Top 7 High Risk Merchants that Need Payment Processing

Navigating the world of high-risk merchant accounts can be daunting, especially for businesses operating in industries with elevated risk of chargebacks or fraud. But fear not! This blog post is here to guide you through the complexities of high-risk payment processing, providing valuable insights into the best high-risk merchant account providers and offering practical tips for reducing chargebacks and maintaining a low-risk profile. By the end of this post, you’ll be well-equipped to make informed decisions and choose the best payment processing solutions for your high-risk business.

Quick Summary

• High-risk merchant accounts are necessary for businesses in high-risk industries to securely process payments.
• When selecting a provider, consider factors such as speed of approval, fraud and chargeback protection, fees, and customer support.
• Strategies such as having a clear return policy can help reduce chargebacks and maintain a low-risk profile.

Understanding High-Risk Merchant Accounts

High-risk merchant accounts are specifically designed for businesses operating in industries with an elevated risk of chargebacks or fraud. These accounts are necessary because traditional merchant accounts may not be suitable for businesses in high-risk industries, such as online gambling, adult entertainment, or telemarketing. High-risk payment processors play a crucial role in providing high-risk merchant services, as they have specialized knowledge and experience in dealing with the unique challenges faced by high-risk merchants.

One of the main challenges faced by high-risk businesses is the higher payment processing fees associated with high-risk merchant accounts. This is because high-risk payment service providers need to account for the increased risk of chargebacks and fraud, which can result in higher costs for businesses in high-risk industries. Despite the higher fees, high-risk merchant accounts are essential for businesses that want to accept credit and debit card payments from their customers, as they enable them to process transactions securely and efficiently.

It’s important to note that not all high-risk payment processors are created equal. Some providers may specialize in specific high-risk industries, while others may offer more comprehensive services for a wide range of high-risk businesses. Therefore, it’s crucial to carefully research and compare different high-risk payment processors before deciding on the one that’s best suited to your business’s needs.

High-risk merchant accounts are necessary for businesses in high-risk industries that want to accept credit and debit card payments from their customers. These accounts enable businesses to process transactions securely and efficiently, despite the increased risk of chargebacks and fraud and the higher payment processing fees associated with high-risk payment processing. By working with a reliable and experienced high-risk payment processor, businesses can mitigate these risks and enjoy the benefits of accepting credit and debit card payments from their customers.

Factors to Consider When Choosing a High-Risk Merchant Account Provider

When choosing a high-risk merchant account provider, there are several factors to consider. One of the most important ones is the speed of approval. High-risk businesses often face challenges in obtaining merchant accounts, so finding a provider that offers rapid approval is crucial. Fraud and chargeback protection is another critical aspect to consider, as high-risk businesses are more susceptible to these issues. Providers that offer robust fraud and chargeback protection tools can help businesses mitigate these risks and maintain a secure payment processing environment.

Fees are an important factor to consider when choosing a high-risk merchant account provider. High-risk account fees are typically charged per transaction or as part of a monthly membership and can add up quickly if your business processes a high volume of sales. It’s important to find a provider that offers transparent pricing and reasonable fees for processing credit and debit card payments. Customer support is another essential aspect to consider, as issues with internet-based payment processing can occur frequently. Providers that offer responsive, personalized customer service can help businesses resolve payment processing issues quickly and efficiently.

In addition to the factors mentioned above, it’s crucial to ensure that the high-risk merchant account provider you choose is compatible with the payment gateways and shopping carts your business uses. Integrations with popular payment gateways and shopping carts can help streamline your payment processing and improve the overall customer experience. To find the best high-risk merchant account provider for your business, it’s essential to research and compare different providers, request quotes, and negotiate fees. Some providers may offer online applications, making the process easier and more convenient. Ultimately, the goal is to find a provider that is easy to work with and offers fair rates for your high-risk business.

Top 7 High Risk Merchants that Need Payment Processing

Not all businesses are created equal, and not all businesses need high-risk merchant accounts for the same reasons. For this list, we looked at the most common high-risk merchants that we provide accounts for and that we have seen in need of high-risk accounts over the years.

The best high-risk merchant account is the one that never interrupts service and helps you mitigate chargebacks. Trust is a big factor and the best high-risk merchant account is the one you trust the most.

