We received a call from a high risk merchant recently who, after he was informed that his industry was considered high risk, posed a common question:
‘How do I get out of being classified as high risk?’
The short answer is, you don’t. Of course, we were more eloquent with our high risk merchant. We explained to him that the distinction of high risk is given by a bank and/or a payment processor (such as Instabill) because there are risk factors surrounding your business that cause banks to take extra precautions such as:
- High chargeback rate
- Industry perception
- Imperfect credit/processing history
- E-Commerce merchants
Merchants in high risk industries will likely always be classified as such, but there are steps merchants can take to lower their risk profile.
An important (and overlooked) fact about e-commerce merchants
In the state of e-commerce today, online merchants are distinguished as high risk because they are more prone to fraud than physical store merchants. During an online transaction, the credit card is not present with the merchant at the point of sale – meaning the chances of fraud are higher (friendly fraud chargebacks, use of stolen credit cards).
At the checkout of a physical store, the merchant can ascertain the identity of the cardholder.
Perhaps unfortunately, e-commerce merchants will always be labeled more of a risk.
How a high risk merchant can lower a risk profile
- Lower your chargeback rate
Every online business deals with chargebacks – some more than others. If a high chargeback rate is keeping you from lowering your risk profile, action is needed. There are many proactive steps a merchant can take to significantly reduce chargebacks.
- Improve and build credit
Pay those bills, on time every time, both personal and business. Responsibility, consistency and punctuality are merchant traits that banks love.
- Multiple merchant accounts to ease volume restrictions
When merchants consistently near volume limits, banks tend to get nervous. The way to ease high volume restrictions is to open a second merchant account to split volume in half.
- Secure your transactions
E-commerce fraud, also called ‘card not present’ fraud, is skyrocketing since credit cards and physical points of sale are becoming more secure. Merchants should either opt to have 3D secure transactions in place or to outsource their payment platform to prevent hackers from stealing customer data.
Instabill can help you with all four
Instabill merchant account managers are on hand not just to help you launch your online business; they remain as consultants for the duration of your merchant account with Instabill. Speak directly with one today at 800-530-2444 to find out how to lower your risk profile.