Topics Covered Hide
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1
Guidelines to Designate a Business as High Risk
- 1.1 Types of Risk
- 1.2 Business Model
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2
Reasons a Business Might Be Seen as High Risk
- 2.1 Intangible Products
- 2.2 New Products
- 2.3 Highly Regulated Industries
- 2.4 Questionable Customers
- 2.5 International Operations
- 2.6 Natural Health
- 2.7 MLM Model
- 2.8 Out of Control Debt
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3
Card Standards – How Visa & Mastercard Decide
- 3.1 Visa
- 3.2 MasterCard
- 4 Tiers in High Risk Industries
- 5 How the Business Type Affects the Gateway Needs
- 6 Understanding the Pricey Consequences of a High Risk Business
- 7 Becoming Familiar With Rolling Reserves
- 8 Useful Practices to Reduce Chargebacks
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9
Top 6 Best High Risk Payment Processing Providers
- 9.1 Total Processing
- 9.2 Worldpay
- 9.3 CcNetPay
- 9.4 High Risk Pay
- 9.5 Inovio
- 9.6 Soar Payments
- 10 FAQs
High risk industries are often the most profitable ones, but at the same time, they’re often wrongfully labeled by banking institutions. There are numerous industry factors that can cause a business to be deemed at high risk.
From chargebacks and potential licenses to cardholder disputes and regulations, anything can contribute to this label. Many business owners trade by the highest standards, having no issues at all, yet the label puts every business in certain industries in the exact same boat.
If you only dealt locally and requested cash, it wouldn't have been a problem. However, in a world where fewer and fewer people carry cash, it would be quite uncomfortable for customers to find an ATM nearby to shop.
On the other hand, dealing online or being able to take card payments is clearly the way to go and that’s when the high risk label kicks in to cause trouble. Luckily, there are some reputable high risk payment processing vendors out there, but let’s see how to pick the best one.
Some businesses or industries are automatically deemed as high risk. Most traditional banks won’t even want to hear your business model or see your numbers. Unless you’re a corporate giant with impressive numbers in revenue, they won’t look at you. And yes, money does buy credibility.
There are more factors that can affect decisions when different bodies review industries and businesses to determine their risks. Indeed, some industries are already labeled, so it’s too late for them, but others may join the lists.
Sometimes, high risk businesses can be labeled in low risk industries as well. It’s not unusual to come from a low risk industry and be targeted by disputes or issues that could increase the potential risks for banking institutions.
In some cases, additional documents could be required to assess the risk. In the worst possible cases, on site visits are also considered, only to gain more information about the operations.
The more in-depth an inspection or risk assessment is, the less risk these institutions will take. It's not all about the risk but also about legal liabilities or even damage to the reputation.
Different institutions assess risk in different ways.
For example, the nature of your products or services is one of the first factors. Payment service providers check ethical considerations, regulations, and laws. They review everything. From the official website to the marketing side of the business, only to spot red flags.
Financial risks depend on the credit score as well as overall financial stability. Every business has some financial obligations. Plus, think about potential chargebacks, too. You'll need the money to handle them.
No one wants to ruin their reputation by supporting a random business, so the public perception is also taken into consideration. Any negative associations will most likely lead to rejection.
At this point, reviews, complaints, and publicity will make the difference.
Payment service providers will ensure AML procedures are in place, too, as such platforms could be used to launder illegal funds. The identity of the business and business activities must comply with such regulations.
Even later on, most high risk payment processing providers will monitor patterns in transactions for unusual activities.
Your business and sales model can determine whether your company is risky or not.
Most institutions will dislike the idea of having you as a customer if you have too many chargebacks, disputes, or fraud issues. Some of the most common risk triggers include subscriptions, recurring billing, and even free trials.
Recurring billing and subscriptions will most likely increase the risk of chargebacks. Such things may cause automatic charges, and that's when the risk occurs.
Subscriptions and free trials can lead to customer disputes later on. For example, not being informed about an automatic renewal could lead to a dispute.
Recurring billing and free trials can also increase the potential for fraud.
With all these, it doesn’t mean a bank will assess every business in particular. They’ll take a quick lock, but some industries are generally considered high risk.
Generally speaking, a business falling under a specific industry could be automatically seen as high risk.
Some of these industries include:
The high risk merchant account at highriskpay.com could be your best bet if you’re part of this category.
Some businesses have excellent business plans and products, but they’re still labeled as high risk, hence the necessity of a high risk payment processing vendor. The good news is there are options out there.
Furthermore, dealing with such products will require lots of licenses.
There’s some financial inconsistency there, which could be seen as a potential risk for traditional banking institutions.
From this point of view, electronic commerce is often affected. Normally, you’ll require a high risk alternative to classic banks, such as a high risk merchant highriskpay.com account.
Since there’s no governmental approval, payment processors often see such products as high risk.
There are more people who lose money in such schemes, so this frustration can lead to regular chargebacks.
The processor basically invests in your business, so they don’t want to take any risks. Besides, debt also equals a bad credit score, so a high risk merchant account could be your only option.
You’re wrong if you think traditional banking institutions and payment processors are the only structures avoiding high risk businesses or industries. These standards tend to target more and more financial institutions.
For example, card networks like Visa and MasterCard also have their own standards in order to determine companies deemed as high risk. Each brand has a series of particularities in the process, and these can affect how you deal with card payments.
Visa simply doesn't want you to ruin its reputation if your business fails. Apart from reputation risk, brand damage could also become an issue in a high risk industry. This isn't the first program introduced by Visa, though.
The newer Visa Integrity Risk Program comes with some extras.
For instance, high risk companies aren’t general, but they go into three different tiers. Each tier is defined by the level of risk, which is considered according to a series of factors.
This new program is updated to the latest standards in the industry, and it's only aimed at high risk merchants.
Last, but not least, there are some categories for the control assessments conducted by Visa.
Basically, this program tries to find non-compliance with its rules and standards. Any potential issue is addressed straight away, while the merchant is added to a database (MATCH) with high risk issues.
