High-Risk Merchant Account

Why a high-risk merchant account is the need of the hour for business?

Yes, you read it right: high-risk merchant accounts are the need of the hour for the business regime. Because, nowadays the majority of the payment's businesses accept, comes through digital payment methods like e-wallets or online bank transfers. Although cards are still one of the most popular payment options for customers worldwide. As per the FIS Global Payment Methods Report 2023, digital wallets were the most popular payment option across the world in both e-commerce and POS systems, accounting for 49% of the total transaction value of e-commerce payments in 2022 and 32% of the total transaction volume of POS payments. Credit cards are the second most popular payment method in both sections, and debit cards are the third most popular payment method among global customers.

However, cash still has decent significance in POS payments, with 16% involvement in the total share of transactions; in online purchases, it is almost out of sight with a mere 2% accountability of e-commerce payments. Considering the numbers, it may not be too difficult for a person to imagine the importance of expertise in accepting online payments for a business in recent times, and for this, a merchant account has become a necessity, which brings us to the point where we start, high-risk merchant account's Essentiality.

Essentiality of high-risk merchant accounts

A high-risk merchant account is a business account that is mainly designed for businesses that have an excessive risk of chargebacks, fraud, or legal compliance. But the reality is that these are the industries that make the most of the profits that run the economies of countries. Exempli gratia, e-commerce is counted among the high-risk businesses, but it is also among the most profitable businesses, with a global market of USD 3,573,386.4 million and expected to grow at a CAGR of 11.2% in the upcoming four years, per ecommerce DB. These statistics solidify the fact that high-risk businesses are the ones with the most potential for profitability in the future. And because such businesses process payments only through a high-risk merchant account, this is why it becomes the need of the hour.

Understanding the high-risk merchant account

A high-risk merchant account is a specialized business account that provides online payment processing solutions to businesses that are deemed to be industries with an excessive risk of online fraud, higher chargeback rates, and legal complications. Therefore, such businesses are recognized as high-risk businesses, and business accounts for such industries are considered high-risk merchant account. A high-risk business account is nothing short of a lifeline for high-risk industries, as it offers tailored payment processing solutions to mitigate the payment processing risk associated with such businesses. The online payment processing solutions provided by a high-risk account include advanced and sophisticated fraud prevention tools, real-time transaction monitoring, smart chargeback management, multi-currency processing, and compliance assistance with industry-related regulatory authorities. Because high-risk accounts operate in industries that are subject to elevated payment processing risks, obtaining a high-risk merchant account requires a stricter and more time-consuming procedure due to the stringent underwriting processes. Despite the flaw in the approval procedure, high-risk accounts are essential for high-risk businesses because they process payments securely and minimize financial setbacks, which makes them a compulsory inclusion in the payment scenario of a high-risk business.

How do high-risk merchant accounts work?

A high-risk merchant account operates as a specialized business account for high-risk businesses. Hence, its functioning is a little bit different from the usual low-risk merchant accounts. For the approval of a high-risk account, merchants need to have a solid credit history and chargeback management records. In contrast to a low-risk merchant account, a high-risk business account assesses the risk involved in a payment with the help of many advanced and sophisticated fraud prevention tools like 3D secure transactions, real-time transaction monitoring, and 3-factor authentication. Here is a list of what a high-risk merchant account does:

  • Provide robust fraud prevention tools to safeguard against fraudulent transactions.
  • Give advanced chargeback management services to efficiently handle disputes and minimize financial impact.
  • Enable businesses with industry-specific expertise for navigating regulations and compliance challenges.
  • Provide customized payment processing solutions, including high-risk payment gateway.
  • Give 24/7 dedicated customer support for troubleshooting and technical assistance.
  • Provide secure payment processing with encryption and PCI DSS compliance.
  • Help businesses grow by mitigating risks and facilitating stability.
  • Addresses payment processing challenges like chargebacks, fraud, and regulatory compliance.

So, this is how a high-risk merchant account work.

Reasons for considering a high-risk merchant account

Nature of Business

If you are operating a business whose nature is different from other businesses, like having a higher tendency to breach transaction limits, being prone to more chargebacks, or facing legality issues. In such a case, you have to approach high-risk payment processors for a high-risk merchant account.

High risk of fraud

For instance, if you have a business that is considered fraud-prone or vulnerable to online fraudulent activities like data breaching and payment-related fraud, then you are left with high-risk merchant accounts and high-risk gateway as your only options for payment processing solutions.

Higher chargeback

If you are running a business that usually has a higher chargeback rate than the standard chargeback rate, then you must consider a merchant account for high-risk businesses for seamless payment processing.

International sales

Businesses with the ambition of going global or businesses with already established operations in overseas markets need a high-risk merchant account. Because it helps them navigate the complexities of currency conversion as a merchant account for high-risk businesses and enables them with multi-currency payment processing.

Low credit score

Reputed payment processors prefer to provide a merchant account to businesses that have a tremendous or at least a decent credit score. But if you don't have the luxury of a good credit history, then you can turn your attention towards high-risk payment processors to get a merchant account.

High transaction volume

Businesses that breach the transaction limits more often need a high-risk merchant account for online payment processing solutions, as a merchant account for high-risk businesses provides flexibility for businesses to make excessive transactions.

