A Common Question is – What is a High-Risk Business?
Well, a “high-risk business” is a term utilized by the payment processing industry. It’s generally based on two pieces of criteria firstly, your industry (some verticals aren’t deemed as secure as others) and your individual situation (factors like your credit history, past viability, etc.). One refers to more non-specific criteria and slightly shallow characteristics that are based on the type of business you have. Traits from the second are more directly associated with your history and business practices.
The reality is a high-risk business encounters challenges in accepting credit or debit cards where other standard businesses do not have to contend. If you are in a high-risk vertical market, you will, in turn, can use a high-risk merchant account. This normally means more restrictions and potentially higher processing fees (in some situations). Here is the deal, if you’re in a high-risk industry or ultimately selling high-risk products, there’s minimal you probably can do about not using a high-risk card processor or high-risk payment processor.
Unfortunately, high-risk businesses are merely merchants who have a greater risk of financial failure. What is a high-risk business? Truthfully, there is a particular amount of risk connecting all payment processing, and eCommerce in particular; there’s usually little wiggle room around that. Merchants carry a lot of that risk directly, but acquirers and payment processors can be affected as well.
Of course, all involved desire the best possible return on their investment. So, it makes perfect sense that financial institutions would either try to avoid perilous situations or charge more for accepting greater risk. Naturally, merchants who fall under the high-risk umbrella are obliged to operate from a high-risk merchant account. This means you may have fewer options for card processing. Get the best UK high-risk merchant account processing with 5 Star Processing.
What makes a business high risk?
You might think high-risk businesses are generally those that sell obscure items or administrations. However, that is not true at all.
Here are some reasons why your business can fall into a high-risk business category:
- Online assistance just organizations: Organizations that just offer web-based support, such as Web optimization/SEM, are dangerous on the grounds that there’s no unmistakable item and frequently have high worth exchanges.
- Questionable items: This is the clearest kind of high-risk business. It could incorporate those that sell grown-up amusement, drug gear, and weapons.
- Chargeback rates are higher: A few businesses get more chargebacks than others. This incorporates travel administrations and gadgets.
- High lawful guideline: Organizations like tobacco and nutraceuticals require severe legitimate consistence.
- Membership organizations: A ton of clients neglect to drop their membership or free preliminary and afterward issue a chargeback.
- Deals model: A few organizations have problematic deal rehearses. For instance, MLMs have gained notoriety for being tricks. Regardless of whether you’re absolutely genuine, you’ll in any case be treated with more mindfulness.
- Weak clients: Organizations like obligation combination or credit fix administrations take care of a more hazardous client base.
- Terrible individual credit: Suppliers might see you as not being monetarily capable and partner that with how you maintain your business.
- High-dollar deals: Assuming that the normal ticket size of your exchanges is more than $500, the chargeback risk increments. Therefore organizations like furniture stores are viewed as high gambles.
- High month-to-month volume: In the event that your business routinely processes more than $20,000 per month, the gamble for chargeback increments.
WHICH BUSINESSES & INDUSTRIES ARE CONSIDERED HIGH-RISK?
So, what is the distinction between a high-risk business and a low-risk one? As we mentioned above, there are numerous reasons your business could be considered risky. “Low-risk,” on the other hand, is considered to be normal and of course offers minimal risk.
Also, determining a business’s risk level is centered on multiple compounding factors. So what is a High-Risk Business? Every payment processor has its individual set of guidelines.
One processor may deem you high risk while another may not – which is why it is good to shop around. Once a processor assesses your business, they’ll make an “either/or” conclusion as to whether you qualify as high risk.
Some of the high-risk products and industries usually identified by processors include (but are not limited to):
- Financial counseling/credit repair/debt consolidation
- Recurring billing/subscriptions
- Casinos or online gaming
- Prepaid debit cards
- Telemarketing sales
- Pharmaceuticals and online drug providers
- Tobacco/E-cigarettes/cannabis products
- Adult entertainment and dating services
- Airlines, accommodations, and ticketing agents
- Subscription services (magazines, collectibles, etc.)
High-risk payment processing providers
High risk payment processing providers are liable for all credit card transactions you send through. They desire things to go smoothly, so traditional processors may be timid about doing business with a business with high-risk elements. What is a High-Risk Business? Unfortunately, things like excessive chargebacks or fraud could hypothetically cause trouble between the source and the issuing bank.
To avoid that, the provider may conclude such a company isn’t worth taking a chance on. Many providers don’t agree with having high-risk clients at all. This forces you to choose from a shortlist of providers who do offer high-risk merchant accounts, like 5 Star Processing.
You really don’t need to worry if you have a high-risk business. 5 Star processing can help you in getting a high-risk merchant account with ease to make your payments. Our experts are professionals with long experience and can help you get a merchant account with ease. Contact us today as we are the best high risk merchant account provider in the USA.