This database is public, so MasterCard tries to warn other institutions about the aspect as well. While there’s no public discouragement in doing business with that merchant, being on the list is usually a bad sign.
If a business ends up on that list, it can be removed if there is an error or the company has become compliant. Removal is automatic after five years, but that doesn't mean a business cannot be added again later on.
High risk used to be a blanket designation. It still is for numerous banking institutions. However, when it comes to Visa or MasterCard, this designation is no longer in place. Visa's VIRP program has three tiers, for example. On the other hand, MATCH acts like a warning database.
Companies deemed as high risk by Visa are usually split into three different categories.
Tier 1 is extremely regulated and covers high risk companies. These businesses can be exposed to illicit activities when controls aren’t set accordingly. Furthermore, such illicit activities could harm others, hence the gravity of this tier. Being in this tier could be an instant rejection.
Tier 2 is not necessarily about the harm of others but mainly about economic and financial harm. Businesses thrown in this tier have a high risk of illicit activities, even if not proven. Such activities could occur when there are no proper controls in place.
Tier 3 covers companies that could potentially avoid compliance with different regulations. Such non-compliance may occur without the right controls in place. Even if there is no evidence whatsoever, Visa categorizes companies based on the potential risk.
The bad news is numerous merchants have to avoid classic processors because of all these challenges. The problem is a lot of business owners end up struggling because of some problems from the past.
Back then, regulations weren’t so strict, so there was plenty of room for abuse. Rather than tackle small bits here and there, traditional banking institutions are focused on entire industries now, forcing merchants into high risk payment processing vendor instead.
The MATCH database is just as harmful. Stripe, for example, refuses to work with any company listed on the MATCH list. Sure, Stripe doesn’t take high risk businesses anyway, but even if you’re not in such an industry, being listed on MATCH will close a lot of doors.
Apart from the high risk profile, other reasons to end up on the MATCH list include:
Some concepts, in particular, cater to a more general public, though. For instance, you could have an adult dating, online gaming, or CBD payment processor highriskpay.com account and get it individualized based on your business volume.
What’s really important at this point is the necessity to consider your industry sector. Each industry sector has some particular risks you need to think about.
These risks aren’t given by the nature of the business or the industry. Instead, they’re given by the general consumer behavior.
To help you get an idea about it, if your business offers credit repair services for those with a poor score, you’re basically dealing with people who are financially unstable. This isn’t a general rule, but the vast majority of these people are clearly unreliable.
Sure, it could happen to anyone, and it could be caused by a mistake or perhaps something out of your control, but generally, it's caused by people.
On a different note, if your company offers bail bonds, you have even less reliability.
Some people are innocent, indeed, but overall, there’s a solid chance you’ll deal with people involved in some sort of crime. Either way, your company needs a top level of protection with a secure processor.
Even if your business commercializes something as innocent as knitted hats, there are still some challenges in the process.
Take WooCommerce, for example, one of the most popular platforms for electronic commerce. It's easy to integrate into WordPress and offers a wide variety of features. However, there are plenty of restrictions for high-risk merchandise, too.
Such features are only available if you use a third party high risk payment processing provider. Without having an external vendor, WooCommerce equals instant rejection.
Furthermore, it’s worth noting that many digital payment gateways also reject high risk businesses. A high risk credit card processing highriskpay.com might be your only way to be able to take payments online.
Bottom line, the type of business, products or services you offer will greatly influence the services you can use, hence the necessity of some research upfront.
Chargebacks are some of the main reasons wherefore certain business sectors or industries are considered high risk. This is the main culprit behind this wave of bans against so many companies and businesses.
A chargeback occurs when the cardholder gets in touch with the bank to dispute a certain transaction. Chargebacks can occur on both debit and credit cards. The bank will start investigating, but the person making the complaint should provide some evidence as well.
If the bank decides the respective transaction was illegitimate, the money will be forcefully removed from the merchant’s account.
This is totally understandable for a problem or a mistake. But the problem is there are people out there who’ll try to get as many freebies as possible. After all, what does it cost to start a dispute? Nothing.
From this point on, the merchant will have to provide evidence that the transaction was legitimate. If the merchant loses the case, they’ll lose the sale price, but they’ll also have to pay fees for the case. If the merchant wins, the money will go back, but they’ll still have to pay fees for the case.
While laws tend to protect consumers against unfair billing practices, this move can also go against legit merchants.
Chargebacks, however, can occur from legit reasons as well:
Either way, the merchant will most likely pay the fees.
From many points of view, a chargeback can literally affect the business. Even if you, as a merchant, can provide evidence that can support your case, the decision is not necessarily in your control.
Besides, the problem is most banks tend to side with their customers in order to retain business, so there’s a light bias in that direction.
Some of the most problematic consequences associated with chargebacks include:
Such issues cause small companies to struggle to pay bills, update inventory, hire people, or grow. Luckily, high risk payment processor highriskpay.com offers fraud prevention tools and even dispute or chargeback management tools.
Chargebacks are quite common these days, and the rate keeps going up. On average, these rates float around 1%, but it depends on the business or industry. Some have a higher rate, others have a lower one.
If you’re targeted by such problems, chances are high risk payment processing is your only option to make sure you can take online or card payments.
While this isn’t a general rule, some high risk payment processing vendors require a rolling reserve. And if you think about it, even if you’re not asked for one, it’s a handy idea to prevent potential downfalls in your cash flow.
This rolling reserve should go into a separate account. It varies from one vendor to another, usually between 5% and 20% of the cash value of your monthly cash flow. It's a good idea to keep it around 10% if you're not asked to, but you want it for your peace of mind.
Your reserve should be upped every month as your sales kick in. They keep rolling in and out. This way, you have some money put aside for unexpected situations like chargebacks. It’s a good idea to do it anyway, as it’s just like saving money for bad days and unpleasant surprises.
Some payment processors make it part of the agreement. This way, the processor secures some money in case you’re unable to pay.
