High Risk Merchant Account In Europe: Insiders Guide.
Running a business that is labeled high-risk by banks in the European Union can be very challenging, especially when it comes to accepting credit and debit card payments. A majority of sponsor banks and payment processors in Europe prefer to only work with low- and mid-risk merchant accounts. This makes it even harder for struggling high-risk businesses.
Certain industries like online gaming, gambling, poker, lotteries, raffles, adult streaming, adult dating, adult toys, CBD, hemp, vape, nicotine pouches—all face challenges from low-risk sponsor banks when it comes to payment processing account approval. With a local high-risk merchant account in Europe, businesses from many of these industries can actually start accepting credit and debit card payments.
A High Risk Merchant Account In Europe can be a comprehensive payment processing solution for struggling businesses. These accounts can help businesses easily accept digital payments while efficiently managing chargebacks.
The team at QuadraPay has extensive experience in assisting businesses from various locations, including Europe, with credible high-risk processing accounts. In this guide, our team answers all potential questions that you may have regarding obtaining a high-risk merchant account in Europe. It also discusses various strategies that can help you easily get approved for such accounts. It is a must-have for any e-commerce business looking to get approval for a high-risk payment gateway in Europe. Let’s begin.
What Is a High-Risk Merchant Account from a European Perspective?
A high-risk merchant account in Europe is a specialized payment processing account designed for businesses operating in certain industries or circumstances that are deemed high-risk by most sponsor banks and payment processors.
The fundamental reason behind the high-risk classification of certain merchants is primarily the industry. However, other factors, including the potential for high chargebacks, regulatory scrutiny, as well as the requirement to accept payments from outside Europe, can also be contributing factors.
Industries Commonly Deemed High-Risk by European Banks
Game of chance and game of skill businesses are considered high risk in Europe. This is due to the potential for high chargebacks in the industry as well as the risk of fraud. Businesses operating in the gambling and gaming industry must have the relevant licenses required by the payment processor to approve such accounts. In most cases, merchants are unable to secure these accounts on favorable terms. They may have to pay slightly higher transaction fees and might also have to accept rolling or fixed reserves.
The adult industry is no longer limited to video sites; it has evolved into a large e-commerce subsection. Unfortunately, anything associated with the adult industry is considered high risk in Europe. This includes businesses selling adult novelties, adult figures, magazines, audiobooks, eBooks, and wellness products.
Any business selling herbal products, pharmaceuticals, nutraceuticals, or skincare products is considered high risk. These industries are subject to strict evaluation and proactive monitoring. Businesses operating in these sectors must have lab certificates for their products and the required licenses to sell RX items. In some cases, a LegitScript certification may also be required.
Any business involved in direct selling, especially those selling adult content or services, is naturally identified as high-risk in Europe. These businesses have historically shown higher risks of fraud and chargebacks.
Businesses associated with the financial services industry are considered high risk. This includes Forex trading companies, cryptocurrency exchanges, money service businesses, and trading coaches. Such businesses are deemed high risk due to regulatory uncertainty and the potential risk of financial crimes.
Any business offering travel and hospitality services with delayed delivery is considered high risk. This is because services are typically rendered at a later date, leaving room for customers to dispute transactions or request refunds. Businesses in the travel industry, such as airlines, cruise lines, travel agents, tour operators, and hotels, face challenges in obtaining stable merchant accounts.
Businesses selling alcohol and tobacco products are considered high risk in Europe due to potential health risks and stringent regulations surrounding their sale. Merchants selling such items must have the required licenses. For example, anyone selling cigars and tobacco must possess a tobacconist license. In some cases, a public health license may also be required.
Merchants in certain industries are required to pay a high-risk registration fee, which is a recurring annual fee. The merchant ID (MID) gets registered with the card scheme.
Regulatory Perspectives on High-Risk Merchant Accounts in Europe
The European Union efficiently identifies high-risk countries with strategic deficiencies in their Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) frameworks. This allows the EU to manage the proper functioning of the internal market. Payment processors must ensure compliance with these regulations.
Credit card companies have categorized certain Merchant Category Codes (MCCs) as high risk. For example, businesses selling medicines or offering inbound telecommunication services are considered high risk.
All businesses operating in high-risk industries must have robust compliance measures and fraud prevention strategies in place to ensure their accounts remain in good standing. Merchants must stay informed about regulatory changes relevant to their industries and implement best practices to reduce associated risks.
Key Features of a High-Risk Merchant Account in Europe
A good local European high-risk merchant account must adhere to regional regulations and offer market-specific features. Some of these are listed below:
Support for Multiple Local European Currencies: Although the euro is the primary currency in most European nations, businesses cannot ignore the importance of allowing customers to pay in local currencies. The euro is common in countries like Germany, France, and Spain; however, businesses in the United Kingdom must accommodate the British pound (GBP). Similarly, businesses operating in Switzerland need to process payments in Swiss Francs (CHF), while those in Norway would require the Norwegian Krone (NOK) as their processing currency. A local European high-risk payment processor can offer a wide variety of European currencies for both processing and settlement.