Industries with the label of high-risk businesses

Here are the names of some industries that are labeled as high-risk businesses due to their various industry-inherited risk factors.

Online casino Adult Industry
Online gambling/betting Forex trading
Pharmaceuticals and nutraceuticals Dating apps and matchmaking services
Travel and vacation packages Online tobacco and e-cigarette sales
Cryptocurrency and Bitcoin Exchanges Subscription-Based Services

What makes high-risk merchant accounts a necessity for businesses?

Businesses want a merchant account for high-risk industries for many reasons; the major ones are listed below:

Urge to get a payment processing solution provider: Because traditional processors often avoid high-risk industries, this left businesses with high-risk payment processors with a high-risk merchant account as their only option.

Advantages of risk mitigation tools: High-risk merchant accounts often employ advanced risk mitigation tools to counter chargebacks, fraud, and industry-specific challenges, which makes a high-risk merchant account desirable among merchants.

Better fraud prevention: Advanced tools in these accounts prevent fraudulent transactions common in high-risk businesses, which makes them a must for industries prone to fraudulent activities.

Chargeback handling: The majority of high-risk merchant accounts provide dedicated chargeback management services to help minimize the financial impact of payment disputes, which attracts the attention of high-risk businesses.

Assistance in regulatory compliance: High-risk industries usually face stringent regulations, which makes it difficult for businesses to comply with them, although this becomes a lot easier with the help of merchant accounts for high-risk businesses, which makes them a popular choice among high-risk businesses.

Luxury of customized solutions: high-risk merchant accounts are known for their tailored payment processing solutions like high-risk payment gateway and tolerance for high transaction volume, which makes them popular among high-risk businesses.

Industry expertise: High-risk payment processors, which provide merchant accounts for high-risk businesses, understand the dynamics of high-risk industries quite well, which makes them able to provide industry-specific support and payment processing services. This expertise helps new merchants in high-risk industries; therefore, they prefer a high-risk account.

Why high-risk merchant accounts subject to higher payment processing fees?

We have discussed earlier several reasons why a business is considered high-risk. Basically, these are the reasons that also affect the cost of a high-risk merchant account. There are several concerns, like chargebacks, high transaction volume, fraud, and the nature of business. The high-risk merchant account provides the technology that saves you from all these issues. In high-risk businesses, the proportion of chargebacks and scams is comparatively high. To shield you from these significant risks, a high-risk merchant account provider employs advanced security technologies, sophisticated fraud protection systems, and cutting-edge chargeback prevention techniques. Due to this ever-improving technology, fees are higher. International credit card processing, alternative payment methods, and multicurrency are additional factors that raise the cost of a high-risk merchant account. High-risk merchant accounts may also be subject to a rolling reserve, whereby the payment processor withholds a portion of your revenue until it can confirm that your transactions were valid and not prone to chargebacks. Due to all of these reasons, the payment processing fees of high-risk merchant accounts are slightly higher than usual ones.


Can I get instantly approved for a high-risk merchant account?

Answer- Yes, you can easily secure a high-risk merchant account with instant approval. You just have to provide honest and accurate information while applying with a decent credit history. For instantly approved, high-risk merchant accounts, you can consider PayCly.

Will I need a high-risk payment gateway?

Answer- If you are operating an online business with traits like high transaction volume, excessive chargebacks, and an elevated risk of payment-related fraud, you need a high-risk payment gateway to mitigate the above-mentioned risks in payment processing.

Is there such a thing as a high-risk virtual terminal?

Answer- Yes, a high-risk virtual terminal exists, and it is a payment processing solution for high-risk businesses operating in industries prone to chargebacks or legal complexities. It's a specialized payment processing solution designed to manage risks associated with high-risk industries and transaction types.

What factors make a merchant account high-risk?

The responsible factors for recognizing a merchant account as high-risk could be:

  • Industry Type: Providing services for high-risk sectors like adult entertainment, online gaming, etc.
  • Chargeback Rates: High levels of transaction disputes and chargebacks.
  • Product/Service Nature: Sale of digital goods, subscriptions, or products with high return rates.
  • Reputation: History of complaints, legal issues, or poor business practices.
  • Global Transactions: Involvement in cross-border transactions with regulatory complexities.
  • Credit History: Poor credit of the business owner or entity.
  • Payment Processing History: Past chargeback disputes or terminated accounts.
  • Regulatory Factors: Operating in industries with complex or varying regulations.

How are high-risk merchant accounts different from regular ones?

High-risk merchant accounts are identically opposite; here's a concise differentiation between them:

High-Risk Merchant Account Regular Merchant Account
Suitable for industries prone to chargebacks, fraud, or regulations. Designed for lower risk industries.
Consist of rigorous risk assessment. Consist of a simplified risk assessment.
Has higher processing fees and potential additional risk-related fees. Has lower processing fees.
Possible requirement for reserve funds. Less likely to require reserve funds.
Enable specialized fraud prevention tools. Provide standard payment processing tools.
Has a longer approval process. Have a quicker approval process.
Consist of stricter contract terms. Less strict contract terms.
Has flexible processing volume limits. Has limited processing limits.

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