Having a decent rolling reserve makes you look more trustworthy. However, some vendors may cancel this requirement if they notice you have high profits and your chargeback rates are relatively low because they no longer see you as such a big risk.
Once again, since most high risk payment processing vendors offer highly customized packages, you may or may not able to meet this requirement. Even if you don't have it, it's definitely a safe way to manage your business income.
High risk merchant highriskpay com offers access to tools to reduce chargebacks, while other vendors may also provide assistance for disputes.
Either way, chargebacks take time and money, but luckily, there are a few general ideas you can implement throughout your business to reduce such problems.
For example, two factor authentication is a good idea when it comes to making a payment by card. You can also implement personal data screening, not to mention a brief verification system for the address or location.
One of the main reasons behind chargebacks is the impossibility to return something because the process is too complicated or nearly impossible to complete. Offering reasonable solutions can make the return process more convenient and reduce chargebacks.
Your warranty should also include what’s covered, as well as things that are not covered.
Your shop may be called Fancy Clothing, but if your business name is FPD Detailing, customers could start a chargeback dispute because they have no clue where their money went.
On the same note, payments can often be rejected, causing delays and unnecessary expenses if your banking details aren’t accurate. This issue is more common after business owners change such details, but they forget to update their systems.
At the same time, confusing details can also count as evidence. For instance, it’s pointless to name your wigs Real As Hair Braids and then mention they’re made of synthetic hair. If someone looks at the title of the product only, they could be misled.
Initially, unhappy customers will try to get in touch with you and discuss the problem. If you reply to emails once a week or you don’t have a phone number or live chat feature, chances are they’ll jump straight to a dispute.
A few other simple ideas to think about include:
On the same note, the best-featured high-risk payment processing vendor won't be that good if you end up wasting money on features you don't need.
Start by assessing your overall business needs before filling out any applications.
These being said, let’s check out the best rated high risk payment processing platforms on the market at the moment.
Total Processing is based in the UK and features good reviews and a high satisfaction rate on different websites. It’s a top choice in the UK and provides solutions for both local and international businesses, whether low or high risk.
The company is specialized in high risk solutions and revolves around the customer. Simply put, no matter what you need, chances are you’ll get a deeply customized package anyway.
Unlike other providers, Total Processing deals with pretty much any sector. It makes no difference how poor your credit score is or if you actually have one. As long as the business sector is legal, there are no issues whatsoever.
In terms of tools and integration, there’s an obvious focus on security, so there should be no issues there. Fraud prevention is another popular feature that every business owner should take.
Since everything is individualized, this means there’s also room for negotiations. Make sure you understand your business needs before anything else first.
Other than that, there are no long term contracts, so you can forget about lengthy commitments or massive exit fees.
It's worth noting that Total Processing offers access to about 180 currencies. The uptime is rated at 99.99%, and the proprietary platform works with different programming languages. Some of the most popular integrations include WordPress, Shopify, and Magento.
Pros
Worldpay is another popular choice, mainly used in the UK. However, it’s specialized in high risk industries and can be used pretty much anywhere in the world. It has a good reputation, mainly because many reputable companies use the service, from museums to concert venues.
Some of the most popular industries covered by Worldpay include health and beauty, pharmaceuticals, telemarketing, adult entertainment, electronic cigarettes, and even cryptocurrencies. It's a versatile company that offers a bit of everything, so it's definitely worth a shot.
Like other providers, Worldpay also offers risk management tools and software, chargeback solutions, dispute management, and so on. Security is relatively high, while compliance support means business owners will find it simple to explore the complex regulatory element.
Worldpay has managed to establish some relationships with other financial institutions, too, but this is only a matter of reputation. A high risk industry is less likely to be accepted by a bank anyway.
In terms of fees and rates, you’ll be given a customized offer based on your business requirements. It may seem a bit fishy not knowing anything upfront, but at least the platform’s good reputation compensates for it.
Pros
With the main office in Slovenia and a second office in the UK, CcNetPay is aimed at international businesses considered high risk. No matter where you operate, your location is irrelevant. Services are quite varied, but they only cater to industries ignored by classic payment processors.
Some of the most popular industries that are served include pharmaceuticals, gambling, and entertainment. Despite being advertised, it doesn't mean that other high risk businesses are overlooked.
The fee structure could be a bit confusing, but the platforms offer some pricing plans, so you can have a clue about what to expect. Your fees will depend on your location, industry, and processing volume before anything else.
If you’re based in Europe, discount rates can go between 1.5% and 3.5%. Transaction rates go between $0.15 and $0.25. However, each plan is customized, so rates may also change.
It’s worth noting that CcNetPay charges for additional services, so you may have to pay more if you want some extras. For example, 3D secure authentication is one of the main extras, not to mention rolling reserve solutions.
CcNetPay doesn't have any upfront charges and can only provide some sort of pre-approval within a couple of days.
On another note, it has a comprehensive blog with help guides and solutions, ideal for newbies who are just starting their research.
Pros
Getting a high risk merchant account high-riskpay.com will clear out a series of unnecessary expenses that normally come with such platforms. Normally, you’ll be charged for the initial setup, not to mention transaction and monthly fees.
With High Risk Pay, there’s no application fee whatsoever. After all, why would you pay a fee if you could be rejected? It makes no sense. Then, compared to other vendors, High Risk Pay doesn’t charge a setup fee either. There aren’t even any contracts to sign, as this is a rolling agreement.
High Risk Pay is mainly known for the high approval rate, with up to 99% of all high risk companies being accepted straight away. Companies with a bad credit score are also accepted, so poor financial decisions from the past won’t haunt you now.
It’s also worth mentioning the quick decision time, which is usually less than 24 hours. Chargeback prevention tools are also offered. Monthly fees are set at just under $10 a month, while transaction fees are usually $0.25. In some cases, they may go up to $0.5.
High Risk Pay offers a package tailored to your business needs, hence the necessity of doing your homework upfront. During the application, you'll have to discuss monthly income averages, number of transactions, and other similar details about your company.