1. Online Gambling

Online gambling companies are considered high-risk businesses for a variety of reasons, and that’s why they often require a high-risk merchant account processor to handle their transactions. Let’s break down why this is the case:

1. Regulatory Hurdles: Gambling laws differ greatly from one jurisdiction to another. This creates a complex legal environment that traditional banks and payment processors may not want to navigate. Add to that, the fact that many jurisdictions are resorting to online gambling, and the grey area gets even larger.
2. Fraud Risks: Online gambling platforms can be targets for fraudulent activities like chargebacks, identity theft, and payment fraud. High-risk merchant processors are specialized in handling these issues.
3. Financial Stability: The revenue stream for gambling companies can be volatile. Mainstream financial institutions often prefer to work with businesses that have predictable revenue.
4. Reputation Risk: Gambling may be extremely popular now, but traditionally, it has a reputation that is less than perfect in the United States. Some banks and traditional financial institutions may not want to associate with gambling businesses due to the perception that they could be facilitating addiction or other social issues.
5. High Volume, High Value: Gambling companies often deal with a large volume of transactions, some of which can be very high value. This creates additional risks that high-risk processors are better equipped to manage.
6. Currency & International Concerns: Online gambling often involves multiple currencies and international transactions, which add another layer of complexity and risk.

High-risk merchant account processors are specialized in handling these kinds of challenges. They have the infrastructure and risk management tools needed to facilitate online payments for businesses operating in industries that are deemed high-risk.

2. Cannabis Seeds

Cannabis seed businesses also fall into the high-risk category for several reasons, making them prime candidates for high-risk merchant account processors. Here’s why:

1. Legal Gray Areas: While cannabis and cannabis seeds may be legal in some jurisdictions, they are still illegal or controlled substances in many others. This creates a complicated legal landscape that many traditional banks don’t want to get involved in.
2. Regulatory Changes: Cannabis laws are frequently changing, and a change in law can quickly impact the legality of selling cannabis seeds. High-risk merchant processors are often better equipped to adapt to such changes quickly.
3. Chargeback Risks: Like online gambling, the cannabis seed industry also has a higher likelihood of dealing with chargebacks, which financial institutions typically want to avoid.
4. Reputational Concerns: Traditional financial institutions often worry about the stigma associated with the cannabis industry, even if the business only deals with seeds and not the psychoactive parts of the plant.
5. Cross-Border Issues: If the business is international, that adds another layer of complexity due to differing laws and regulations concerning cannabis and its seeds across countries.
6. High Transaction Volumes: Cannabis seed businesses can process a large volume of transactions, especially if they’re popular online. High-risk processors have the systems in place to handle that kind of volume.
7. Banking Scrutiny: Financial transactions involving cannabis-related products are often subject to higher levels of scrutiny, which can slow down the payment process. High-risk merchant processors are used to dealing with this level of scrutiny and have streamlined processes for it.
8. Customer Verification: Ensuring that customers are of legal age or are authorized to purchase cannabis seeds can be an additional burden. Specialized high-risk merchant processors often have robust age and identity verification processes.

High-risk merchant account processors are geared to deal with all these issues effectively. They have specialized risk management tools, flexible infrastructure, and are often more accommodating of the legal complexities and nuances that come with running a cannabis seed business.

3. Nutraceuticals

These companies also often require nutraceutical high-risk merchant account processors for a variety of reasons. Here’s the rundown:

1. Regulatory Challenges: Nutraceuticals exist in a sort of gray area between food and pharmaceuticals. Different countries have their own sets of regulations, and these products are not always FDA-approved, making it tricky for traditional banks to navigate the landscape.
2. Claims and Liabilities: These companies often make health-related claims about their products. If these claims are not substantiated, they can be subject to lawsuits or regulatory action, which is a risk many standard merchant processors don’t want to take on.
3. Consumer Skepticism and Chargebacks: Because of the health-related claims, consumers might expect immediate or significant results. If those don’t materialize, the companies might face high levels of chargebacks.
4. Reputational Risks: Nutraceuticals are sometimes associated with controversial health claims or negative media coverage, which could pose reputational risks that traditional banks want to avoid.
5. Fluctuating Sales: Nutraceutical companies often experience seasonal or trend-driven sales, making income unpredictable. Traditional processors prefer stable, predictable revenue streams.
6. High Average Transaction Values: Nutraceuticals can be expensive, resulting in higher-than-average transaction values that could be considered risky in case of chargebacks or disputes.
7. International Sales: These products are often sold internationally, complicating matters further with cross-border fees and differing regulations between countries.
8. Ingredient Scrutiny: The source and quality of ingredients can come under intense scrutiny, and poor quality control can lead to legal issues, another risk for payment processors.

