Quadrapay Added 5+ High Risk Merchant Account Solutions In 2021.
With the start of the year 2021, we have added five new High Risk Merchant Account providers. With these new options, our merchants can have a better chance of approvals and get even better rates. If you need a similar solution, fill the contact form, and our team will start working on your requirements asap. For a detailed understanding of the high risk merchant account industry, you can read this article. The has some recent inputs.
Why You May Need High Risk Merchant Accounts
Many businesses need High Risk Merchant Accounts. They need these as regular processors say no. Most eCommerce credit card processing companies prefer to work with merchants from low-risk industries. You will be surprised to know that all eCommerce sites are technically high risk. These sites are high risk because most transactions on these sites are in the Card Not Present Scenario. In the CNP Transaction, there is no face to face interaction between merchant and cardholder, and thus it elevates the risk of fraudulent transactions. Modern features like 3DS, AVS, EMV and NFC technology have put substantial control on fraud transaction. Card fraud still happens. As the processing companies are becoming advanced fraudsters are also becoming smarter. Merchants need to understand what makes them high risk and prevent them from getting converted to a prohibited merchant. Quadrapay, with its five years + expertise in assisting merchants, has established some new business relationships in 2021. If you need a solution for your business, then fill the form on this page. If you wish to gain a detailed insight into the high risk merchant account processing industry, continue with this article.
Let us explore Some Factors That Make A Merchant High Risk Oriented:
- Bad Credit Score. By Default merchants with a low credit score are considered a more significant risk than those with a high credit score. It does not mean that merchants who do not have an excellent credit score will never get a payments solution. They should approach bad credit merchant account providers. We also work with a few of them and can assist.
- Startup Businesses. Banks and payment institutions prefer to work with merchants that are already accepting card payments. They can quickly check what volume the merchant will bring in and what is the expected chargeback ratio. However, in case of any startup merchant, this is not possible. Some high risk merchant account providers may charge slightly higher and say yes to startups. Having said that in most cases, they would undoubtedly ask for upfront setup fees. This is to check the genuineness of merchant and also for high risk band merchant registration fee. Card schemes charge this fee for merchants in specific industries.
- Cross Border Transactions. Payment processing companies have fixed jurisdiction in terms of merchant acceptance. PSPs that are allowed for the EU can only operate in the EU and must follow EU directives. PSPs in CEMEA can offer services in the same region and must follow local regulations. That means a PSP can not cross its jurisdiction in terms of underwriting the merchant. However, they may allow traffic from external regions. Like an EU processor may allow USA, LAC, CEMEA, AP Traffic. However, they will apply restrictions. Cross border transactions are also a risk factor. However, these days, cross-border transactions are in vogue, and many High Risk Merchant Accounts come with this ability.
- High Monthly Sales Projection. The merchant account application has many fields that let the processor scan the business. After in-depth analysis, decide the monthly expected sales volume. Sometimes merchants think that a giant sales projection will impress the underwriter. In reality, it increases credit risk. A higher forecast of sales and lower merchant credit score and low financial standing will not help the merchant get approved. Be realistic and state what is achievable.
- Large Ticket Size. High ATV. The ticket size is the average value of each transaction. Same like the above-discussed item here also merchants think that high ATV will help. But it makes things difficult. What we are trying to say is that be as realistic as possible. If your monthly sales volume is 5000 Euro, then please don’t claim that you will do a 1 million Euro business each month. It does not help anyone. High Risk Merchant Accounts are not allocated based on ATV or expected volume; many additional factors are considered before approval.Transaction value in most high risk industries may be a lot higher than low risk industries. The bigger the transaction value, the more significant the risk of chargebacks. Now you know why getting a merchant account for precious metal sales is so tricky. Merchants selling Gold and Silver coins also face similar challenges. Companies selling expensive earrings and expensive watches face difficulties in getting an account.
- High Chargeback To Sales Ratio. This is pulled from the history of the merchant. When you apply for a high risk merchant account, you will be asked to submit your last six months processing history. This document is first checked for authenticity, and after that, data is analysed. Your processing history will help the processor understand the following. Expected monthly sales volume/Average Ticket Size/Average Chargeback Volume/Average Chargeback Percentage/Average Return Volume and Average Return Percentage. If the processor sees a more significant chargeback ratio on your account, then it may say no. In this situation, merchants can approach the processor and ask for Alternative Mode Of Payments, also known as Amps. Some processing companies use CDRN and Alert services at the gateway level, and the merchant has to use this service mandatorily. These processors can probably handle a slightly more significant risk.