Pros
Inovio has gained some popularity for its high risk payment processing services for online services. While the platform seems more stable than others and offers some decent rates, this means there’s a big compromise when it comes to in-person payments.
Inovio offers its customers a virtual terminal to support online payments. Unless you’ve already managed to get a checkout page for your online business, you can have a hosted checkout as an extra. However, if you don’t run an online business, it’s only an extra you won’t need.
Supporting about 50 different currencies, the platform supports subscription billing software and actually integrates it very well. It supports businesses from more high risk companies, with a primary focus on rentals, software, and catering.
Overall, Inovio is a good choice for companies looking for a full online package.
Unfortunately, the vendor isn’t very transparent regarding its rates and fees. Everything’s given out based on a customized quote, so you won’t know anything upfront. Worth a shot though!
Pros
Soar Payments is ready to tackle pretty much any high risk industry out there. While most providers have some sort of specialization, Soar Payments can support industries and businesses from all sectors, regardless of the risk.
Some of the most popular industries relying on this high risk payment processing provider include CBD, medical, property management, or credit repair, just to name a few.
However, Soar Payments doesn't support ultra high risk industries, so there might be an issue there. Gambling, crypto, adult entertainment, or debt collection businesses will have to look elsewhere. Overall, there are 50 industries served, so it's always worth asking if you're not sure.
Fees are based on a quote. Get in touch, supply some details about your business, and you'll be given a personalized quote.
To some business owners, it's a contact they just don't want to take, as it feels a bit fishy. It's understandable that custom packages will come with slightly different fees, but it's good to have an idea about averages, too.
In terms of software integrations, Soar Payments may seem a bit basic, yet you can still gain access to the most popular options on the market.
Furthermore, it’s worth noting that recurring billing is supported, but there are quite a few restrictions out there.
Pros
From this point of view, some industries are immediately labeled as high risk.
This being said, industries like cannabis, online dating, credit repair, or adult services are considered high risk. Dealing with questionable clients is also considered high risk, such as companies helping with bail bonds.
As a short final conclusion, finding a high risk payment processing vendor can be a daunting task for many, but it’s also an actual necessity for businesses willing to take card or online payments.
Unless you deal locally with cash only, chances are you’ll have to research your options and pick a platform based on your business needs.
From chargebacks and potential licenses to cardholder disputes and regulations, anything can contribute to this label. Many business owners trade by the highest standards, having no issues at all, yet the label puts every business in certain industries in the exact same boat.
If you only dealt locally and requested cash, it wouldn't have been a problem. However, in a world where fewer and fewer people carry cash, it would be quite uncomfortable for customers to find an ATM nearby to shop.
On the other hand, dealing online or being able to take card payments is clearly the way to go and that’s when the high risk label kicks in to cause trouble. Luckily, there are some reputable high risk payment processing vendors out there, but let’s see how to pick the best one.
Guidelines to Designate a Business as High Risk
Some businesses or industries are automatically deemed as high risk. Most traditional banks won’t even want to hear your business model or see your numbers. Unless you’re a corporate giant with impressive numbers in revenue, they won’t look at you. And yes, money does buy credibility.
There are more factors that can affect decisions when different bodies review industries and businesses to determine their risks. Indeed, some industries are already labeled, so it’s too late for them, but others may join the lists.
Types of Risk
Determining the type of risk will help a traditional banking institution determine whether or not a certain business or industry is high risk. Risk is assessed in different ways. There are automated tools that check out chargebacks or disputes, but also manual reviews to inspect the potential risks.Sometimes, high risk businesses can be labeled in low risk industries as well. It’s not unusual to come from a low risk industry and be targeted by disputes or issues that could increase the potential risks for banking institutions.
In some cases, additional documents could be required to assess the risk. In the worst possible cases, on site visits are also considered, only to gain more information about the operations.
The more in-depth an inspection or risk assessment is, the less risk these institutions will take. It's not all about the risk but also about legal liabilities or even damage to the reputation.
Different institutions assess risk in different ways.
For example, the nature of your products or services is one of the first factors. Payment service providers check ethical considerations, regulations, and laws. They review everything. From the official website to the marketing side of the business, only to spot red flags.
Financial risks depend on the credit score as well as overall financial stability. Every business has some financial obligations. Plus, think about potential chargebacks, too. You'll need the money to handle them.
No one wants to ruin their reputation by supporting a random business, so the public perception is also taken into consideration. Any negative associations will most likely lead to rejection.
At this point, reviews, complaints, and publicity will make the difference.
Payment service providers will ensure AML procedures are in place, too, as such platforms could be used to launder illegal funds. The identity of the business and business activities must comply with such regulations.
Even later on, most high risk payment processing providers will monitor patterns in transactions for unusual activities.
Business Model
The business model can also help a company show up as a low risk business, but on the other hand, things could go in the opposite direction as well.Your business and sales model can determine whether your company is risky or not.
Most institutions will dislike the idea of having you as a customer if you have too many chargebacks, disputes, or fraud issues. Some of the most common risk triggers include subscriptions, recurring billing, and even free trials.
Recurring billing and subscriptions will most likely increase the risk of chargebacks. Such things may cause automatic charges, and that's when the risk occurs.
Subscriptions and free trials can lead to customer disputes later on. For example, not being informed about an automatic renewal could lead to a dispute.
Recurring billing and free trials can also increase the potential for fraud.
With all these, it doesn’t mean a bank will assess every business in particular. They’ll take a quick lock, but some industries are generally considered high risk.
Reasons a Business Might Be Seen as High Risk
Generally speaking, a business falling under a specific industry could be automatically seen as high risk.
Some of these industries include:
- Adult entertainment
- CBD
- Crypto
- Guns
- Gambling
- Online dating
- Supplements
- Pharmaceuticals
- Subscription products
- Travel agencies
- Telemarketing
Intangible Products
Digital products often go in this category because they’re exposed to electronic commerce chargebacks. It’s easy for people to claim that they didn’t get the product they ordered. Receipts are signed electronically, so fraud is also easy to commit.The high risk merchant account at highriskpay.com could be your best bet if you’re part of this category.
