High-Risk Merchant Accounts In Canada: A Complete Guide
Canadian businesses that are categorized as high-risk by acquiring banks face many challenges when it comes to getting a merchant account. Some may be lucky to get a good solution after applying with multiple providers, while many may not find any provider that would say yes. Such merchants find it hard to survive despite being highly professional and customer-centric.
At QuadraPay, we understand this challenge, and that’s why our content team has written this cheat sheet which explores all the factors related to Canadian high-risk merchant accounts. We are confident that after reading this guide, you will be in a much better position to understand ways to remove the obstacles that may come in your quest to get a merchant account. You can also listen to the audio version of this cheat sheet on this page and our social media handles. Let’s begin.
What is a High-Risk Merchant Account In Canada?
A high-risk merchant account in Canada is a specialized bank account that allows businesses categorized as high-risk by acquiring banks to accept credit card payments.
What makes a Canadian merchant high-risk for credit card processors?
Industry: Certain industries are globally classified as high-risk. These industries are categorized into three tiers, each with its own requirements. Merchants from such industries can get card processing solutions, but they must undergo mandatory high-risk registration. Here is an extensive list of high risk industries with corresponding MCC codes:
- MCC 4816: Cyberlockers and similar remote digital file-sharing services
- MCC 5122, 5912: Pharmacies
- MCC 5966: Card-not-present, outbound telemarketing
- MCC 5968: Card-not-present, subscription “Negative Option” merchants
- MCC 5993: Cross-border, card-not-present, tobacco sales
- MCC 6211: Card-not-present, high integrity risk financial trading platforms
- MCC 5816: Card-not-present, games of skill
- MCC 5967: Adult content
- MCC 6051, 6012: Crypto merchants, with transactions required to use Special Condition Code 7
- MCC 7273: Dating and escort services
- MCC 7995: Gambling
High Chargeback: The most common reason that makes a Canadian merchant high-risk is excessive chargebacks. Payment processors are required to keep the overall chargeback percentage under 1%. Merchants that cannot keep the chargeback ratio under 1% may create serious challenges for sponsor banks and merchant processors.
Bad Credit Rating: Credit card processors prefer to work with merchants who have good credit scores. Businesses established by individuals with better credit ratings typically have a stronger financial foundation, which can act as a cushion against high chargebacks. Conversely, those with less-than-excellent credit may not be able to payback in case of high chargebacks.
High Ticket Size: In some industries, the average ticket size and the monthly sales volume are higher than in many other regular industries. Payment processors prefer to work with merchants that do not have an excessively high average ticket size and do not have a very large monthly sales volume. This is the key reason why high volume merchants generally use alternative payment methods like Interac, echeck and ACH.
Key Features of the Best High-Risk Credit Card Processors in Canada
It is important for Canadian businesses to consider several factors when selecting a high-risk merchant processor. We have listed some here:
Jurisdiction: The first thing a Canadian business must look at is regulatory compliance. Business owners should know that Canadian businesses can only be underwritten by payment processors licensed to operate in North America or those licensed for global operations.
High-Risk PSP: Not every payment processor works with high-risk merchants. Some high-risk merchants in select industries can only be onboarded by specialized payment processors. In the payment industry, these processors are also known as ISO – HIGH INTEGRITY RISK and HIGH INTEGRITY RISK PAYMENT FACILITATORS.
Industry Regulations: Merchants must ensure that the payment processor they are working with is well-versed in industry regulations. For example, a merchant operating in the CBD industry should have lab certificates, while a merchant in the remittance industry should have the required money transfer licence. The payment processing partner must be well aware of these intricacies.
Experience: It is also important to ensure that the payment processor has enough experience assisting merchants from the region. A seasoned high-risk payment facilitator operating in Canada or the USA may be better positioned to onboard high-risk merchants.
Multiple Payment Instruments: A provider that offers the ability to accept a variety of payment methods should be the number one choice for merchants. By adding multiple payment methods to the checkout page, merchants increase the chances of transaction success.
Affordability: Pricing should be reasonable. As an informed merchant, you should be aware that in the payment industry, pricing comes in three different types: fixed pricing, tiered pricing, and interchange-plus pricing. A little bit of research on these pricing models can help merchants negotiate better pricing.
Full Compliance: From the initial application to the final stage of account approval, the underwriting team, irrespective of where they are located (at a Canadian bank or American bank) should follow strict protocols to ensure that legitimate merchants get an opportunity to accept cards.
Efficient Settlement Cycle: Most high-risk payment processors in Canada offer a T+2/T+3 settlement cycle. This helps ensure better business operations with a healthy cash flow.
Easy Integration: Integration must be straightforward. The payment processor should provide ready-to-use plugins for content management platforms like Shopify, Wix, BigCommerce, etc. Detailed API information for implementing custom integrations should also be provided.
Intelligent Merchant Panel: The merchant panel should be easy to use. It should have functions for exporting records and uploading chargeback representment documents.
