If your merchant account application has been denied, don’t panic. First, you’re not alone, and it’s not as uncommon as you might think. Your business may just need high-risk payment processing. Today we’re breaking down the basics of high-risk payment processing, why it exists, and how to choose the right high-risk payment processor.
No small business owner wants to read those words after applying for a merchant account with their payment processor of choice. Unfortunately, applications can be denied from time to time.
If it’s happened to you, it’s normal to feel a little taken aback. You may be wondering why your application was denied. What does it mean for your new business? Will you still be able to accept credit card payments? Perhaps you’ve been in business for some time and have had your traditional merchant account suspended.
The good news is that a denied merchant account application or a suspended account doesn’t have to be the end of the world. It’s also not as uncommon as you might think. It simply means your business may require high-risk payment processing services.
In this article, we’ll dive into the basics of why high-risk payment processing exists in the first place, some common reasons your business might fall into a high-risk category, and how to choose a high-risk payment processor.
Chargebacks and High-Risk Payment Processing
You can’t talk about high-risk payment processing without first mentioning chargebacks. While there are many reasons a business might fall into a high-risk category, chargebacks are one of the most common.
Chargebacks happen when a customer works with their bank to force a payment to be refunded. Sometimes this happens if a customer was first unable to receive a refund from the merchant directly but still feels they should get their money back. Unfortunately, chargebacks can also happen without warning.
Whether your business has an existing history of chargebacks or not, the numbers don’t lie – some industries simply have a higher rate of chargebacks than others. Even if you’re just starting out with no transaction history to speak of, if your business happens to operate within one of those industries, you may still require the specialized services of a high-risk payment processor.
Payment processors carry a significant financial risk when it comes to chargebacks, at least initially. The funds must immediately be returned to the customer while banks on both sides investigate. High-risk merchant accounts, and the higher fees that sometimes accompany them, are a way for payment processors to mitigate some of the risks that they take on.
Common Reasons Your Business May be Considered a High-Risk Merchant Account
The reasons a business might fall into a high-risk category vary between payment processors, and each has its own threshold for the level of risk it will take on for a standard merchant account. Below are just a few of the more common reasons your business might be labeled high-risk and require high-risk payment processing:
Card Not Present (CNP) or PCI Compliance Issues
Ensuring that your business follows the policies and procedures necessary to remain PCI compliant is key to preventing chargebacks. Sometimes, due to your business’s nature, you may need to accept payments without a credit card or a customer being physically present. Businesses who frequently accept Card Not Present (CNP) transactions may find that they’ll need high-risk payment processing. CNP transactions are common for businesses that accept remote orders, online orders, or mail-orders.
Specific Industries Tend to be at Higher Risk
While the list varies from payment processor to payment processor, just a few of the industries that often require high-risk processing include:
- Financial services
- Medical practitioners
- Legal services
- Travel agencies
- SEO and digital advertising services
High Average Ticket Sales
If your average sale is higher than most, you may require high-risk payment processing. This can include any number of industries from furniture sales to travel, tourism, and B2B business models.
Businesses that operate on a subscription basis or who require recurring payments can sometimes be considered high-risk. This is primarily due to the volatility of their revenue.
Choosing the Right High-Risk Payment Processor for Your Business
Choosing the best high-risk payment processor for your business goes beyond merely looking for the least expensive option. Choosing a payment processing partner with an outstanding reputation and specializing in working with high-risk merchants is essential both for your bottom line and your peace of mind.
If you’ve applied for a standard merchant account and have been turned down, there’s no reason to panic. Trustworthy, affordable high-risk payment processors like PaymentClub can help you navigate the process of doing business with a high-risk label with minimal pain and expense.