New Products
New products are uncertain. Some of them are so new that no proper tests have been made, so they could face an issue over a short period of time. These products could also be targeted by class action lawsuits later on. It’s simply too much hassle, so banks try to avoid potential issues.Some businesses have excellent business plans and products, but they’re still labeled as high risk, hence the necessity of a high risk payment processing vendor. The good news is there are options out there.
Highly Regulated Industries
If you sell something that's heavily regulated with side effects, age restrictions, or content, chances are you'll need to look for a high risk payment processing provider. From tobacco and gambling to pharmaceuticals and adult entertainment, such categories will give you an instant rejection.Furthermore, dealing with such products will require lots of licenses.
Questionable Customers
You may not realize it, but a legally established business could be serving questionable customers. For example, if you deal with bail bonds, credit repair operations, or debt collection, the nature of your business attracts people who don't do well with money.There’s some financial inconsistency there, which could be seen as a potential risk for traditional banking institutions.
International Operations
When dealing internationally, you’ll take more currencies. You’ll also need an international payment gateway. Since international operations are difficult to keep under control, banking institutions see them as high risk.From this point of view, electronic commerce is often affected. Normally, you’ll require a high risk alternative to classic banks, such as a high risk merchant highriskpay.com account.
Natural Health
Natural health isn’t well regulated, so this natural approach to wellness doesn’t feature any proper testing or approval. The western medical world refuses to believe that food can be considered medicine, despite such uses in eastern cultures.Since there’s no governmental approval, payment processors often see such products as high risk.
MLM Model
The multi level marketing model is associated with pyramid schemes. And if you think about it, it's hard to think of such a company that has passed the test of time. People at the top make money while the rest struggle, causing a lack of consistency.There are more people who lose money in such schemes, so this frustration can lead to regular chargebacks.
Out of Control Debt
Most businesses face some sort of debt at some point or another. If you think about it, it shouldn’t matter for a payment processor. However, debt also means you’ll find it difficult to handle your fees and expenses.The processor basically invests in your business, so they don’t want to take any risks. Besides, debt also equals a bad credit score, so a high risk merchant account could be your only option.
Card Standards – How Visa & Mastercard Decide
You’re wrong if you think traditional banking institutions and payment processors are the only structures avoiding high risk businesses or industries. These standards tend to target more and more financial institutions.
For example, card networks like Visa and MasterCard also have their own standards in order to determine companies deemed as high risk. Each brand has a series of particularities in the process, and these can affect how you deal with card payments.
Visa
Visa has a program known as the Visa Global Brand Protection Program. It’s basically a set of different regulations and compliance rules that define the potential risk associated with a company. The concept behind this program is fairly simple to understand.Visa simply doesn't want you to ruin its reputation if your business fails. Apart from reputation risk, brand damage could also become an issue in a high risk industry. This isn't the first program introduced by Visa, though.
The newer Visa Integrity Risk Program comes with some extras.
For instance, high risk companies aren’t general, but they go into three different tiers. Each tier is defined by the level of risk, which is considered according to a series of factors.
This new program is updated to the latest standards in the industry, and it's only aimed at high risk merchants.
Last, but not least, there are some categories for the control assessments conducted by Visa.
MasterCard
MasterCard has its own program as well. Known as the Business Risk Assessment and Mitigation, this program is different from Visa's. If Visa mostly cares about reputation, MasterCard is about enforcing its own rules.Basically, this program tries to find non-compliance with its rules and standards. Any potential issue is addressed straight away, while the merchant is added to a database (MATCH) with high risk issues.
This database is public, so MasterCard tries to warn other institutions about the aspect as well. While there’s no public discouragement in doing business with that merchant, being on the list is usually a bad sign.
If a business ends up on that list, it can be removed if there is an error or the company has become compliant. Removal is automatic after five years, but that doesn't mean a business cannot be added again later on.
Tiers in High Risk Industries
While not designed to work together, these programs can literally ruin a company’s reputation in terms of finding a reliable payment processor. Many times, companies are forced into looking for a high risk payment processing provider, rather than deal with all the hassle.High risk used to be a blanket designation. It still is for numerous banking institutions. However, when it comes to Visa or MasterCard, this designation is no longer in place. Visa's VIRP program has three tiers, for example. On the other hand, MATCH acts like a warning database.
Companies deemed as high risk by Visa are usually split into three different categories.
Tier 1 is extremely regulated and covers high risk companies. These businesses can be exposed to illicit activities when controls aren’t set accordingly. Furthermore, such illicit activities could harm others, hence the gravity of this tier. Being in this tier could be an instant rejection.
Tier 2 is not necessarily about the harm of others but mainly about economic and financial harm. Businesses thrown in this tier have a high risk of illicit activities, even if not proven. Such activities could occur when there are no proper controls in place.
Tier 3 covers companies that could potentially avoid compliance with different regulations. Such non-compliance may occur without the right controls in place. Even if there is no evidence whatsoever, Visa categorizes companies based on the potential risk.
The bad news is numerous merchants have to avoid classic processors because of all these challenges. The problem is a lot of business owners end up struggling because of some problems from the past.
Back then, regulations weren’t so strict, so there was plenty of room for abuse. Rather than tackle small bits here and there, traditional banking institutions are focused on entire industries now, forcing merchants into high risk payment processing vendor instead.
The MATCH database is just as harmful. Stripe, for example, refuses to work with any company listed on the MATCH list. Sure, Stripe doesn’t take high risk businesses anyway, but even if you’re not in such an industry, being listed on MATCH will close a lot of doors.
