High Risk Merchant Account Overview
Many businesses need High Risk Merchant Accounts. They Need High Risk Processing solutions when regular processors do not accept them. Most card processing companies prefer to work with merchants from low risk industries. Sometimes businesses from low risk industries also face challenges in getting approved. These merchants face this challenge because of various factors. Some factors are.
- Bad credit score of business owners.
- Startup businesses with no previous processing experience.
- Cross-Border Transactions
- Very high monthly sales projection
- High ticket size and items
- High chargeback to sales ratio
- Incomplete website
- Copied content on the site
- Low or no traffic on the website
- Visible negative reviews about the merchant on the internet.
- Merchant Listed on Match or TMF Merchants.
Every legal business should get the possibility of accepting payments online. We have established relationships with various processors. Few of these processing companies may onboard merchants from select high risk industries. Please note that processors do not support merchants from prohibited industries or categories. This article will give you an insight into high risk processing in 2018. You will know how you can get a high risk merchant account to accept credit cards online. You will also know about alternative ways of payment processing solutions. These can be very beneficial for high risk processing.
HIGH RISK MERCHANT ACCOUNTS. WHY SO HARD.
It is tough to get high risk credit card processing 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. The final approval always depends upon the acquiring institution. ISO’s or Resellers cannot force any financial institution to onboard any merchant. Resellers can educate the merchant about website compliance. It can increase the chances of approval. Getting instant approval for high risk industries is an impossible task. 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 MERCHANT ACCOUNT PROVIDERS. THINK TWICE.
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, then 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. 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 own 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 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 status of the processor on the site of various card brands. Most card brands display the list of service providers on website.
- Integration Process. There is no point in getting a high risk merchant 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 card holders are from. European union merchants should prefer processors from 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 a lot of 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 recognize 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 recognize the charge. An irrelevant descriptor can create unnecessary confusion in the minds of the customers.
RATES FOR HIGH RISK CREDIT CARD PROCESSING.
High Risk 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 like.
- Credit repair
- Tech support
- Web design/Seo/Smo/Internet Marketing
- 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
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 is operating. The higher the risk, the more the setup fee. The merchant should try to request the acquirer to deduct the setup fee from the payout. Most of the processing companies may offer this flexibility. The setup fee helps the provider to stay away from non-serious merchants. It also helps in risk mitigation from the beginning.
Merchants from low risk Industries can also have high risk associated. This can happen if the credit score of the business owner is bad. This kind of merchant needs a bad credit merchant account. In the United States of America, a lot of merchants struggle with the problem of bad credit. Unfortunately, they find it hard to get a bank account as well as a merchant account. 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 services and start accepting credit transactions.
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.
High Risk Merchant Account and Risk Factors.
Low Risk acquirers always say no to high risk merchants because of different factors.
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.
Acquiring institutions refrain from few Industries because of reputation.
- Adult entertainment
- Credit Repair
- Online magazine sales
- Online Dating
- Online Gaming
- Video streaming
- File hosting
- IPTV boxes
- Phone Chat Lines
- Extended warranty services
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.
High Ticket Transaction.
Transaction value in most high risk industries may be 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.
$1 trial and recurring payments.
Nutraceutical companies offer free trials . Some weight-loss companies also offer a $1 trail. 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.
If the merchant is on the MATCH list or has a TMF record. Processors scan the industry database to check if the merchant is on MATCH list.
If the merchant and cardholders are from different countries, then acquirers may say no. Not every processor offer cross-border payments.
HIGH RISK MERCHANT SERVICES PROVIDERS RISK REDUCTION.
High Risk Merchant processors reduce risk by implementing various measures. General processing companies also follow these measure. 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. The 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.
- Charging a higher transaction fee to reduce risk. Processors may charge high fees 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 serious merchant will pay a setup charge. In case of the merchant is not serious then he would not get the solution. This also helps financial Institutions to skip unwanted applications. This also avoids non-serious merchants.
- 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.
- limiting the per Item ticket size. When a merchant fills a merchant account application, then he mentions these. Lowest 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 accounts. This helps the processors to reduce fraudulent transactions to a great extent.
- Fixed Monthly Sales Volume. Payment service providers fix 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 on separate accounts. . If merchants exceed monthly capping, then more transactions may not go through.
- Chargeback Alerts and Notification. To reduce the credit risk, many processors use chargeback alert services. This helps the processors to get alerts when the cardholder calls the card issuer. Signals may not appear every time, but most of the times they appear. Processors may refund the transactions in case of alerts.