Stories From High Risk Merchant Services: 5 Lessons for Merchants

Stories From High Risk Merchant Services: 5 Lessons for Merchants

Providing high risk merchant services is never boring, never without its characters and certainly never without its challenges. Sometimes the boarding process goes smoothly and other times we face hurdles and roadblocks.

  • We’ll often receive inquiries from merchants who could use a bit of educating in the process — which we do not mind a bit. To us, it’s part of the process.
  • Sometimes a prospective merchant will show signs of fraudulence, such as applying for a retail merchant account for cover for his tech support business (more on that below).
  • Every so often, a merchant will have a look at the required documents during early in the application process and we’ll never hear from them again.

After more than 15 years in the high risk merchant services business, we’ve just about seen it all.

3 (Suspected) Fraudulent Merchant Stories

Just within the last six months, we’ve had two merchants go through the entire merchant account boarding process, only for us and our acquiring banking partner to discover they were fraudulent.

  • One merchant advertised he was selling large contractor-size dumpsters, the kind you see at a construction site. Instead, we discovered he was a tech support merchant who tried to circumvent tech support merchant account rates by disguising his business with dumpster sales.
  • We had a similar merchant earn an approval for his ‘carpet cleaning business,’ only to find shortly after he was a tech support merchant also.
  • About six months ago, we were approached by a merchant selling school supplies that we thought were outrageously expensive. We confronted him about it, but he stood firm on his pricing. We decided not to move forward. A month later, his website was offline.

What to Do and Not to Do When Applying for High Risk Merchant Services

There are certain know-your-customer documents that are absolutely necessary when applying for high risk merchant services. Without them, there is no going forward.

  1. Business Bank Statements

Simply, Instabill and the acquiring bank with which we match a business need to know a merchant’s payment processing history and to ascertain there is working capital in their bank account (for working startups, we’ll consider alternative documents).

What not to do: Recently, we had a merchant begin the application process when we discovered he had a negative balance in his business bank account. Acquiring banks need to see a certain amount of working capital.

  1. Country Registration

If a merchant must register his/her business in a different country, a degree of knowledge about that country’s business laws and regulations is necessary. Merchants learning as they go is a perilous method that could have fatal implications.

What not to do: Ignore Visa’s new cross border regulations. Merchants need to pay close attention to these regulations when applying for an offshore merchant account.

  1. Valid ID of all Stakeholders/Owners of 10 Percent

We, along with any acquiring bank, need to know who the owners and stakeholders are — with over 10 percent ownership — with any business.

What not to do: Stall and not be transparent. We once had a merchant stall in providing the identification of his business partners. With each passing day, we felt he was hiding something. So we passed on his merchant account.

  1. Working Website with Pricing 

Acquiring banks and payment processors love a website with clear and competitive pricing, as well as contact information (phone and e-mail) and return policy.

What not to do: Hide or omit contact information – which can lead to a rejection from a merchant account provider. A contact form on the website is fine, but we prefer an e-mail address and even the option for live chat, if possible. There is nothing more frustrating for a consumer who needs to contact a merchant, and is unable.

  1. Finally, Be Honest With Us — We’ll Work with You

Instabill has secured high risk merchant services for merchants who have imperfect credit and many who have even been MATCH-listed. These merchants may incur higher fees, but usually we can find a solution for them.

What not to do: Two weeks ago, we received an application from a merchant who sent all the necessary documents for his merchant account. He failed to tell us, however, that he had been on the MATCH-list, which was a game-changer for us. We’ve worked with MATCH-listed merchants before – those who have been honest and up front with us.

In this case, we figured if the merchant is dishonest from the start, s/he will be dishonest in the future.

We passed on the merchant.

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