Sometimes, we decline merchant accounts. We just can’t take the risk.
As a high risk payment processor, we’ve just about seen it all. And when we admit that we’ve seen it all, a new referral comes along and leaves us shaking our collective heads. Some referral examples we’ve seen (and turned down) include:
- An international e-commerce merchant openly selling illegal narcotics
- A merchant that offers on-the-spot IVs with vitamin B to relieve hangovers
- A “lender” who wanted to offer personal loans, charge a monthly recurring credit card fee for preparation, but – admittedly – would never offer the loan.
Once, after a merchant account decline, the merchant retorted, ‘But you’re high risk!’ Indeed, we offer merchant services for high risk industries, but there are frequent occasions when we are unable to provide payment processing solutions.
There are a number of reasons for this.
5 Reasons Why We Decline Merchant Accounts
If we had to venture an educated guess, Instabill declines about 15 percent of the merchant account inquiries it receives from merchants themselves and partners.
1. Inconsistent Payment Processing History
For a high risk merchant account – depending on the industry type – banks usually like to see 3-6 months of payment processing history. Often, we’ll see prospective merchants show us two months with one bank, one month with another and three months with yet another bank.
Staggered processing history with different banks in a short window indicates the merchant has been shut down on three occasions.
2. What’s going on in your country?
There are certain parts of the world – countries in turmoil or those notoriously known for corruption – in which acquiring banks and processors simply must refrain from doing business. It’s not a good time to open a business in, for example Syria or Iraq, as well as several African nations. The risk is just too great.
3. Product pricing that defies logic
We’ve come across websites on which the products for sale are ridiculously expensive. This creates an air of suspicion among merchant services providers and bank. It’s possible the website could be a front for something illicit and illegal.
4. Monthly volume and average ticket discrepancy
A merchant who has a modest processing volume of $5,000 per month and an average ticket amount of $500 might raise a red flag. It is possible that the merchant only processes a small number of transactions each month; or it could mean the merchant is hiding a portion of revenue.
5. We simply don’t accept your industry
Instabill has a prohibited list: A list of industries for which we do not offer payment solutions. It doesn’t mean that the industry is necessarily illegal. What it means is that the industry bears too high a risk for a processor or an acquiring bank to take on.
How Payment Processors Can Verify Merchants
Along with our merchant account application checklist that requests the appropriate know-your-customer (KYC) documents, account managers at Instabill utilize other verification tools to vet potential merchant partners.
When Instabill is underwriting a potential merchant, we do so not only for our own protection, but also for our banking partners, with whom maintaining our credibility is critical.
We Do Startups! Need a Merchant Account
Although merchants with good processing history earn approvals more often than not, Instabill is proud to offer merchant accounts for startup businesses with a bank reference letter. Our representatives are on hand Monday through Friday (8 a.m.-6 p.m., US eastern time) at 1-800-318-2713, or by clicking the live chat option below.