These processors are tailored to manage such risks and have the infrastructure to support the unique needs of the industry.

4. Moving Brokers

Brokers also often find themselves in need of moving broker high-risk merchant account processors for several reasons:

1. Consumer Trust Issues: The moving industry is sometimes seen as unreliable or untrustworthy due to past experiences people have had with scams or poor service. This perception increases the risk for chargebacks.
2. High-Value Transactions: People often pay a significant amount of money to move their belongings, especially for long-distance or international moves. Higher transaction amounts can be riskier for payment processors.
3. Fluctuating Business: Moving can be a seasonal business. For example, more people tend to move during the summer months. This fluctuation makes income less predictable, something that traditional financial institutions usually avoid.
4. Liability Concerns: If something goes wrong during the move, like damaged or lost items, the broker might have to deal with disputes, claims, or even legal issues, making it a riskier venture for standard merchant processors.
5. Interstate Regulations: Different states and countries have different laws and regulations related to moving and transportation services. Traditional banks often don’t want to deal with the added complexity.
6. Upfront Payments: Many moving brokers require upfront payments, which can increase the likelihood of chargebacks if customers are unhappy with the service or if plans change.
7. Customer Disputes: The nature of the service—handling people’s personal belongings—makes it prone to customer disputes, which are something that high-risk merchant processors are better equipped to handle.
8. Complex Service Agreements: Contracts for moving services can sometimes be complicated, and if customers feel they didn’t get what they signed up for, they might initiate chargebacks or disputes.

These specialized processors have the tools and expertise to manage these risks and complexities, making it easier for moving brokers to focus on delivering a good service to their customers.

5. Credit Repair

Credit repair companies are another industry often categorized as high-risk, and here’s why they generally need credit repair high-risk merchant account processors:

1. Regulatory Scrutiny: Credit repair is a highly regulated field, with laws like the Credit Repair Organizations Act (CROA) in the U.S. keeping a close eye on operations. A slight misstep can result in significant legal consequences.
2. High Chargeback Rates: Customers expecting quick fixes to their credit scores may be disappointed and initiate chargebacks if they don’t see immediate results.
3. Reputational Concerns: The industry has a bit of a mixed reputation due to some companies employing unethical practices. Traditional financial institutions often avoid doing business with sectors that have reputational risks.
4. Uncertain Revenue: Results in credit repair can take time, making monthly revenue less predictable. Banks and standard merchant processors prefer businesses with stable, predictable income streams.
5. Long Payment Cycles: The nature of credit repair services often involves longer customer relationships, increasing the timeframe during which chargebacks can occur.
6. Advanced Payments: Many credit repair companies charge upfront for their services, which is generally considered risky by traditional financial institutions because of the potential for chargebacks or fraud.
7. Consumer Complaints: Due to the sensitivity and complexity of credit repair, these companies are often at a higher risk of facing customer disputes and complaints, which can lead to legal issues.
8. Custom Financial Agreements: The contracts between clients and credit repair companies can be complex and customized to individual needs, making it harder to standardize the risk associated with these financial agreements.

High-risk payment processors are more equipped to handle the industry’s complexities and risks, allowing credit repair companies to focus on providing their services.

6. Health & Beauty

Health and beauty businesses selling products online often fall into the high-risk category for various reasons:

1. Regulatory Complexity: Many beauty and health products contain ingredients that may be subject to varying regulations depending on the country. Plus, there’s the concern of making health claims that can’t be substantiated.
2. High Chargeback Rates: Customers may have high expectations for health and beauty products. If the product doesn’t deliver as promised or if they have an adverse reaction, they may initiate a chargeback.
3. Subscription Models: Many health and beauty companies operate on subscription models, which have a higher risk of chargebacks and cancellations compared to one-time purchases.
4. High-Value Transactions: Some beauty and health products can be quite expensive (like high-end skincare or wellness supplements), and high ticket sales are generally considered more risky by traditional merchant processors.
5. Fraud Risks: Online sales always come with a risk of fraud, but beauty and health products are often specifically targeted due to their high value and high demand.
6. Cross-Border Sales: These businesses often serve an international customer base, and international transactions come with their own set of risks like currency conversion and varying laws and regulations.
7. Seasonal or Trend-Driven: The health and beauty industry can be subject to trends and seasonal fluctuations, which creates less predictability in revenue streams. Financial institutions generally prefer businesses with stable incomes.
8. Quality and Safety Concerns: If a product is found to be unsafe or of low quality, it can result in product recalls, lawsuits, and reputational damage. Traditional processors often want to avoid these risks.
9. Customer Reviews and Reputational Risks: Negative reviews can impact the business significantly, leading to increased scrutiny and financial risk that some traditional merchant accounts might not want to engage with.