Localized Payment Methods: European consumers prefer region-specific payment methods. A good high-risk merchant account must enable customers to make payments using various local options, including SEPA Direct Debit, which is widely used in the Eurozone. Payment methods like Sofort and Giropay are very popular in Germany and Austria, while iDEAL dominates in the Netherlands and Bancontact is essential in Belgium. By offering local payment methods, businesses can significantly increase conversion rates and enhance customer satisfaction.
VAT-Compliant Reporting: A robust merchant account solution must adhere to mandatory tax compliance reporting. For example, a European high-risk merchant account must account for Value-Added Tax (VAT) regulations, which vary by country. Automated VAT calculation is essential for EU nations like Italy, Sweden, and Portugal. Comprehensive reporting features can help merchants prepare VAT filings and generate transparent invoices, ensuring compliance with local European tax authorities.
Fraud Prevention and Chargeback Mitigation: European high-risk payment gateway providers must have experience supporting businesses from industries like gaming, CBD, and travel, which often experience higher-than-average chargeback rates. A good merchant account should include 3D Secure Authentication (3DS2), a requirement under the European Union’s PSD2 regulations. Payment processors should employ AI-driven fraud detection tools capable of identifying both local and international transaction patterns to efficiently prevent fraud. Additionally, integration with chargeback dispute resolution services is crucial to reducing overall chargeback percentages.
Cross-Border Payments for European High-Risk Businesses: Merchants operating within the European Union can collaborate with payment processors across the EU. For example, a business registered in Denmark, Ireland, or Hungary can approach a processor in Malta or Cyprus. Identifying countries with a higher concentration of international payment processing companies is beneficial, as these providers are better equipped to handle cross-border transactions while managing associated risks.
European businesses often accept orders from customers worldwide, making it vital for payment processors to support transactions from regions such as North America, Latin America, and Asia. However, merchants should maintain the majority of their traffic from within the European Union. A good payment processor should also offer dynamic currency conversion, displaying prices in customers’ local currencies to increase conversions and boost customer trust.
Competitive Transaction Fees: Credit card processing rates for high-risk businesses are not uniform across Europe. If a merchant obtains an account directly from an acquirer, they can expect lower fees. However, solutions involving multiple intermediaries may incur additional markups. Generally, high-risk credit card processing fees in the EU range between 2.5% and 5.9%.
It is worth noting that transaction fees for payments within the European Union are typically lower than those for transactions outside the EU. For example, an e-commerce grocery store in Finland with 100% domestic traffic or a food delivery app in Sweden with only Swedish customers may qualify for more economical pricing.
Robust Payout Options: Merchant accounts can only hold funds temporarily, so payment processors must facilitate timely transfers to the merchant’s business bank account. European payment processors should offer various payout options, including SEPA transfers in the Eurozone, local payouts in GBP for UK customers, and support for additional e-wallets.
Customer Support with Local Expertise: High-risk businesses in the European Union should partner with payment processors that understand local markets. Multilingual support in languages like English, German, French, and Spanish is essential. Providers should also be familiar with country-specific regulations, such as the French tax system or the UK’s FCA compliance standards, to offer tailored solutions.
KYC Documents for High-Risk European Merchant Accounts
KYC, or Know Your Customer, is an essential compliance process for high-risk merchant accounts in Europe. It is mandatory for European payment service providers to comply with various European regulations, including the Anti-Money Laundering Directive (AMLD) and the General Data Protection Regulation (GDPR). Sponsor banks and payment processors are required to verify all documents submitted by merchants to identify the business and its stakeholders. This process aims to prevent fraud, money laundering, and financial crimes. High-risk merchant account providers in the European Union require a specific set of KYC documents, as detailed below:
The business registration certificate serves as legal proof of the company’s existence. European high-risk merchant account providers will require a Certificate of Incorporation or its equivalent, depending on the country of registration. For example, a business registered in France must submit a K-bis extract from the commercial register. Similarly, a corporation registered in Germany must provide a Handelsregisterauszug (Commercial Register Extract). Entities registered in Italy are required to submit a Visura Camerale from the Chamber of Commerce.
Merchants must provide proof of the company’s physical address as well as the home address of the directors. This can include the latest utility bill, a lease agreement, or a property ownership document.
All stakeholders of the company must submit photo ID proof, such as a passport or national ID for European Union citizens. Non-EU nationals operating in the European Union can provide a residence permit. The address proof must not be older than three months.
To link the merchant’s business account with the merchant account, the payment processor requires valid documentation that confirms the business bank account belongs to the applicant company. Businesses can provide a voided check or a letter from the bank that confirms the account details.
Businesses operating in certain industries must provide additional licenses and certifications. For instance, a gambling company operating in Malta must submit a Malta Gaming Authority license, while a gaming company in the UK must submit a UK Gambling License. Companies selling CBD products must provide a Certificate of Analysis to ensure compliance with CBD and hemp regulations. Forex trading and proprietary trading companies may be required to submit documents confirming regulatory approval from European authorities such as the Cyprus Securities and Exchange Commission (CySEC).
