There are times when an online business undergoes a higher amount of risk in relation to chargebacks and wishes to process credit card transactions This is where you will need a high-risk merchant account. If you are unaware of the term “high risk merchant account” or wish to learn the type of businesses that require a high-risk especially for you.

Before moving ahead, let me tell you that opening a high risk merchant account is not an easy task. To achieve this, you will have to search for an acquiring bank to underwrite your business. However, to increase your chances of getting an account, I would suggest you to ask a reliable payment provider for assistance.

For this write-up, let’s look at the definition of a high risk merchant account.

What Is A High Risk Merchant Account?

A merchant account is a bank account set up exclusively for firms to make and receive high-risk payments. A merchant account is not the same as a conventional bank account. This is a simple premise that most company owners are confused about. 

Merchant account services are often accompanied by additional payments, as well as a variety of services. Most merchant accounts require the merchant to cover processing costs from high-risk payment providers, credit card associations, and the issuing bank. As a result, it could be wiser for the retailer to seek a solution that will help reduce the cost per sale.

High-risk merchant accounts are bank accounts tailored for enterprises that compete in niche markets. These companies may be subject to regulatory constraints or have brand partnerships that banks are unable to fund. 

Additionally, if there are warning signs involved with your buying experience, your company could be deemed high risk. Increased chargebacks, refunds, and even cases of theft are examples.

It’s essential to keep in mind that not all merchant service companies use the same criterion for classifying a company as “high risk.” What qualifies you as a high-risk merchant with one supplier does not identify you as such with another. 

However, there are a few that are considered part of the high-risk merchant list. They are often designated as such:

Mind well if one or more of these factors apply to you or your company, you might find that certain credit card processors regard your company as a high-risk merchant, meaning they will charge you higher rates and have other conditions as a result.

The High-Risk Merchant List

Among the wide range of industries in the market today, industries that are highly regulated and prone to security fraud constitute the high-risk merchant list. Below mentioned are 5 of them, with the reasons as well.

Adult Entertainment Industry

Adult entertainment merchants sell a range of merchandise and services to their clients, including streaming media, photos, escort services, and novelty items. 

Even though adult entertainment merchants run profitable enterprises and follow stringent standards and regulations, many banks continue to reject their applications for merchant accounts.

Both companies that process card-not-present purchases are considered high risk by banks. Merchants have a difficult time checking buyers are who they want to be. This is because cardholders aren’t there to sign for their transactions. However, there are other explanations why adult service providers could be rated as the high-risk merchants by banks, including:

• Customers will have to pay per minute if you provide subscription-based services.
• They have to process a considerable amount of purchases.
• Having little to no experience in credit card management (especially for start-ups)
• Because of the industry’s tight policy and safety restrictions, banks can refuse to open merchant accounts for adult service providers.
• Banks may be reluctant to process high-risk payments for a company that deals with questionable content due to pornographic content.

Travel Industry

Although being one of the busiest and popular, the travel and tourism industry is not very far from its potential risks. 

People are traveling more for work, recreation, and several other purposes as society progresses. 

Increasingly affordable mass transit, hotels, and infrastructure have opened remote destinations to millions of people worldwide, spawning new travel genres such as participatory, educational, and eco-tourism.

The transport industry and services industry are expected to be worth more than $2 trillion each year.

Significant sums of money going through payment gateways and processors are dangerous because cancellations, chargebacks, other conflicts, and manipulation are generally more likely.  Because of the essence of these purchases, most financial firms consider a travel business’ account to be a high risk merchant account. 

Customers can many times say that they are “dissatisfied” and contact their card issuer to file a chargeback claim due to customer guarantees in place. The customer is seldom asked elaborate questions, and they are always considered genuine.

Pawn Shops

For a variety of factors, pawn shops are considered high-risk merchant meaning their credit card processing is not always flawless. They typically market high-end pieces (with an average price of more than $100). High-value purchases are particularly vulnerable to so-called “friendly fraud,” which may result in a chargeback for the credit card issuer. Many even market their wares online (e.g., on eBay, Facebook group sites, etc. ), resulting in card-not-present purchases, and are more susceptible to theft and chargebacks.

Consumer security laws extend to pawn shops, and a processor’s review of a merchant services application for enforcement necessitates further underwriting due diligence. 

Pawnshops are often considered high-risk by many credit card processing merchants, and many people believe that pawn shops market counterfeit merchandise. 

Some other examples of high-risk merchant businesses are financial services, liquor sales, pet shops, and marriage services.

Final Thoughts

As you can see from this write-up these are some of the largest industries that require a high risk merchant account. However, the list that we have refurbished here is not exhaustive by any means. There can be more industries that would require a high risk merchant account. However, once you are well-aware of the industries it can prove to be a catalyst in finding the right merchant account provider to aid your business to process payments, protect your customers, and ultimately your business.