Health and beauty high-risk merchant account processors are more prepared to handle these specific challenges and risks. They offer specialized services like fraud protection, chargeback dispute resolution, and tailored payment solutions that make life easier for health and beauty businesses operating online.

7. MOTO (Mail Order – Telphone Order)

These companies often require MOTO high-risk merchant accounts for several reasons:

1. Lack of Physical Verification: Since transactions don’t occur face-to-face, there’s a higher risk of fraud because identity verification is more challenging.
2. High Chargeback Rates: MOTO transactions generally have higher chargeback rates compared to in-person transactions, often due to misunderstandings, fraud, or dissatisfaction with the product or service received.
3. Data Security Concerns: Handling sensitive payment information over the phone or via mail increases the risk of data breaches, something that conventional merchant processors might want to steer clear of.
4. Regulatory Hurdles: Different countries have different rules for MOTO businesses, especially concerning consumer rights and data protection. Compliance can be complex and costly.
5. No Immediate Delivery: MOTO businesses often have a gap between the time of payment and the time the customer receives their goods, increasing the risk of disputes and chargebacks.
6. Shipping Issues: These businesses are often reliant on third-party shipping services. Any issues with shipping (delays, damaged goods, etc.) can lead to customer dissatisfaction and, consequently, chargebacks.
7. Large Transactions: Depending on the business, MOTO transactions can sometimes involve larger amounts of money, making each transaction a higher financial risk for the merchant processor.
8. Reputational Risks: The lack of a physical storefront means customers are relying on trust, and if that trust is broken, it can be hard for a MOTO business to shake off the stigma, making them riskier from a financial institution’s point of view.
9. Fluctuating Sales: Like other high-risk categories, MOTO businesses may experience seasonal or trend-based peaks and valleys in sales, making revenue less predictable.

High-risk merchant account processors are better equipped to deal with these challenges. They offer specialized risk assessment tools, fraud detection mechanisms, and the expertise to handle the intricacies and risks that come with MOTO transactions. This allows MOTO businesses to focus more on their operations and customer service.

Top High-Risk Merchant Account Provider

In this section, we’ll introduce the top 6 high-risk merchant account providers, offering a brief overview of their services, features, and benefits for high-risk businesses. These providers have been carefully evaluated based on factors such as honest sales practices, transparent onboarding process, personalized customer service, fair contract terms, and reasonable rates and fees for processing credit and debit cards.

Keep reading to learn more about each provider and how they can help your high-risk business succeed.

First Card Payments

First Card Payments supports a wide range of high-risk businesses, including those on the MATCH list, and offers ACH, in-person, and online payment processing. The company works with a vast range of high-risk businesses. These include those with subpar credit metrics, high-volume merchants, B2Bs, and international firms. It also works with businesses in the MATCH list, providing specialized services tailored to their unique needs and challenges.

First Card Payments offers a 25% reduction in merchant fees for businesses that transition to the service, making it an attractive option for high-risk businesses looking to lower their payment processing costs. In addition to competitive pricing, First Card Payments provides business operational support, customer management services, and call center services to help high-risk businesses succeed.

By partnering with First Card Payments, high-risk businesses can enjoy the benefits of a comprehensive suite of payment processing services tailored to their unique needs and challenges. With personalized customer service and support, First Card Payments is an attractive option for high-risk businesses seeking a reliable and responsive merchant account provider.

Tips for Reducing Chargebacks and Maintaining a Low-Risk Profile

Reducing chargebacks and maintaining a low-risk profile is essential for high-risk businesses, as it can help prevent their merchant accounts from being terminated by the bank or financial institution. One effective way to reduce chargebacks is to have a clear return policy, which can help avoid misunderstandings and disputes with customers. Additionally, providing prompt customer service can help resolve any issues that may arise during the payment process, reducing the likelihood of chargebacks.

