High-Risk Payment Processing for eCommerce Businesses
Summary
High-risk payment processing is a niche service for eCommerce merchants. It is considered high-risk because of the nature of the business, the types or number of transactions it conducts, or its geographical location. These businesses often struggle to find a suitable payment processing service, as gateways and banks may be unwilling to work with them. These red-zone service providers offer solutions that suit these high-risk businesses, such as fraud prevention, chargeback options, and liberal underwriting procedures. Choosing a high-risk payment gateway service guarantees eCommerce businesses safe and efficient payment processing. At the same time, the company focuses on development and growth.
Are you an eCommerce business owner struggling to find a reliable payment processor? Are you in a high-risk business area or facing issues related to transaction frequency and geographical location? Look no further! High-risk payment processing is tailored to your business needs and offers various benefits.
When considered to be in the high-risk category, your business belongs to an industry that experiences higher rates of chargebacks, regulatory oversight, or legal limitations. Some examples include online gaming and gambling, adult entertainment, traveling, and cannabis-based products. Challenges like fraud risk factors, legal issues, and a volatile market environment make these businesses less attractive to standard payment processors.
Finding a payment processor for a non-traditional business can take time. Most conventional processors would steer clear because of the perceived risks, and high-risk companies may need more choices and are often charged heftier fees. This is where high-risk payments
processing services come in.
Knowing High-Risk Payment Processing: Essential Insights for Your Business
High-risk payment processing services are third-party providers caring for customers’ payments, such as specialized processors. They provide services that address the issue of enhanced chargeback control, such as enabling an industry standard related to chargeback and security concerns for the business and the customers.
Yet, companies that operate under high-risk payment processing have their share of problems. The fees are usually higher than standard processors, and the approval process may be more complex. Some forms may require businesses to attach copies of their business licenses, company financial statements, and, in some cases, credit reports of those who own the business. However, the terms of service agreements are more flexible than in other countries, allowing users to reverse their transactions through a chargeback.
Still, high-risk payment processing is vital for particular industries and enterprises since it plays an outstanding role in reaching customers. It aptly helps them take payments securely, manage their money, and stay operational without interruption. This is why comprehending the specifics of high-risk payment processing may mean the difference between growth and mere existence for such companies.
What Makes a Business High-Risk?
A business is usually determined to be at high risk based on the type of industrial sector, the volume of transactions, and the types of products and services the company offers. Some common high-risk industries include gaming, adult content, travel, Nutra or vitamin and supplements, and subscription services. These industries usually need higher chargeback rates, legal issues, and legal concerns that delay the whole process, making these giants unattractive to conventional payment processors. Another criteria may include low credit scores or the company's location in an area with high fraud levels.
How Do High-Risk Accounts Differ from Regular Accounts for Payment Processors?
Payment processors implement several key differences when comparing high-risk merchant accounts to regular accounts to manage the additional risks associated with high-risk businesses.
Lengthier Application Process
High-risk merchant accounts typically involve a more rigorous application process. Payment processors may require extensive documentation to assess your risk profile thoroughly. This often includes reviewing your business's transaction history, partnerships, and even personal credit history to identify potential red flags, such as poor credit.
Elevated Processing Fees
Processing fees are among the most significant differences between high-risk and regular merchant accounts. While standard businesses might pay a fee of around 0.3% above the interchange rate, high-risk businesses can expect to pay significantly more, often up to 1.5% plus the interchange rate. These elevated fees reflect the increased risk the processor takes.
Higher chargeback fees
High-risk businesses often face steeper chargeback fees. When a customer disputes a transaction, the business must pay a fee ranging from $20 to $100 per chargeback. Businesses with a high frequency of chargebacks, such as those in industries prone to returns or disputes, may incur substantial costs.
Credit Card Processing Volume Caps
Some payment processors limit the volume of transactions that high-risk businesses can process. The processor may temporarily halt further transactions if a company exceeds this cap. This precaution limits exposure to potential losses associated with high-volume sales in high-risk sectors.
Cash Reserve Requirements
Payment processors might require high-risk businesses to maintain a cash reserve to mitigate potential losses. This reserve can be managed in various ways:
Rolling Reserve - A percentage of each transaction is held back and only released after a set period, such as six months.
Capped Reserve - Funds are withheld until a predetermined reserve amount is reached, after which the contributions stop, but the reserve remains in place.
