High risk payment processing can be a challenging aspect for many businesses. Hence, it is necessary to know if your business falls in this category. This article explores various such companies that fall in high-risk credit card processing. But first, let us understand high-risk processing.
What is high-risk processing?
High-risk payment processing, also known as high-risk merchant accounts, are businesses that prove risky for bank institutions. A high-risk merchant account is subjective in nature; one processor may label your business as high risk while some other processors may not.
There are various reasons a business could be deemed high risk, such as:
- History of chargebacks
- High refund transactions
- History of payment processing
- Personal credit
- Business nature and history
Though being labelled a high-risk business can be disturbing, there are many benefits of high-risk payment processing.
Features of high-risk payment processing
- High-risk accounts have increased fraud protection. They have an advanced AI system that alerts any suspicious activities immediately.
- Risk mitigation along with a long-term operational efficiency that keeps your account healthy.
- Processors providing High-risk merchant accounts have a dedicated support system that enhances business flexibility and efficiently handles all business transactions.
- They provide opportunities for international transactions with reduced chargebacks, increased sales volume, recurring bills, and expert security.
All this comes with a cost, and the high-risk merchants have to pay higher transaction fees and rolling reserves. Rolling reserve is an amount that banking institutes and payment processing companies charge to shield themselves from chargebacks and other financial losses in risky business models. Calculated by acquiring banks, rolling reserves depend on the average monthly transactions done by merchants. This amount is refunded to the merchant within a specified time, which is ideally six months.
To check whether your business is high-risk or not, here are specific guidelines to consider:
- Average monthly sales should be 20,000 dollars or more.
- Average credit card transactions should be more than 500 dollars.
- History of a fraudulent credit transaction and higher chargebacks
- Acceptance of multiple currencies and trading with high-risk countries (which are any countries barring the US, EU, Japan, Australia, and Canada)
10 Businesses that need high-risk payment processing
● Adult industry
The adult industry includes adult films, toys, books, magazines, and any adult content available on the website. If your business is in any of these categories, then your business is at high risk. It is due to the uncertainty and risk involved in such businesses. Though uncertain, the adult market is thriving worldwide, and new toys, novelties, books, and content are growing on the internet. The sex toy market alone is estimated to grow over 52 billion dollars by 2026.
● Travel and bookings
The travel and tourism industry almost always comes under the high-risk category as the business is based on future endeavors. This coming model of business has the highest potential and history for chargebacks and frauds.
Similarly, Airline and other bookings also come under the high-risk category due to their similar nature with the travel industry.
● Cannabidiol industry
The Cannabidiol or CBD industry has become famous due to its medical benefits and non-psychotic effects. Though quite famous, the legality and laws regarding CBD are still unclear. Some countries have legalized CBD, while some countries’ legal status is still in flux. Due to its connection to marijuana, an illegal drug, the businesses operating or trading CBD products are deemed high risk.
● Dating sites
Dating sites have a long history of chargebacks and fraud experiences in the dating industry. People either do not wish to subscribe, or the recent subscribers want out of the subscription. Clients sometimes forget to cancel their contract or subscription, which results in increased chargebacks.
● Online gaming and betting
Casino games and online betting games use real money and credit in the game. The challenges of adhering to gaming industries’ rules and regulations are immense. This sector includes digital casinos, sports betting, online table games, online bingo, etc. Due to legal issues and increased chargebacks, online gaming is labeled high risk.
● Membership and subscription oriented companies
Though shocking, membership and subscription-related companies also fall under this category. Certain practices such as harmful option bills and recurring revenue have the potential of increased chargebacks which is why banking institutions flag this industry as high risk.
● Real estate
Real estate is all about land, whether buying land, building construction, or acquiring skyscrapers. Whether you are investing, brokering, buying, or selling land, the profits are unstable and can fluctuate quickly. Further, various malicious and illegal acquirement of land has compelled real estate in the high-risk business category.
● Seo service and marketing
Seo service and marketing software work on a monthly payment basis. A customer may forget to cancel and mark the subscription amount as a fraudulent transaction like a subscription business. This increases chargebacks and frauds.
Further, the search engine goes through various updates and algorithms. Hence, due to the uncertainty and negative client satisfaction, digital marketing agencies come under this category.
● Astrology and horoscopes
Astrology and horoscopes are all about getting future insights from the astrologer. No one can see the exact future, and there is no way to verify the astrologer’s claim. Further, the internet has opened doors for instant online booking without the hassle of standing in the queue. Also, there are many imposters in this field. Sometimes the astrologer’s claim may be invalid, leading to increased dissatisfaction, and clients may claim refunds.
● Life coach and counselling services
Life coaches and counselling services are based on experience. Counsellors strive to provide value, guidance, motivation, and solutions to clients’ problems. As it is based on experience, one may or may not be satisfied with these services. Hence, this sector sees an increased number of chargebacks, refunds, and frauds.
Apart from this list, other businesses such as e-cigarettes, credit repairs, nutraceuticals, hosting, etc., also come under the high-risk category. All these business models are innovative and can bring more chargebacks, refunds, and fraud. To avoid such a situation, buy a reliable high-risk payment processor that is secured, supportive, flexible, and transparent to suit all your business needs.