Why are Gaming Businesses High Risk?
Compared to other business types the gaming business presents a higher risk to the underwriter and that is why this merchant business is called high risk by banks and merchant account providers.
The gaming business, also known as online gambling, has over the years become a crucial part of a well-organized and profitable gambling industry. The gaming business merchants proffer all kinds of gambling in the form of casinos, sports wagering, online poker, online bingo and mobile gaming.
The gaming business merchants are called high risk merchant accounts because of the following reasons:
- The gaming business has a high volume turnover which is considered a risk factor by banks and merchant account providers who are giving them a credit line.
- The gaming businesses are based offshore and there have been instances of money laundering and fraud making it a high risk business.
- The product offered by the gaming business is a high risk product as there is a potential for numerous chargebacks and refunds, increasing the liability the processor would likely incur when processing for the business.
- The gaming business merchants may be relatively new in their fields and thus have no credit line, increasing the chances of insolvency and thus placing the bank/merchant account provider underwriting them at a financial risk.
This does not mean that banks and other credit card processors do not give high risk merchants like the gaming businesses, merchant accounts. There are numerous merchant account providers, like Instabill.com, that offer high risk merchant accounts in the form of Offshore Merchant Accounts. They may have higher transaction costs and reserves, but in the long run, they would allow unlimited sales volume—which is the basis of the gaming business industry.