- Incomplete Website. Can you drive a car without a drivers licence? Similarly, you can’t get a high risk merchant account without an active website if you apply with an inactive webpage that lowers your possibility of getting approved. PSP’s want to work with responsible business owners.
- Copied Content On The Merchant Site. Copied content can lead the merchant’s website to be taken down. It also displays the unethical approach of the merchant. The processor may check the entire website in few seconds for the plagiarism. So make sure that your website has authentic content.
- Low Or No Traffic On Website. The high risk processor will only make money when you generate sales on your website. Will you be able to generate sales if there is no traffic on your site. This is the reason why PSPs will check the traffic on your site. If the site has low traffic, they may straight ahead say no. If you plan to make money by using PPC services, you may share a plan for the same. Let the PSP know about your marketing budget and plan.
- Negative Reviews About The Merchant On The Internet. Your online reputation is the mirror of your customer care and product quality levels. If a company has substantial negative reviews, then the processor may say no. Various Online reputation management companies may help you fix this.
- Merchant Listed on Match or TMF Merchants. Nothing can be done in 99% of cases where the merchant is listed on TMF/Match. However, in rare cases, this can be approved as well. However, this depends a lot on how much time you and your PSP spend on the application. The best solution for TMF listed merchants is to use a non-card scheme solution. Alternative methods like SEPA, ACH, Echeck, Interac and EFT are quite popular among TMF merchants.
- Industry. Some industries are traditionally considered high risk This may be because of credit or reputational risk. A site selling erotic magazines may attract reputational risk. A site selling low standard televisions may attract credit risk. Over the years of operation, card schemes have established MCC codes. These are unique codes for each industry type. Some industries are restricted, and some are prohibited. In restricted industries, the PSPs look at each application on a case by case basis. If the industry is not permitted, that means PSPs will not move ahead with the application.
- Organisation Structure. Sometimes few businesses may have very complex organisational structure or ownership. To make things easier at quadrapay, we ask merchants to share an organogram.
- Previous Owners. Sometimes the pervious owners of the company may also become the reason for application decline. If the previous owner is infamous or may have huge debts and too broken credit score, then underwriter may say no. They may think that the new owner is just a front for the old owner. This is a credit risk.
- Previous Businesses. If the previous business of the merchant had a very bad reputation, then the application of the new business may also get declined. The underwriters may think that the new business will work as a front of the old company. If the situation is so bad, you should forget credit card processing and switch to alternative payment modes. Build some reputation and revisit the PSP.
- Transaction Laundering: Transaction laundering is a critical problem for any payment related institution. This is also a key reason why they refrain from working with merchants from High Risk industries. In the past merchants have offered other businesses to use the account for small profit. This is a direct violation of any merchant account agreement. Unfortunately, in High Risk Industries, there have been many similar instances. This is also a vital reason why low risk acquirers do not touch merchants from high risk verticals.
- $1 trial and recurring payments. Nutraceutical companies offer free trials. Some weight-loss companies also offer a $1 trial. Customers may find these offer attractive. They sign up for the trial and later forget to cancel the trial. After the trial period, they notice charges on a regular basis. This attracts chargebacks that may create challenges for the merchant and the PSP. This may create problems for the financial institution as well.
It is tough to get high risk merchant accounts in today’s world. The primary reason is that there are not so many high risk credit card processors. Since there are very few solution providers, they do get a massive number of applications. The goal of the provider is to onboard merchants that attract the lowest amount of risk. High risk account acquirers follow proper underwriting guidelines and risk analysis steps. They check the business model and also review KYC documents submitted by the merchant. When you type high risk credit card processing on Google, you will find thousands of websites. In reality, there are only a few acquirers that onboard high risk merchants. Most of these websites that you see on the internet are of affiliates and resellers like Quadrapay. These affiliates and resellers help the PSPs and acquirers in finding leads. Getting instant approval for high risk industries is impossible. Underwriters take time to check and approve applications. They may serve some high risk industries, but they can not support any illegal activities. It always helps the merchant to be honest with the processing company.
High Risk Credit Card Processing Easy Approval And High Chargeback Trap.
Getting a high risk credit card processing account is hard. If you get one then before signing on the agreement, it is essential for you to look at these factors. If you look at all these factors, then it will be easy for you to find the best high risk processor for your business.
