What Makes A Merchant Account High-Risk?

If you run a business in a high-risk industry, you know that accessing payment processing services can be difficult. 

Despite your official high-risk designation, your business may not feel high-risk, so what’s the deal? 

What makes your merchant account high-risk, and is there anything you can do to make accessing payment processing services easier?

In this blog, we’ll discuss the ins and outs of high-risk merchant accounts and how the powers that be classify companies as high-risk.

Let’s dive in.

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What Makes a Merchant Account High-Risk?

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Merchant accounts tend to be classified as high-risk if they’re operating in industries with a higher-than-normal risk of fraud or chargebacks. 

The reason is simple: 

These payment processing roadblocks increase the likelihood of financial losses for the payment processor supporting the account. 

For example, industries like online gambling and adult entertainment are considered very high-risk, and companies operating within them require high-risk merchant accounts.

Here are a few other factors that may lead to a merchant account being considered high-risk:

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1. Chargeback potential. Companies with high chargeback ratios, which occur when customers seek refunds or reversals or dispute transactions with their credit card provider, can lead a merchant account to be labeled high-risk. Excessive chargebacks are expensive for payment providers and may indicate a problem with the company’s customer service or product. 
2. Legal and regulatory considerations. Today, some businesses operate in industries subject to dynamic and ever-changing regulations. These industries include CBD and cryptocurrency. While the businesses in these industries are usually doing great work, they tend to be considered high-risk due to pervasive legal uncertainties or higher potential for non-compliance.
3. A history of financial problems. In some cases, a high-risk designation has less to do with a company’s industry and more to do with its personal history. Evidence of past financial instability, including bankruptcy and late payments, may lead a company to be considered high-risk since payment processors believe that working with these companies exposes them to additional risk. 
4. Fraud risk: Merchants operating in industries known for high levels of fraudulent activity, including auto warranties, travel, and advertising, or those without robust fraud prevention measures are often classified as high-risk. 
5. Subscription-based services or recurring billing: Businesses that offer recurring billing models or subscriptions tend to face higher chargeback rates than other companies, especially if they make it difficult for customers to cancel, request refunds for, or dispute recurring charges. 

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While the above criteria are a good starting point for understanding high-risk merchant accounts, it’s important to note that specific high-risk criteria vary between financial institutions.

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Your Business Has Been Designated “High-Risk.” What Now?

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Just because your company or industry falls under the “high-risk” umbrella doesn’t mean it has to be impossible to access payment processing services. For companies like yours, there’s Seamless Chex. 

We know that high-risk merchants often struggle to access payment processing services and that, when they do, they pay higher fees, are subject to stricter underwriting criteria, or have to settle for subpar services that don’t truly support their businesses.

Fortunately, we’re here to help.

We offer high-risk merchant accounts designed to allow companies in high-risk industries to accept and process electronic payments from credit cards, debit cards, and electronic checks quickly and easily. 

We provide the infrastructure you need to handle your transactions securely, mitigate chargebacks, and comply with the regulations affecting your industry.

Ready to learn more? Contact us today to determine if our high-risk merchant accounts are right for you.