What Is The Process Of High Risk Merchant Processing?

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Merchant Processing

People who rely on a merchant account must know how important it is to have a convenient way to receive business payments. E-commerce businesses have overgrown the retail market. Any individual that aspires to own a business should consider signing up for a merchant account.

While we know the significance of a high risk merchant processing, the risk level of your business plays a significant role in determining its processing. We know businesses that have low-risk processing and businesses that have high-risk processing. In both cases, the processing risks vary.

If your business requires an online risk of chargebacks and a means to receive credit card payments, possibilities are that your business needs a high-risk merchant account. However, do you know the process of its processing? We will discuss this later in the article. Till then, let us get to know what a high-risk business is.

What is a High-Risk Business?

A high-risk business, in general, is a business whose industry is not as stable as other businesses. The term high-risk business is applied to the payment method that involves card processors concerning your credit history, profitability, etc.

Based on the type and characteristics of your business determines whether it falls under the category of high risk or not. If your services or products come under a high-risk business, you have to start a high-risk merchant account. Because of this fact, these businesses face challenges in accepting payments through credit or debit cards, which is not the case with standard occupations. It is because these businesses have a higher chance of financial failure.

What is High-Risk Merchant Processing?

When an individual operates a high-risk business, some procedures include processing its payments done through online transactions. Most of the payment modes include transactions by credit card. Do you know what is the ACH network? The ACH network is a system of electronic funds transfers that allows people to send and receive money from one another.

A merchant, who wants to get a merchant account, first consults a payment processor before opening up a merchant account. It is so because a partnership with the payment processor will enable the business to work with a banking partner. Here, your merchant account will be established.

Explain the process of high-risk merchant processing.

When payment for a high-risk business is initiated, it is processed by the processing partners for that particular business merchant. It is why the process is termed high-risk merchant processing. These processors mediate the transaction made by digital means to reflect into the merchant bank account.

When an individual makes a payment through their credit card, the information is first retrieved by the processor and the bank that issued that specific card. The transaction information is then affirmed by the bank and returned to the processor for authorization. Various intermediary processes proceed while you make a credit card payment, although it only takes you a few seconds.

How do payment processors consider partnering with your business?

Sharing a partnership with a payment processing firm does not come easy. There are particular parameters that the processing company checks before initiating a deal with a merchant. If they consider your business is free of any drawbacks, the processors then partner with a bank for your merchant account. Some grounds on which the processors make a decision are—

  • Background of your business
  • Whether you have a long term business plan
  • Your business situation
  • The factors that make your business a high-risk one
  • And other data that they might need

processing partner

When your processing partner is satisfied with the background of your business, they further ask a merchant acquiring bank to open up a merchant account specifically for your business. It is why consulting a wise high-risk processing partner becomes a necessity. But, do you know what the purpose of holding a high-risk merchant account is? Let us get to know it.

Why does your business need a high risk merchant account?

Identifying your business can ease your way into exploring different techniques that can contribute to its growth. A merchant should be well aware of what kind of business he runs. If one deals in a high-risk industry, they probably engage in a high-risk business. And to process online payments of these businesses, you require a merchant account, a high-risk one.

If your trade involves dealing with products or services that often end up with refunds or chargebacks filed by the customer, your business needs high-risk processing for a merchant account. Some businesses that frequently receive chargeback need a high-risk merchant account. So that customers can make a payment using their credit cards.

What are the risks of a high risk business?

Depending on your business, particular risks are associated with it. These risks are what set your business services apart from regular businesses. Some risks and obstacles that you might come across dealing with a high-risk business are—

  • High processing fees
  • Application procedure for high risk businesses takes longer than others
  • Higher fees for refunds and chargeback
  • Some cash is reserved with the payment processor
  • Other technical requirements if your business includes an age-restricted service or product

What products and services need high risk processing?

There is no specific indication for a business to be operating at high risk. However, some businesses prone to receiving chargeback and refunds from their customers are high-risk businesses. Some businesses that have a high risk of processing are—

  • Airline tickets
  • Health and wellness services
  • Astrology businesses
  • Antiques
  • Import/Export
  • Auction related
  • Brokering
  • Money transfer
  • Smoking or vaping products
  • Electronics

Although the list still has more suggestions, the industries mentioned above get categorized as high risk. If your business industry operates similarly to the above-stated businesses, you probably need a high-risk merchant account.

The bottom line.

We have covered various segments of why high-risk processing is essential for your high-risk business. Not just this, we know why consulting a wise payment processing partner can change the scenario for the way the business operates. Invest in a processor that provides reliability and security to your services.