Upfront Reserve - The processor may require an upfront payment or withhold all transactions until a specific amount is secured.
Additional Compliance Requirements
Depending on the nature of the business, high-risk merchants may need to follow additional regulations or requirements. For instance, companies that sell age-restricted products might be required to implement age-verification tools. The payment processor may withhold approval until these compliance measures are in place.
Let’s break down some of the factors that could lead to your business being designated as high-risk
Low-Risk Merchant | High-Risk Merchant | |
|---|---|---|
Average monthly sales volume | Less than $20,000 | Over $20,000 |
Average credit card transaction | Less than $500 | Over $500 |
Different currencies accepted | One | Multiple |
Offer recurring (subscription) payments | No | Yes |
Placed on MATCH list/history of excessive chargebacks | No | Yes |
Main product offering | Low risk: books, office supplies, clothing, home goods, etc. | High risk: software, digital, tickets, seasonal items, etc. |
Based in or sell to a high-risk region (anywhere outside the US, EU, CA, JPN, or AU) | No | Yes |
Introducing High-Risk Payment Processing for eCommerce Businesses
From advanced fraud prevention measures to flexible account management options, high-risk payment processors provide the necessary infrastructure to support eCommerce businesses in managing their transactions, protecting revenue, and ensuring compliance with industry regulations. Although associated with higher fees and more stringent account requirements, high-risk payment processing is essential for businesses needing robust, dependable payment solutions.
How High-Risk Payment Processing Works for eCommerce Businesses
1. Assessment and Application
The high-risk payment processing service is customized for eCommerce businesses in industries or markets defined as high-risk by financial institutions. These business ventures are considered ‘high-risk’ because they are exposed to more chargebacks and legal challenges or because of the goods and services they offer in areas such as adult content, travel agencies and affiliate services, online gambling, or luxury items.
High-risk merchant accounts are, therefore, essential for eCommerce businesses, as they enable firms to work with secure and reliable payment processors despite the associated risks. High-risk payment processors are aware of these challenges and provide specific services to help businesses mitigate risks and operate smoothly.
The process begins with a thorough assessment of the business applying for a high-risk merchant account. Payment processors will evaluate several factors, including the industry the business operates in, its financial history, the products or services offered, and its chargeback ratio. This assessment helps the processor determine the level of risk and the appropriate measures to manage it.
2. Underwriting and Approval
Once the application is submitted, it goes through a rigorous underwriting process. This stage involves verifying the business's financial stability, reviewing past processing history, and checking for legal or regulatory compliance issues. High-risk processors typically take longer to approve accounts due to the detailed analysis required to mitigate potential risks.
3. Customizing Terms and Conditions
After approval, the payment processor will establish specific terms and conditions tailored to the business's risk profile. This may include higher transaction fees, a requirement for a reserve account, or caps on monthly processing volumes. These measures help the processor manage the increased risk while allowing the business to accept payments.
4. Integration and Setup
Once the terms are agreed upon, the company integrates the payment processing system with its eCommerce platform. High-risk payment processors typically offer robust, customizable solutions that can be tailored to a business's specific needs, including fraud detection tools, secure payment gateways, and advanced reporting features.
5. Transaction Monitoring
High-risk payment processors also always keep an eye on the transactions that take place so that they can track any fraudulent activities. Such monitoring is useful in reducing chargebacks and other costs related to high-risk businesses. The processor may also generate notifications for suspicious activities, helping the business take necessary action.
6. Reserve Account Management
The processor holds back a portion of each transaction for businesses that maintain a reserve account. This reserve safeguards against potential chargebacks, refunds, or other liabilities. The terms of the reserve—whether it's a rolling reserve, capped reserve, or upfront reserve—are determined during the underwriting process.
7. Chargeback Handling
High-risk payment processors are equipped to manage higher rates of chargebacks, a common issue in high-risk industries. They often provide tools and support to help businesses dispute chargebacks effectively, reducing the financial impact on the business.
8. Ongoing Compliance and Support
High-risk payment processors ensure businesses follow industry regulations and standards. They may offer ongoing support to help the business navigate regulatory changes, optimize payment processing, and address any issues.