- The rate of Transaction(TDR/MDR). Do not pay above the industry standards. Remember a very high transaction fee is a hole in your pocket. We recommend you to find a processor that offers an interchange-plus pricing model.
- Rolling Reserve. High risk processors always ask the merchant to agree on a rolling reserve. It is usually a % value. Try to get it negotiated below 10 %. Some accounts may be available at a reserve of 5%. The reserve amount comes back to the merchant after 180 days. It’s better to have that money in your account rather than with the processor. Request them if they can reduce the rolling reserve percentage.
- Payout Period. For regular businesses, the payouts period is usually 2-3 working days. For high risk businesses, this can be a week or 15 days. In case if the provider asks you to accept monthly payments, then look for some other provider.
- Arrears and Hold-back. To reduce the credit risk processors ask the merchant to accept an arrears clause. It means that the first payout will be after a specific time frame. Most of the times, this should be from 1 to 2 weeks.
- Contract Term. If the PSP wants you to sign a very long contract, try to negotiate on a smaller contract term. You may get better rates from another processor in six months. Shorter the contract term the better it is.
Account Termination Fee. Some providers may put a penalty if you close the account before the contract end day. Try to negotiate and see if the processor waives this.
- Setup fee. Usually, the setup fee for a high risk credit card processing account is zero. Having said that, still few processors might charge a setup fee. It will be great if you can convince the provider to either waive the setup fee or offer some discounts.
- Monthly Charges. The monthly fee becomes a burden if the merchant does not process enough transactions. You may agree to a small monthly fee. If the monthly payment is very high, then search for some other high risk provider.
- Reputation. Birds of a feather flock together. You should only work with processors that have a good reputation. Investigate online and see if they have any negative reviews. Ask the provider about there point of view on the negative review. Sometimes there may be some anonymous reviews. You should trust the reviews that appear to be genuine. Few of the largest processors in the world may have few negative reviews. You should not consider all reviews to be honest and trustworthy. Some may be from competitors. Use your analysis.
- Merchant Account Holding funds. You do not want to work with a payment processor that does not respond to your queries and keeps all your money. The fact of the matter is that there are many sharks out there. These companies usually do not reveal there address and business registration number. Before accepting the offer check if the processor is infamous for holding funds.
- PCI DSS Compliance. All Credit and Debit card payment processors must follow PCI DSS standards. Most of the times, they display their compliance status on the website. In case if it is not visible, ask for it. You can also verify the quality of the processor on the site of various card brands. Most card brands display the list of service providers on the website.
- Integration Process. There is no point in getting a high risk credit card processing account if it is too hard to integrate. Ask the processor how easy it is to integrate the payment gateway to your website. Ask them if they have ready-made plugins. Many high risk processors display the API details on their websites. Try a sandbox integration before signing the agreement.
- Approval Ratio. A significant challenge in the High-Risk processing industry is the approval ratio. A solution with a very high decline ratio can create an adverse effect on your business. Work with a processor that offers high approval ratio for card transactions. You should prefer to work with an acquirer or PSP from the same zone where the cardholders are from. European union merchants should choose processors from the EU or European Economic Area. This will be helpful as the processors may be comfortable with the local bins and local cards. For payments from Latin America approach a South American high Risk processor. Quadrapay can help you find processors in different nations.
- Various Pricing Quote. Beyond these factors get quotes from more than three providers. Perform a detailed comparison of rates, fees, and charges. It may help you to avoid much hassle.
Acquirers Location. As a merchant, you should work with the service provider that offers high success ratio. The processor should work with most of the card brands.
- Billing Descriptor. Make sure you mention an easy to recognise descriptor on the application form. This is the name that will appear on the credit card billing statement of the customer. Many companies put their support line number as a billing descriptor. This helps customers to call the support line number in case if they do not recognise the charge. An irrelevant descriptor can create unnecessary confusion in the minds of the customers.
Rolling Reserve For High Risk Merchants. Apart from the TDR providers also charge a reserve amount. This reserve amount applies to every transaction. This is the rolling reserve. The acquirer holds this amount for 180 days. Depending upon the type of business, the rolling reserve can range from 5% to 10%. In rare cases, the processor may also approve a fixed reserve amount. It means the merchant will deposit a specific amount with the processor. Merchant gets rolling reserve after 180 days post-closure or termination of the account.
Industries That Require High Risk Merchant Accounts.
Low Risk acquirers always say no to high risk merchants because of different factors.
- Credit Risk. Merchants from high risk industries may attract high chargebacks. This can affect the stability of the payment service provider. Card processors avoid on boarding merchants that may have High chargeback to sales ratio.
