Introduction
In the world of digital payments, the term "high-risk" often carries a negative connotation that can deter both merchants and payment processors. Misinformation and misconceptions about what high-risk payment processing entails are rampant. This comprehensive blog post aims to debunk some of these myths and shed light on the facts, helping businesses and payment processors make more informed decisions.
What is High-Risk Payment Processing?
Before diving into the myths and facts, it's crucial to understand what high-risk payment processing means. In simple terms, a high-risk merchant account is one that is deemed risky by payment processors due to various factors such as the likelihood of chargebacks, financial instability, or the nature of the business itself. Industries like online gambling, adult entertainment, and pharmaceuticals fall under the category of "Registered High Risk," which simply put, means that only certain acquiring banks (approved for High Risk Processing) can process transactions for these merchants and they must be properly classified and registered with the card brands. There is also a category of high risk merchants that are not classified or registered as such, and these are simply a matter of opinion from each payment processor or acquiring bank. Many so-called "high risk" merchants are simply misunderstood.
Myths and Facts
Myth 1: High-Risk Means Illegal or Fraudulent
Fact: High-Risk Refers to the Likelihood of Chargebacks or Financial Instability
One of the most common myths is that a high-risk business is synonymous with illegal or fraudulent activities. This is far from the truth. Being categorized as high-risk simply means that the business has a higher likelihood of experiencing chargebacks or financial instability. This could be due to the nature of the business, the clientele, or even the countries the business operates in.
Myth 2: High-Risk Businesses Can't Get Good Payment Processing Rates
Fact: Specialized Processors Offer Competitive Rates for High-Risk Businesses
Another misconception is that high-risk businesses are doomed to suffer from exorbitant payment processing fees or need to process through 3rd parties or banks in far off countries. While it's true that high-risk merchant accounts may face higher fees initially, specialized high-risk payment processors offer competitive rates. These processors take the time to understand the unique challenges and risks associated with high-risk businesses and can provide tailored solutions that are both secure and cost-effective.
Additional Considerations for High-Risk Merchants
Building a Strong Relationship with Processors
One way to secure better rates and terms is by building a strong relationship with your payment processor. Providing a full detailed account of background, business history, customer satisfaction, continued product development, customer support, etc. and demonstrating a history of low chargebacks and secure transactions can go a long way in renegotiating terms.
Diversifying Payment Methods
High-risk businesses can also benefit from diversifying their payment methods. Offering multiple payment options can not only attract a broader customer base but also mitigate the risks associated with relying on a single payment processor. We often recommend our clients to obtain 2 or more (depending on the size of the business and transaction volumes) merchant accounts. If one processor becomes uncomfortable with the risk or the business category, you have a second or third account that you can rely on to move transaction volume to.
Regulatory Compliance
Staying compliant with industry regulations is crucial for high-risk businesses. This not only helps in maintaining a good relationship with payment processors but also instills confidence among customers. Not only does this mean providing value and support to your customers, but also means you are responding to negative complaints online, and continuously improving your disclosures so that complaints are managed and disclosures and terms are clear and understandable.
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Conclusion
Understanding the intricacies of high-risk payment processing is essential for businesses to make informed decisions. By debunking common myths and focusing on the facts, merchants can find the right partners for payment processing, secure competitive rates, and operate their businesses more effectively. Remember, being high-risk doesn't mean you're out of options; it simply means you need to be more strategic in your approach.
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If you're a high-risk merchant looking for reliable payment processing solutions, schedule an Evaluation Call with the Payments Doctor for specialized assistance tailored to your needs.
Would you like to know more about high-risk payment processing? Feel free to leave your questions in the comments section below.
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