A Beginner’s Guide to High Risk Merchant Services

If you’re looking for your first payment processor, the task can feel a bit overwhelming. There is so much terminology and so many different options, from so many different providers, that it can be difficult to know not just what you want, but what you need.

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One thing that confuses many people is high risk merchant services. It can be difficult to secure payment processing from a provider as a high risk merchant, but many businesses are assessed as high risk. Not only does that mean getting an account may be more difficult, it can also mean the services you receive will be a little bit different.

Who Is a High Risk Merchant?

The list of who is a high risk merchant is a lot longer than the list of who is a low risk merchant. Many, many businesses are classed as being high risk.

This includes many businesses you’d typically think of as having a high degree of risk, such as casinos, drug paraphernalia shops, credit and debt repair and 1-800 chat sites, among others. It also includes a number of businesses you may not readily think of as being high risk: Real estate and financial services such as financial planning and investment are all considered high risk.

How Is Risk Assessed?

Payment providers take many factors into consideration when they determine if a merchant is high risk. One of the most significant is the risk of fraud. Airlines, for example, are often considered high risk: Since flights can be quickly and easily purchased online or over the phone, a fraudster can book a flight, skip town, and be long gone by the time the real credit card holder gets the statement and disputes the charge. That leads to chargebacks on the airline’s account—which means it delivered the service without ever getting paid for it.

Plenty of businesses are risky for other reasons—investment services, for example, can have windfall profits one year, then default as the market falls through the next quarter. There’s also a high degree of risk for financial fraud.

And even if your business is on the up-and-up, your industry may have a reputation as risky, which can mean that you need to secure a high risk merchant account.

What Kind of Services?

Generally speaking, high risk merchant services aren’t too much different than those offered to low risk businesses. The most major difference is often the fees that the payment processing provider wants to charge.

High risk merchant accounts often have heftier fees than those for low risk businesses, because of the perceived risk. Payment providers do not want to be on the hook if your account defaults on a series of chargebacks or if your business suddenly goes belly-up. That said, many providers work specifically with high risk merchants to protect both businesses while ensuring everyone is getting a fair deal.

Another difference associated with partnering with a high risk merchant services provider is often security. Payment processing providers take security measures to protect all of their merchant accounts, no matter their level of risk, but they may offer additional protections for high risk merchants.

Those additional protections can help your business reduce fraud. Even some of the service options can help protect a business: A pay-later option can help online merchants reduce chargebacks, effectually reducing credit card fraud. Some payment processing providers will even offer protection against chargebacks.

Being High Risk Is Not a Bad Thing

Many business owners fret that their businesses will be deemed high risk, and many worry that, once they are declared high risk, they won’t be able to pay the high fees that payment providers want or that they won’t even be able to secure services.

But being high risk doesn’t need to be a bad thing. There are payment processing providers that work specifically with high risk merchants to ensure that the fees are as fair as possible and that everyone—including you and your customers—are well protected.


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Lisa Gibson

Lisa is the Credit Manager of BNA Smart Payment Systems and has over 18 years of experience in diverse roles of credit and credit risk management. She graduated from the financial program at Boreal College and is an expert in personal loans and line of credit, mortgage underwriting, private label commercial credit cards, small business loans, and merchant account underwriting. Lisa is also an avid railfan and HO scale train modeler, and enjoys curling.

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