- Reputation Risk. Acquiring institutions refrain from few Industries because of reputation and credit risk.
List of Industries that Require High Risk Credit Card Processing Accounts
- Adult entertainment
- Credit Repair
- Online magazine sales
- Online Dating
- Online Gaming
- Video streaming
- File hosting
- IPTV boxes
- Phone Chat Lines
- Extended warranty services
- Document preparation services
- Job sites/Resume Services
- Matrimonial websites/Matchmakers
- Online dating websites and Dating Apps
- Nutraceuticals/Ayurveda products/Weight Loss products
- Online magazine Sales/Anime Magazine
- Astrology/Tarot Card Readers/Faith healers(Sessions Only)
- Extended warranty.
- Satellite TV Set-top Boxes 16. Licensed IPTV Companies
- Web design/Seo/Smo/Internet Marketing
- Crypto Exchanges
- Skill Gaming
- Cruise liners
- Tech Support
Rates For High Risk Merchant Processing Solutions.
This is an industry known fact that high risk merchant solutions are expensive. Merchants usually pay a high transaction fee. Most of the times, the rates for high risk industry starts at 3.5% Per transaction MDR. This transaction fee can also increase depending on the industry. MDR also depends on the financial standing of the business and the business owners. Some providers charge even higher fees for specific Industries.
Most acquirers in the high risk processing industry ask the merchant to pay a setup fee. The setup fee can range from $300 to $1,500. The setup fee depends a lot on the business type and the industry in which the merchant operates. The higher the risk, the more the setup fee. Merchants from low risk Industries can also have high risk associated. This can happen if the credit score of the business owner is terrible. This can lead the merchant to a problematic situation. This may even force him to close his business. These merchants can get high risk merchant accounts and start accepting credit transactions.
Credit Card Processing For High Risk Merchants And Risk Reduction.
High Risk Merchant Account Providers reduce risk by implementing various measures. General processing companies also follow these measure. With High risk accounts, the scrutiny is deep and intense.
- Strict Underwriting Process. Underwriting team looks at various endpoints to identify the genuineness of the merchant. They reject any application that appears to be false. Reject merchants that are not showing the correct business model.
- Detailed Risk Assessment: The risk team looks at the profile of the merchant. They try to understand the level of risk the institution will attract after approval. This is the risk exposure analysis. High risk processors cannot violate the guidelines of card brands and govt. They can take a limited risk but can never cross the limit.
- They charge a higher transaction fee to reduce risk. Processors may charge high prices to lower the loss because of chargebacks. Accounts are only profitable if the volume is vast, and chargeback is low.
- Rolling reserve that keeps growing. Processors deduct rolling reserve on each transaction. This amount stays with the merchant account acquirer for 180 days. High risk processors may use this money to handle merchants chargebacks and refunds.
- Charging a Setup fee: Most of the times merchant will pay a setup charge. In case if the merchant is not serious then he would not get the solution. This also helps financial Institutions to skip unwanted applications.
- Regular and surprise audits. Performing checks on merchant accounts help processors to identify high risk activities. Processing companies check accounts at regular intervals. They also keep an eye on the business model of the merchant. The high risk credit card processing account may close if the merchant misuses it.
- They are limit the per item ticket size. When a merchant fills a merchant account application, then he mentions these. Smallest ticket size. Highest ticket Size. Transactions per month. Monthly sales volume. Based on these values, the processor limits the per ticket size. Credit card processors also set the merchant’s sales forecasts for internal use. The account may go on hold if the merchant experiences a spike in any of the projected values.
- No Virtual Terminal or Moto Panel. In the US and EU, low risk merchants may get Virtual Terminal. Processors generally do not offer virtual terminal for high risk merchant account. This helps the processors to reduce fraudulent transactions to a great extent.
- Fixed Monthly Sales Volume. Payment service providers set a monthly sales volume as per the profile of the merchant. Merchants cant accept orders over an approved monthly volume. If your business gets a very high volume of sales, then use more then one merchant account. Split the volume into separate accounts. If merchants exceed monthly capping, then more transactions may not go through.
- Chargeback Alerts and Notification. To reduce credit risk, many processors use chargeback alert services. This helps the processors to get alerts when the cardholder calls the card issuer. Alerts may not appear every time, but most of the times they appear. Merchants may refund the transactions in case of alerts.
If you have any doubts about High Risk Merchant Accounts then you can reach us at [email protected]