The article title says it all: Risky Business.
We’re not talking about the 1983 Tom Cruise breakout film. It is the title of an article in the June edition of Digital Transactions, in which author and editor Kevin Woodward expertly explains the acquirer and processor side of the ‘high risk-high return’ nature of processing credit card payments for high risk business types: online gaming, tech support, online dating and travel, among other industries.
High risk payment processing is a balancing act, an obstacle course and a winding with detours and pitfalls. The returns, however, can be substantial.
The article marked the second time this year Instabill was cited in Digital Transactions, regarded as one of the industry’s most prominent periodicals.
Visa Chargeback and Fraud Threshold: A Game-Changer for Merchants
When Visa announced it was making its chargeback threshold to 1 percent or 100 chargebacks per month for domestic and international merchants beginning Jan. 1 of this year, it shook the high risk payment processing population to its core.
As detailed in the article, Instabill Sales Manager Wendy Jacques noted, “These regulations really make you understand how to break down processing statements. Processing statements are all different, so learning how to read them during the underwriting phase is a big step in whether we move forward in the applications process with the merchant.”
Visa’s new chargeback standard has also made reserves more important than ever. Banks need to protect themselves against several hazards such as chargebacks and bankruptcy. Reserves can run as high as 10 percent, but as Adil Moussa, Principal of Adil Consulting in Omaha, Neb., said that while necessary, they need to be at a rate where the merchant can run his/her business.
The CFPB: Omnipresent
Over the last three years, high risk merchants have increasingly faced another challenge: Oversight from the Consumer Finance Protection Bureau (CFPB) and the Federal Trade Commission, which has targeted lenders and debt collection merchants among others, as well as their payment processors.
As a result, it is more difficult for a high risk merchant to get a merchant account. Both agencies have made banks increasingly leery of high risk industries.
High Risk Businesses are Here to Stay
While the CFPB and the FTC gain traction in their oversight, high risk industries will never go away. Therefore, there will always be a need for high risk payment processing, says Ms. Jacques.
“The challenge lies in how we can become smarter in educating the merchants on better business practices to keep their high risk merchant account operating.”
Instabill offers high risk payment processing solutions. For a free quote, speak with a live merchant account manager at 1-800-318-2713 or select the live chat option below.