Apart from the high risk profile, other reasons to end up on the MATCH list include:
- Laundering activities
- POS data misuse
- Account data compromise
- Fraud investigations or convictions
- Bankruptcy or insolvency
- Standard violation
- Merchant collusion
- Identity theft
- Illicit transactions
- Too many chargebacks
How the Business Type Affects the Gateway Needs
Your business type affects your gateway needs. There’s no such thing as a general high risk payment processor that works wonders for everyone. That’s why many companies tend to provide customized packages, according to their clients’ needs.Some concepts, in particular, cater to a more general public, though. For instance, you could have an adult dating, online gaming, or CBD payment processor highriskpay.com account and get it individualized based on your business volume.
What’s really important at this point is the necessity to consider your industry sector. Each industry sector has some particular risks you need to think about.
These risks aren’t given by the nature of the business or the industry. Instead, they’re given by the general consumer behavior.
To help you get an idea about it, if your business offers credit repair services for those with a poor score, you’re basically dealing with people who are financially unstable. This isn’t a general rule, but the vast majority of these people are clearly unreliable.
Sure, it could happen to anyone, and it could be caused by a mistake or perhaps something out of your control, but generally, it's caused by people.
On a different note, if your company offers bail bonds, you have even less reliability.
Some people are innocent, indeed, but overall, there’s a solid chance you’ll deal with people involved in some sort of crime. Either way, your company needs a top level of protection with a secure processor.
Even if your business commercializes something as innocent as knitted hats, there are still some challenges in the process.
Take WooCommerce, for example, one of the most popular platforms for electronic commerce. It's easy to integrate into WordPress and offers a wide variety of features. However, there are plenty of restrictions for high-risk merchandise, too.
Such features are only available if you use a third party high risk payment processing provider. Without having an external vendor, WooCommerce equals instant rejection.
Furthermore, it’s worth noting that many digital payment gateways also reject high risk businesses. A high risk credit card processing highriskpay.com might be your only way to be able to take payments online.
Bottom line, the type of business, products or services you offer will greatly influence the services you can use, hence the necessity of some research upfront.
Understanding the Pricey Consequences of a High Risk Business
Chargebacks are some of the main reasons wherefore certain business sectors or industries are considered high risk. This is the main culprit behind this wave of bans against so many companies and businesses.
A chargeback occurs when the cardholder gets in touch with the bank to dispute a certain transaction. Chargebacks can occur on both debit and credit cards. The bank will start investigating, but the person making the complaint should provide some evidence as well.
If the bank decides the respective transaction was illegitimate, the money will be forcefully removed from the merchant’s account.
This is totally understandable for a problem or a mistake. But the problem is there are people out there who’ll try to get as many freebies as possible. After all, what does it cost to start a dispute? Nothing.
From this point on, the merchant will have to provide evidence that the transaction was legitimate. If the merchant loses the case, they’ll lose the sale price, but they’ll also have to pay fees for the case. If the merchant wins, the money will go back, but they’ll still have to pay fees for the case.
While laws tend to protect consumers against unfair billing practices, this move can also go against legit merchants.
Chargebacks, however, can occur from legit reasons as well:
- An item arrived damaged or with defects.
- Service or item is not as described initially.
- There were issues with the delivery.
- Some items ended up missing.
- Services were not provided.
- Transactions were not authorized.
- Transactions were fraudulent.
- Friendly fraud, which refers to buying something and then changing your mind.
- Charges that are not recognized.
- Errors in the billing process.
- The impossibility of canceling a service or a subscription.
- Confusing rules regarding potential returns.
- The impossibility of finding a merchant in order to return something.
Either way, the merchant will most likely pay the fees.
How Chargebacks Affect Merchants
Chargebacks are the main reasons wherefore businesses in certain industries may require a high risk payment processing vendor. Their consequences are still harmful and can cause discomfort and unnecessary expenses for many merchants.From many points of view, a chargeback can literally affect the business. Even if you, as a merchant, can provide evidence that can support your case, the decision is not necessarily in your control.
Besides, the problem is most banks tend to side with their customers in order to retain business, so there’s a light bias in that direction.
Some of the most problematic consequences associated with chargebacks include:
- Fees vary from one bank to another, but on average, a chargeback will cost $20 to $100. In some cases, that’s more than the price of the product or service.
- Loss of both products and money.
- Loss of all the costs associated with the processing.
- Some companies may even be fined.
- Revenue is dramatically reduced.
- Waste of time and resources.
- Processing rates become higher.
- In some cases, repetitive chargebacks could cause account termination.
- Repetitive chargebacks could add a company to MasterCard’s MATCH database.
- Struggling to find a different processor.
Such issues cause small companies to struggle to pay bills, update inventory, hire people, or grow. Luckily, high risk payment processor highriskpay.com offers fraud prevention tools and even dispute or chargeback management tools.
Becoming Familiar With Rolling Reserves
Chargebacks are quite common these days, and the rate keeps going up. On average, these rates float around 1%, but it depends on the business or industry. Some have a higher rate, others have a lower one.
If you’re targeted by such problems, chances are high risk payment processing is your only option to make sure you can take online or card payments.
While this isn’t a general rule, some high risk payment processing vendors require a rolling reserve. And if you think about it, even if you’re not asked for one, it’s a handy idea to prevent potential downfalls in your cash flow.
This rolling reserve should go into a separate account. It varies from one vendor to another, usually between 5% and 20% of the cash value of your monthly cash flow. It's a good idea to keep it around 10% if you're not asked to, but you want it for your peace of mind.
Your reserve should be upped every month as your sales kick in. They keep rolling in and out. This way, you have some money put aside for unexpected situations like chargebacks. It’s a good idea to do it anyway, as it’s just like saving money for bad days and unpleasant surprises.
Some payment processors make it part of the agreement. This way, the processor secures some money in case you’re unable to pay.
Having a decent rolling reserve makes you look more trustworthy. However, some vendors may cancel this requirement if they notice you have high profits and your chargeback rates are relatively low because they no longer see you as such a big risk.
Once again, since most high risk payment processing vendors offer highly customized packages, you may or may not able to meet this requirement. Even if you don't have it, it's definitely a safe way to manage your business income.