Benefits of High-Risk Payment Processing
High-risk payment processing offers a range of benefits crucial for the success and sustainability of eCommerce businesses operating in high-risk industries. Let's explore some of these key advantages:
Access to Merchant Accounts
High-risk payment processors specialize in helping businesses in high-risk industries secure merchant accounts, which are essential for accepting online payments. This access opens doors to a wider customer base and enables businesses to operate seamlessly in the digital marketplace.
Reduced Risk of Account Termination
Unlike traditional payment processors, which may abruptly terminate the accounts of high-risk merchants, specialized high-risk processors understand the nuances of these industries and implement measures to mitigate risks. This reduces the likelihood of sudden account closures, giving businesses stability and continuity.
Fraud Prevention and Chargeback Management
High-risk payment processors employ robust fraud prevention tools and chargeback management systems to protect businesses from fraudulent transactions and minimize chargeback disputes. This safeguards revenue and helps maintain a healthy merchant account.
Customized Solutions
High-risk payment processors understand that every business is unique. They offer tailored solutions that cater to different industries' specific needs and risk profiles, ensuring optimal payment processing experiences.
Global Reach
Many high-risk payment processors offer multi-currency support and international payment processing capabilities, allowing businesses to expand their reach and tap into global markets.
Enhanced Security
High-risk payment processors prioritize security and follow industry standards such as PCI-DSS, protecting sensitive customer data.
Improved Customer Experience
By offering various payment options and ensuring smooth transaction processing, high-risk payment processors contribute to a positive customer experience, fostering trust and loyalty.
Business Growth
High-risk payment processors provide reliable payment processing, allowing businesses to focus on their core operations, expand their customer base, and grow sustainably.
Comparison of High-Risk Payment Service Providers for eCommerce Businesses
Rank | Name | URL | Evidence for High-Risk Provider Classification | Evidence for Consideration | Popularity Indicators |
|---|---|---|---|---|---|
1 | PaymentCloud | Specializes in high-risk industries like CBD, adult and firearms. | A wide range of solutions and positive reviews from high-risk businesses | Strong online presence, industry recognition, frequent mentions in blogs, and positive reviews on TrustPilot and BBB | |
2 | eMerchantBroker | Known for serving high-risk industries like credit repair, travel, and adult | High approval rates, quick onboarding, and extensive services for high-risk clients | Recognized by industry leaders, a significant social media presence, and strong online reviews | |
3 | PayKings | Serves high-risk sectors, including firearms, CBD, and nutraceuticals. | Extensive banking network, competitive rates, personalized support | Positive client feedback, a strong presence in industry rankings, and positive mentions on forums and review sites | |
4 | Easy Pay Direct | Caters to high-risk industries like supplements, coaching, and continuity | Transparent pricing, straightforward solutions | Positive client reviews on Google and BBB, with an emphasis on transparency, are recognized by industry experts. | |
5 | Instabill | Specializes in global high-risk industries, including travel and tech support. | Global reach, international payment expertise | Caters to global high-risk businesses; positive reviews on Trustpilot are mentioned in international trade articles. | |
6 | Host Merchant Services | Supports high-risk sectors such as debt collection and eCommerce | Chargeback & fraud prevention, multiple tools, and strong client support | Positive reviews on BBB, recognition in the industry, and a strong emphasis on risk mitigation in industry publications | |
7 | Helcim | Serves high-risk industries, including eCommerce and professional services. | Transparent pricing supports high-risk businesses. | Positive feedback for transparency and customer support, well-reviewed on TrustPilot and other review platforms | |
8 | NMI | Provides solutions for high-risk merchants with diverse integration options. | A comprehensive platform for payment processing with a robust API | Well-regarded in the payment processing industry, recognized for supporting complex and high-risk businesses. | |
9 | USAePay | Focuses on high-risk merchant accounts with tailored payment gateway solutions. | A robust gateway platform supports high-risk businesses across multiple industries. | Positive industry reviews, recognized for its robust and secure payment gateway solutions | |
10 | Allied Wallet | Offers global high-risk merchant accounts and payment processing solutions | Global reach, extensive experience in handling high-risk transactions | Recognized in global markets, positive feedback on international review platforms | |
11 | Flagship Merchant Services | Focuses on high-risk industries like adult and travel sectors | High-risk focus, personalized support | Positive customer reviews, strong emphasis on industry-specific solutions | |
12 | High Wire Payments | Specializes in high-risk merchant accounts across various industries. | Tailored, high-risk payment processing solutions | Recognized for high-risk specialization and positive reviews on niche forums | |
13 | SMB Global Payment | Provides high-risk merchant accounts and international payment solutions. | Focuses on international high-risk processing | Known for high-risk specialization, particularly in international markets | |
14 | iPayTotal | Offshore payment processing for high-risk industries | Specializes in high-risk and offshore payment processing. | Positive feedback for offshore solutions, recognized in high-risk industry forums | |
15 | Leap Payments | Serves high-risk industries, including eCommerce, firearms, and adult entertainment. | Focuses on providing personalized service for high-risk merchants | Positive reviews for customer service, known for transparent pricing and high approval rates | |
16 | iPayTotal | Specializes in high-risk merchant accounts and offshore payment processing. | Cell | Cell |
Now, we will break down the concepts for you.