European high-risk merchant account providers follow strict KYC protocols to ensure they do not process transactions for non-compliant businesses. Non-compliance can result in heavy fines for payment providers. By conducting thorough KYC checks, payment processors significantly reduce the risk of onboarding fake businesses or illegal operations.
Website Compliance for High-Risk Payment Gateway in Europe
For any business seeking approval for a high-risk payment gateway in Europe, it is crucial that the website complies with the merchant processor’s requirements. The underwriting team will carefully examine every section of your website, and if they realize that the website does not meet their expected standards, the application will be declined. To increase the chances of approval, ensure that your website fully complies with the payment processor’s requirements. Here are a few tips:
Ensure Your Website Is Complete and Functional. As an experienced provider of high-risk merchant accounts in Europe, we have observed many merchants applying for a credit card processing account while neglecting their website’s functionality. Applying for an e-commerce merchant account with an incomplete or non-functional website does not make sense. Ensure your website is fully operational, free of broken links, and features complete, up-to-date content. A fully functional website reflects professionalism and helps underwriters trust your business.
Install an SSL Certificate for Data Security. It is absolutely non-negotiable for any website to operate without SSL. Your website must have a valid SSL certificate. This technology secures the browser and encrypts transaction data. If you apply for a payment gateway with a website lacking an SSL certificate, your application is guaranteed to be declined.
Display All Products with Accurate Information. All products and services should be clearly listed on the website with accurate specifications, dimensions, and descriptions. Websites that offer detailed product information are favored by both search engines and underwriters. Conversely, websites lacking clear product information often appear fraudulent or incomplete.
Include a Clearly Defined Shipping Policy. Customers must be informed about the delivery timeline for products. Your website should feature a shipping policy that provides estimated delivery timeframes and detailed information about applicable shipping charges. If you handle international shipping, this information must also be clearly displayed, as international customers may incur higher costs than local European customers. The shipping policy should also outline procedures for delayed or lost shipments.
Avoid Using Copied Content and Images. Payment processors prefer working with genuine companies, and no legitimate business relies on copying content or images from others. Ensure that all content and images on your website are original. If you use images, ensure you have the rights to them. Original content and images reflect your business’s authenticity and professionalism.
Provide Detailed Contact Information. For proper communication with customers, your website should feature detailed contact information. This can be placed on the “Contact Us” page or in the footer section of every page. Include the company name, a valid phone number, a registered email address, and your business address. Payment service providers rely on this information to verify your business. Missing or incorrect details can significantly reduce your chances of approval.
Display the Descriptor Provided by Your Payment Provider. The payment service provider will assign you a billing descriptor, which is the name that appears on customers’ billing statements. Ideally, this descriptor should be displayed on all key pages, such as the footer, checkout, terms and conditions, or billing pages. Mention on your website that charges on customer billing statements will appear under this descriptor name. This transparency reduces the risk of disputes or chargebacks, as customers can easily recognize the transaction.
FAQs About High-Risk Merchant Accounts in Europe
Can Any Business Apply for a High-Risk Merchant Account?
Yes, any business can apply for a high-risk merchant account in Europe. However, it is important to know that the approval of the same depends on many factors, including business documentation, industry, and financial history. The payment processor will evaluate the merchant’s credit score, past chargebacks, business plan, and industry before deciding whether the account should be approved or not. In cases where the payment processor declines the application for credit card processing, the business can explore alternative payment options.
What Are the Costs Associated with High-Risk Merchant Accounts In Europe?
The actual cost and fees will be detailed in the high-risk merchant account contract shared by your European payment processor. However, in general, a merchant may face a typical transaction fee ranging from 2.9% to as high as 7% or 8%. This largely depends on the merchant’s risk profile and industry. In most cases, the merchant will need to agree to a percentage-based rolling reserve, which ranges from 5% to 10%. Some accounts may also require a monthly fixed fee, which can range from €20 to €50. Merchants in certain industries may be required to undergo a high-risk merchant registration, which involves costs ranging from $500 to around $1,000 for different card brands. This amount is billed annually.
How Does Overestimating Sales Volume Affect Merchant Account Approval?
One of the most important pieces of information a merchant submits on the merchant account application form is the projected sales volume. Many merchants believe that showing a very high sales projection will improve the chances of account approval. In reality, it can work against the merchant, as the amount requested as monthly sales volume represents a credit risk for the bank. If the merchant does not have previous processing history or strong financial standing, this can lead to account rejection. It is recommended to be as realistic as possible when providing this information.
Can Merchants with Poor Credit Scores Get a High-Risk Merchant Account?
Credit history plays a very important role in the account approval process. However, many merchants struggle with less-than-excellent credit scores. Certain businesses may qualify for offshore-based bad credit merchant accounts, which cater specifically to such cases.
Can All Merchants Qualify for a Virtual Terminal?
A virtual terminal allows a merchant to submit credit card details of the customer on an online system and process the transaction. While this feature may be vital for many industries, it is also susceptible to fraud, which is why not every merchant is approved for a virtual terminal. That said, genuine merchants with strong credentials are more likely to qualify for a virtual terminal (VT).
For more information on how Quadrapay can assist with getting a high-risk payment gateway in Europe, contact us at [email protected].