Useful Practices to Reduce Chargebacks
Reducing chargebacks should be a priority for any business dealing with such issues, whether or not it’s labeled as high risk. After all, it’s an unnecessary expense. Whether you only pay the fees or you also lose the sale cost (even the actual product or service), there’s no need to waste money like that.High risk merchant highriskpay com offers access to tools to reduce chargebacks, while other vendors may also provide assistance for disputes.
Either way, chargebacks take time and money, but luckily, there are a few general ideas you can implement throughout your business to reduce such problems.
Card Fraud Prevention Tools
Take time to understand, explore, and fully implement card fraud prevention tools. Some vendors have them in their packages, but you can also find third party software to help in the process.For example, two factor authentication is a good idea when it comes to making a payment by card. You can also implement personal data screening, not to mention a brief verification system for the address or location.
Easy Returns
It happens. Something may get to your customer damaged. No matter how careful you are with the packaging, you don’t know how postal services or couriers handle such things. Either way, if the customer isn’t happy or the item looks different than what they imagined, they may have to return it.One of the main reasons behind chargebacks is the impossibility to return something because the process is too complicated or nearly impossible to complete. Offering reasonable solutions can make the return process more convenient and reduce chargebacks.
Crystal Clear Policies
Policies and warranties should be crystal clear when you ship something. Make sure they’re well defined and accessible for everyone. For example, give people slightly more time for deliveries than what they normally take, just to play it safe.Your warranty should also include what’s covered, as well as things that are not covered.
Accurate Details
It may sound stupid, but believe it or not, this is one of the most common mistakes. If your business name isn’t recognizable or your banking details aren’t accurate, statements could be confusing for customers.Your shop may be called Fancy Clothing, but if your business name is FPD Detailing, customers could start a chargeback dispute because they have no clue where their money went.
On the same note, payments can often be rejected, causing delays and unnecessary expenses if your banking details aren’t accurate. This issue is more common after business owners change such details, but they forget to update their systems.
Accurate Descriptions
Your product or service must be accurately described, simple as that. Thinking to omit small details will cause customers to think they’ve been tricked, so you risk facing a chargeback.At the same time, confusing details can also count as evidence. For instance, it’s pointless to name your wigs Real As Hair Braids and then mention they’re made of synthetic hair. If someone looks at the title of the product only, they could be misled.
Easy Customer Service
Never overlook customer service because, in many cases, this could be the difference between a successful sale and a chargeback.Initially, unhappy customers will try to get in touch with you and discuss the problem. If you reply to emails once a week or you don’t have a phone number or live chat feature, chances are they’ll jump straight to a dispute.
A few other simple ideas to think about include:
- Branding in your store (if you deal with different products) should be consistent, or it could cause confusion.
- Stick to PCI DDS compliance when using POS devices for every card transaction, it’s a matter of security.
- Only take EMV or contactless card payments, as well as mobile device payments, when taking in-person payments.
Top 6 Best High Risk Payment Processing Providers
Browsing the best high risk payment processing vendors will give you a good idea about what to expect. Keep in mind that the cheapest option isn’t always the best if the vendor can’t provide what you’re after.On the same note, the best-featured high-risk payment processing vendor won't be that good if you end up wasting money on features you don't need.
Start by assessing your overall business needs before filling out any applications.
These being said, let’s check out the best rated high risk payment processing platforms on the market at the moment.
Total Processing
Total Processing is based in the UK and features good reviews and a high satisfaction rate on different websites. It’s a top choice in the UK and provides solutions for both local and international businesses, whether low or high risk.
The company is specialized in high risk solutions and revolves around the customer. Simply put, no matter what you need, chances are you’ll get a deeply customized package anyway.
Unlike other providers, Total Processing deals with pretty much any sector. It makes no difference how poor your credit score is or if you actually have one. As long as the business sector is legal, there are no issues whatsoever.
In terms of tools and integration, there’s an obvious focus on security, so there should be no issues there. Fraud prevention is another popular feature that every business owner should take.
Since everything is individualized, this means there’s also room for negotiations. Make sure you understand your business needs before anything else first.
Other than that, there are no long term contracts, so you can forget about lengthy commitments or massive exit fees.
It's worth noting that Total Processing offers access to about 180 currencies. The uptime is rated at 99.99%, and the proprietary platform works with different programming languages. Some of the most popular integrations include WordPress, Shopify, and Magento.
Pros
- Pricing is specific for the industry you’re part of
- No need for long term contracts and commitments
- Around 200 different payment methods are included in the deal and around 180 currencies
- A clear focus on comprehensive security standards
- If you’re an ISO, Total Processing works like an intermediary, so expect higher fees
Worldpay
Worldpay is another popular choice, mainly used in the UK. However, it’s specialized in high risk industries and can be used pretty much anywhere in the world. It has a good reputation, mainly because many reputable companies use the service, from museums to concert venues.
Some of the most popular industries covered by Worldpay include health and beauty, pharmaceuticals, telemarketing, adult entertainment, electronic cigarettes, and even cryptocurrencies. It's a versatile company that offers a bit of everything, so it's definitely worth a shot.
Like other providers, Worldpay also offers risk management tools and software, chargeback solutions, dispute management, and so on. Security is relatively high, while compliance support means business owners will find it simple to explore the complex regulatory element.
Worldpay has managed to establish some relationships with other financial institutions, too, but this is only a matter of reputation. A high risk industry is less likely to be accepted by a bank anyway.
In terms of fees and rates, you’ll be given a customized offer based on your business requirements. It may seem a bit fishy not knowing anything upfront, but at least the platform’s good reputation compensates for it.
Pros
- Numerous software integrations for different business aspects
- Good reputation and reviews
- Quick fund transfers, usually within a day
- Dedicated account management and customer support
- No word about the actual prices, fees, and rates, so you'll have to apply blindly
CcNetPay
With the main office in Slovenia and a second office in the UK, CcNetPay is aimed at international businesses considered high risk. No matter where you operate, your location is irrelevant. Services are quite varied, but they only cater to industries ignored by classic payment processors.