KYC Requirements for High-Risk Merchant Accounts in Canada
In order to get a high-risk credit card processing account for your business in Canada, you must submit certain KYC documents. Let’s look at some of the KYC documents that you will have to send to the provider:
- Business registration certificate, AOA, and MOA to confirm the business entity. Merchants with any of the following business structures can apply for an account: Sole Proprietorship, Partnership, Limited Partnership (LP), Corporation, Limited Liability Partnership (LLP), Not-for-Profit Organization, and Trust.
- For identification purposes, you can send a copy of your national ID, passport, or driver’s licence; this should be a photo ID.
- To confirm the company’s physical address, utility bills are required. This can be a telephone, gas, or electricity bill.
- To further assess your business’s financial stability, three recent months of business bank account statements are required. This financial documentation provides insights into your business’s cash flow and financial health, contributing to the overall evaluation for approval.
- Your previous credit card processing statements play a positive role in getting your account approved. High-risk acquiring banks prefer to work with businesses that already have experience accepting credit card payments.
Application Process for High-Risk Payment Processing Account in Canada
The application process for a high-risk merchant account in Canada is simple. It starts with research where you identify providers that support your industry and then apply to all of these providers. However, this process can be very time-consuming. With QuadraPay, you can save a lot of time as we have already established contacts with well-known high-risk processors. We do all the legwork and everything necessary to get you approved.
When you apply with QuadraPay, we will check your website to confirm if our acquiring partners may approve you. If we consider it suitable, we will inform you about additional required documents.
Our high-risk payment processor partner checks all of your details, including your website and KYC documents. Once approved, our partner processor will send you a contract.
After signing the agreement, you can proceed with integration and start accepting real-time transactions on your website or mobile applications.
FAQ: High-Risk Credit Card Processing In Canada
What Integration Assurance Does QuadraPay Offer?
Our solutions are compatible with most modern e-commerce applications and content management systems, including WordPress, WooCommerce, Shopify, Wix, and Magento. There are two ways of integrating the gateway into your website: using a compatible plugin or writing custom code. For platforms without a specific plugin, you can use the API. Our processing partners will provide a detailed API document, and the team at QuadraPay is always ready to provide assistance with payment gateway integration.
What role does QuadraPay play as a high-risk merchant account provider in Canada?
QuadraPay is your high-risk merchant account solution provider in Canada. We are experts in connecting you with the right payment service provider that can comfortably onboard you as a merchant. We are resellers for Bankful/EMB, and all of our Canadian merchant enquiries are handled by these payment processing partners. Our services help you save money and time, allowing you to get a cost-effective merchant account quickly and focus on growing your business.
What Strategies Can Canadian Merchants Implement To Reduce The Risk Of Merchant Account Shutdown?
- Merchants can implement several strategies to reduce the risk of account shutdown:
- Work with a reliable high-risk merchant account processor.
- Implement a thorough order verification process to reduce fraudulent transactions.
- Have a good customer care team to identify and resolve customer problems and disputes.
- Use clear billing descriptions to minimize friendly chargebacks.
- Keep records of all communications with customers and transaction details.
What Can Be The Future Of High-Risk Payment Processing In Canada?
In the coming years, the Canadian high-risk merchant processing industry may see:
- Better acceptance of cryptocurrencies.
- Increased willingness to pay high-risk brand merchant registration fees.
- Enhanced AI and machine learning for more secure and smooth transaction processing.
How Long Does It Take To Get Approval For A High-Risk Payment Gateway In Canada?
Many factors influence the approval timeframe, but most cases result in approvals within a week. It’s important to apply strategically rather than sending applications to all banks and payment service providers, as this approach may delay approvals and create an unfavourable impression.
How Do Regulations For High-Risk Merchant Accounts Differ Across Canadian Provinces And What Can Merchants Do About It?
Regulations for high-risk merchant accounts can vary across Canadian provinces. For instance:
- In Ontario, online gaming merchants must follow the regulations of iGaming Ontario.
- Quebec has strict language requirements for e-commerce websites.
- British Columbia has specific rules for CBD and cannabis-related businesses.
- Alberta has unique regulations for payday loan companies.
Major Canadian cities like Toronto, Vancouver, Montreal, and Calgary are the main hubs for high-risk industries such as fintech and cryptocurrency. These cities often have local business associations that can provide additional support for high-risk merchants.
It’s important to note that while federal regulations apply across Canada, provincial laws can significantly impact how high-risk businesses operate. For example, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) oversees anti-money laundering efforts nationwide, but provincial securities commissions may have additional requirements for forex and cryptocurrency businesses.
When searching for a high-risk merchant account, consider processors familiar with your specific region, whether you’re operating in the Maritime provinces, the Prairies, or the territories. Each area may have unique challenges and opportunities for high-risk businesses.
Industry Resources:
https://www.globaldata.com/store/report/canada-cards-and-payments-market-analysis/
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