving a digital download merchant account?
1. Business Model Clarity
Underwriters first want to understand your business clearly. They want to know exactly what you are selling (ebooks, courses, or software) and how customers can access your course. They even want to know the type of customer who is purchasing your product and their average price.
You need to clearly mention all these things in your website and digital downloads merchant account application. It ensures that your business is genuine and well planned.
2. Website Compliance
Your website plays an important role in the approval of a digital downloads merchant account. Your website must have a clear refund policy, proper product description, contact details, and business name that matches the payment details.
If your website looks confusing or lacks important information, then underwriters will consider your business risky and not give approval for digital download merchant accounts.
3. Chargeback History
Underwriters will check your payment history if you have accepted payments before. They look for how many customers have filed chargebacks or raised disputes. If your digital downloads business had faced elevated chargeback percentage issues earlier, then clearly mention it in the application along with explaining what steps you have taken to reduce chargebacks.
Reducing Chargeback Risk In Your Digital Download Business
1. Descriptor Clarity
The payment descriptor is the name that appears on the customer’s bank statement after payment. If the name is not clear or represents a different brand, then the customer can get confused and claim a chargeback.
So the payment descriptor should clearly mention the name of your business, along with contact details if possible. This enables customers to contact your business directly instead of the bank.
2. Delivery Confirmation
There is no physical shipment involved in digital products. You should always keep proof of delivery, especially when a customer downloads your product. The proof includes the date and time of download, the customer’s IP address, and login details. You can show these proofs when a customer claims that they did not receive the product.
3. Explicit Refund Policy
A simple and clear refund policy can reduce chargeback issues. Your website should clearly mention the refund policy and explain how customers can easily get their refunds. You should write in simple language so that customers can easily understand it. Writing in a complicated language can confuse customers, and hence, they will contact the bank directly and ask for a refund.
4.3D Secure Authentication
3D secure authentication is an extra security layer added while making a payment. The customer needs to enter the one-time password sent to their mobile or email while making a payment. 3D Secure authentication reduces fraud, as only the real card owner can enter the one-time password and complete the transaction process.
5. Velocity Controls
Velocity controls limit how many transactions can happen within a short time. This is quite important because fraudsters test the stolen credit cards by making small payments.
Frequently Asked Questions
1. Is the digital download business always high risk?
Many traditional acquiring banks and low-risk payment service providers consider digital downloads under the high-risk category because of elevated chargeback percentages. Simultaneously, standard payment processors generally reject such businesses or approve under shared accounts.
Sometimes such accounts can get frozen or terminated. Hence, many digital download merchants choose high-risk payment service providers as they understand the business and the risks associated with it.
2. What transaction fees should I expect?
Digital download businesses usually pay higher transaction fees compared to normal business owners. The fees can range from 2.5% to 5% per transaction. Banks keep a rolling reserve of 5% to 10% for 90-180 days to cover fraud risks and chargeback issues.
3. Can I get approved if I have previous chargebacks?
Yes, you may still be approved if you have previous chargeback issues. Acquiring banks will carefully review the chargeback percentage of your business and the reasons for disputes.
Final Words
Are you running a digital download business and struggling to have a dedicated merchant account? You can connect with QuadraPay. We will connect with the finest payment processing companies that provide quick approval of a digital downloads merchant account.