Some of the most popular industries that are served include pharmaceuticals, gambling, and entertainment. Despite being advertised, it doesn't mean that other high risk businesses are overlooked.
The fee structure could be a bit confusing, but the platforms offer some pricing plans, so you can have a clue about what to expect. Your fees will depend on your location, industry, and processing volume before anything else.
If you’re based in Europe, discount rates can go between 1.5% and 3.5%. Transaction rates go between $0.15 and $0.25. However, each plan is customized, so rates may also change.
It’s worth noting that CcNetPay charges for additional services, so you may have to pay more if you want some extras. For example, 3D secure authentication is one of the main extras, not to mention rolling reserve solutions.
CcNetPay doesn't have any upfront charges and can only provide some sort of pre-approval within a couple of days.
On another note, it has a comprehensive blog with help guides and solutions, ideal for newbies who are just starting their research.
Pros
- Publicly displayed fees and rates, yet custom packages may change them
- No hidden fees or costs popping up later on
- A wide variety of software and tool integration for security and convenience
- Support available round the clock
- Some of the extras come for an extra price, too
High Risk Pay
Getting a high risk merchant account high-riskpay.com will clear out a series of unnecessary expenses that normally come with such platforms. Normally, you’ll be charged for the initial setup, not to mention transaction and monthly fees.
With High Risk Pay, there’s no application fee whatsoever. After all, why would you pay a fee if you could be rejected? It makes no sense. Then, compared to other vendors, High Risk Pay doesn’t charge a setup fee either. There aren’t even any contracts to sign, as this is a rolling agreement.
High Risk Pay is mainly known for the high approval rate, with up to 99% of all high risk companies being accepted straight away. Companies with a bad credit score are also accepted, so poor financial decisions from the past won’t haunt you now.
It’s also worth mentioning the quick decision time, which is usually less than 24 hours. Chargeback prevention tools are also offered. Monthly fees are set at just under $10 a month, while transaction fees are usually $0.25. In some cases, they may go up to $0.5.
High Risk Pay offers a package tailored to your business needs, hence the necessity of doing your homework upfront. During the application, you'll have to discuss monthly income averages, number of transactions, and other similar details about your company.
Pros
- No setup or application fees
- More than 25 years of experience with high risk industries
- Low and affordable rates and fees
- Reliable customer service
- Compliance requirements are quite strict, but that’s what contributes to the high success rate
Inovio
Inovio has gained some popularity for its high risk payment processing services for online services. While the platform seems more stable than others and offers some decent rates, this means there’s a big compromise when it comes to in-person payments.
Inovio offers its customers a virtual terminal to support online payments. Unless you’ve already managed to get a checkout page for your online business, you can have a hosted checkout as an extra. However, if you don’t run an online business, it’s only an extra you won’t need.
Supporting about 50 different currencies, the platform supports subscription billing software and actually integrates it very well. It supports businesses from more high risk companies, with a primary focus on rentals, software, and catering.
Overall, Inovio is a good choice for companies looking for a full online package.
Unfortunately, the vendor isn’t very transparent regarding its rates and fees. Everything’s given out based on a customized quote, so you won’t know anything upfront. Worth a shot though!
Pros
- Good online integration
- Takes international payments in about 50 currencies
- Virtual terminal
- POS solutions
- No solutions for in-person payments
Soar Payments
Soar Payments is ready to tackle pretty much any high risk industry out there. While most providers have some sort of specialization, Soar Payments can support industries and businesses from all sectors, regardless of the risk.
Some of the most popular industries relying on this high risk payment processing provider include CBD, medical, property management, or credit repair, just to name a few.
However, Soar Payments doesn't support ultra high risk industries, so there might be an issue there. Gambling, crypto, adult entertainment, or debt collection businesses will have to look elsewhere. Overall, there are 50 industries served, so it's always worth asking if you're not sure.
Fees are based on a quote. Get in touch, supply some details about your business, and you'll be given a personalized quote.
To some business owners, it's a contact they just don't want to take, as it feels a bit fishy. It's understandable that custom packages will come with slightly different fees, but it's good to have an idea about averages, too.
In terms of software integrations, Soar Payments may seem a bit basic, yet you can still gain access to the most popular options on the market.
Furthermore, it’s worth noting that recurring billing is supported, but there are quite a few restrictions out there.
Pros
- Accepts both in-person and online payments
- Offers a few basic integrations
- No fees for the initial setup
- Can take recurring payments, too
- There’s no pricing transparency
FAQs
Still unsure about the optimal high risk payment processing platform?What makes businesses high risk?
A high risk business is the type of company that can pose some risks. Some of these risks can affect a vendor's reputation, but most of them are financial. Businesses with numerous chargebacks, poor credit or no credit at all, or an unstable history are often deemed as high risk.From this point of view, some industries are immediately labeled as high risk.
Why are certain industries considered high risk?
There are dozens of industries considered high risk. Most of them fall into certain categories. For example, dealing with intangible items is a risk. Strict regulatory restrictions can also pose some risks, not to mention dealing with new products.This being said, industries like cannabis, online dating, credit repair, or adult services are considered high risk. Dealing with questionable clients is also considered high risk, such as companies helping with bail bonds.
What’s the difference between high risk payment processing vendors and regular vendors?
The most common difference is in the actual fees and rates. The vendor takes a greater risk, so fees and rates are higher than normal.What’s the best high risk payment processing vendor?
High Risk Pay is an excellent option that can keep costs down while supporting many businesses and offering multiple integrations. Other vendors in the above list are worth some attention, but High Risk Pay has what most business owners look for.As a short final conclusion, finding a high risk payment processing vendor can be a daunting task for many, but it’s also an actual necessity for businesses willing to take card or online payments.
Unless you deal locally with cash only, chances are you’ll have to research your options and pick a platform based on your business needs.
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