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.
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.
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:
So, this is how a high-risk merchant account work.
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.
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.
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.
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.
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.
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.
Here are the names of some industries that are labeled as high-risk businesses due to their various industry-inherited risk factors.
|Pharmaceuticals and nutraceuticals
|Dating apps and matchmaking services
|Travel and vacation packages
|Online tobacco and e-cigarette sales
|Cryptocurrency and Bitcoin Exchanges
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.
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.
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.
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.
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.
The responsible factors for recognizing a merchant account as high-risk could be:
|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.