B2B eCommerce Conversion Rate
This is the percentage of website visitors who complete a desired action on a B2B eCommerce site. The desired action could be making a purchase, requesting a quote, or signing up for a wholesale account. Example: If 100 businesses visit a site and 2 make a purchase, the B2B eCommerce conversion rate is 2%.
B2B Lead-to-Customer Conversion Rate
This is the percentage of leads (potential customers who have expressed interest) who are converted into paying customers. Example: If a company generates 100 leads and 25 of them make a purchase, the B2B lead-to-customer conversion rate is 25%.
B2C eCommerce Conversion Rate
This is the same concept as the B2B eCommerce conversion rate, but it applies to B2C eCommerce sites. Here, the desired actions might be adding items to a cart, creating an account, or completing a purchase. Example: If 1,000 consumers visit a site and 25 make a purchase, the B2C eCommerce conversion rate is 2.5%.
B2C Lead-to-Customer Conversion Rate
Similar to the B2B lead-to-customer conversion rate, this is the percentage of B2C leads that become paying customers. Example: If a company has 500 leads from consumers and 30 of them purchase, the B2C lead-to-customer conversion rate is 6%.
How to Choose the Right High-Risk Payment Processor?
When operating a high-risk business, selecting the right payment processor is crucial for ensuring smooth, secure transactions and the long-term success of your eCommerce operations. Here are key factors to consider when choosing a high-risk payment processing provider:
Industry Experience
Choose a payment processor with substantial expertise working with firms in your sector. Providers who understand your industry's issues and laws are better positioned to offer personalized solutions that meet your requirements. Their experience may be extremely useful in managing the complexity of high-risk transactions and maintaining compliance.
Fee Structure Transparency
Selecting a service with a clear cost structure is crucial, even if high-risk payment processing sometimes entails higher rates. Understand the associated expenses, including transaction fees, chargeback fees, and any additional charges for reserves or setup. A trustworthy company will clearly explain its price structure, allowing you to avoid unforeseen charges.
Security Measures.
Given the heightened risks, ensure the processor uses robust security measures like modern fraud detection and encryption to safeguard transactions and client information. A provider that prioritizes security will help protect your company from potential financial losses and reputational harm.
Customer Support and Service.
When dealing with the complexity of high-risk payment processing, you must provide responsive and skilled customer assistance. Choose a service that offers dedicated assistance, with personnel accessible to help you with any concerns or queries. Consider companies that provide 24/7 service, primarily if your company works abroad or outside regular office hours.
Customizable Solutions
High-risk enterprises may have special requirements that traditional payment processing systems cannot meet. Look for a service that provides customizable payment processing alternatives, such as flexible payment gateways, personalized reporting tools, and connectivity with your current systems. A supplier who can adjust to your unique needs will be better able to assist in your business's growth.
Reputation and Reviews.
Assess the reputation of possible payment processors by reading reviews and testimonials from other high-risk firms. A service with a proven track record and excellent feedback from clients in related sectors will likely be more dependable and effective. Be wary of suppliers who have received multiple complaints or poor feedback since this may suggest problems with service quality or reliability.
Global Reach and Multi-Currency Support
If your company works or intends to develop globally, select a payment processor that supports many currencies and has a global reach. This guarantees that you may take consumer payments worldwide without causing additional problems or hefty conversion expenses.
Flexibility and Growth Potential
As your firm expands, your payment processing requirements may alter. Choose a company whose services are flexible and scalable. This will allow you to change terms, enter new markets, or boost transaction volume without encountering substantial restrictions.
