First of all, the most important question a merchant should know is “exactly what is high risk?”When interviewed, a vice president of one of the nation’s largest merchant services providers stated, “the first litmus test is what is being sold. Is this an item that I can hold high risk merchant account at highriskpay in my hand, or a widget? Or, is this a concept, service, or idea where in which customer satisafaction is a subjective term ?”In easy speak, is your service easily susceptable to chargeback?
Other reasons for a business to be deemed high risk may be due to a merchant’s personal credit.Why does personal credit come into play ?Well, let us examine. Over 90% of all high risk businesses are either internet based or moto (mail order / telephone order).When a client orders a product or service, the merchant has no concept as to who the patron actually is. In addition, the credit card is not physically present. Therefore it is ahigher risk than a face to face / retail transaction.In banking, higher risk equals higher rate.In the unfortunate event that the transaction, card or even the patron are not who they present themselves as, the transaction is void.This means that the merchant would have to return the funds received.This scenario is one of the primary reasons why a merchant’s personal credit becomes an issue.
Another reason a company may be considered high risk may be high ticket prices.Suppose a merchant sold items for $10,000 – $20,000 a piece and earned $1,000,000 a month in total.By the time a week passes they could be holding as much as $250,000 in their business account.Normally , however, it takes a patron a week to a month to request a refund.In the eyes of the bank, the merchant is actually receiving something similiar to a $250,000 – $1,000,000 signature loan.That is not a gamble many banks like to make.
Finally many merchants may state, “I’ve been in business for 20 years. I know all of my clients,…and, I never have chargebacks…..Why is my company classified as high risk?”Please , no offense intended.This is by no means a reflection of the individual business. It is moreso a reflection of thew business model, that may fall into a high risk classification.
Now, before this article takes on the appearance of an excercise in futility ; it is important to know that high risk businesses can receive a merchant account.Again , you can receive a merchant account for high risk businesses !
In order to acheive a high risk account you must be aware of three facts :