Another important aspect of maintaining a low-risk profile is ensuring a full AVS match. AVS, or Address Verification Service, is a tool used by payment processors to verify the billing address provided by the customer during a transaction. By ensuring a full AVS match, businesses can more effectively challenge chargebacks and maintain a low-risk profile. High-risk merchants should also consider using fraud and chargeback protection tools such as Address Verification Service (AVS), Card security code (CVV2, CVC, etc.), and 3D Secure (Visa Secure, Mastercard SecureCode, etc.) to further reduce the risk of chargebacks and fraud.

In summary, maintaining a low-risk profile is crucial for high-risk businesses, as it can help prevent their merchant accounts from being terminated by the bank or financial institution. By implementing strategies such as having a clear return policy, providing prompt customer service, and ensuring a full AVS match, high-risk businesses can reduce chargebacks and maintain a secure payment processing environment.

Alternative Payment Options for High-Risk Businesses

High-risk businesses can consider alternative payment methods such as ACH transfers, cryptocurrency payments, and digital wallets to maximize customer payment options and reduce reliance on traditional merchant accounts. By offering alternative payment methods, high-risk businesses can provide a wider range of payment options to their customers, making it easier for them to accept payments and complete transactions.

Alternative payment methods can be particularly beneficial for high-risk businesses operating in offshore or international markets, where traditional merchant accounts may be more difficult to obtain or maintain. By exploring alternative payment options, such as Payline Data, PaymentCloud, National Processing, Durango Merchant Services, Host Merchant Services, Soar Payments, and First Card Payments, high-risk businesses can ensure that they have access to the high-risk payment gateway and processing services they need to succeed, regardless of their location or industry.

In addition to providing a wider range of payment options for customers, alternative payment methods can also help high-risk businesses reduce their reliance on traditional merchant accounts and the associated costs and risks. By diversifying their payment processing options, high-risk businesses can mitigate the impact of chargebacks and fraud on their bottom line and maintain a more stable and secure payment processing environment.

Alternative payment methods offer a valuable solution for high-risk businesses looking to maximize customer payment options and reduce reliance on traditional merchant accounts. By exploring the range of alternative payment options available, high-risk businesses can ensure that they have access to the payment processing services they need to succeed, regardless of their location or industry.

Full Summary

In this blog post, we’ve explored the complexities of high-risk merchant accounts, discussed the top high-risk merchant account providers, and provided practical tips for reducing chargebacks and maintaining a low-risk profile.

By understanding the unique challenges faced by high-risk businesses and making informed decisions when choosing a payment processing solution, you can set your high-risk business up for success. Remember, the key is to find the right high-risk merchant account provider that meets your specific needs and offers the necessary support and services to help your business grow and thrive.

Frequently Asked Questions

What is a high-risk merchant account?

A high-risk merchant account is one that payment processors and card networks perceive to be at a higher risk for chargebacks, fraud, returns, or defaulted payments than a traditional bank account. Such businesses may have difficulty finding a suitable payment processing service provider.

What is a high-brand-risk merchant?

High Brand Risk Merchants are those that operate in an industry or category with high financial, reputational, and/or legal risks. They are categorized by Payment Card Networks (PCNs) as requiring additional due diligence and are identified by Visa as presenting an elevated risk to the payment system due to higher levels of disputes or brand/reputational risk.

PCNs have established specific criteria for merchants to be classified as High Brand Risk Merchants. These criteria include, but are not limited to, the merchant’s industry, product/service offerings, and/or customers.

How do I choose the right high-risk merchant account provider for my business?

When selecting a high-risk merchant account provider, ensure that it meets your business needs in terms of quick approval, fraud and chargeback protection, fees, customer support, and payment gateway and shopping cart integrations.

These features are essential for any business that processes payments online, and it is important to find a provider that can offer the best combination of these features.

Take the time to research the different providers and compare their offerings to ensure that you are getting the best deal for your business.

What are some alternative payment methods for high-risk businesses?

High-risk businesses can reduce reliance on traditional merchant accounts by leveraging alternative payment methods such as ACH transfers, cryptocurrency payments, and digital wallets to increase customer payment options.

These payment methods provide a secure and cost-effective way to accept payments while also providing customers with more payment options. ACH transfers are a great option for businesses that need to process large payments quickly and securely. Cryptocurrency payments are becoming increasingly popular.

How can I reduce chargebacks and maintain a low-risk profile for my business?

To reduce chargebacks and maintain a low-risk profile, ensure a clear return policy, prompt customer service, and a full AVS match.