The upside of being a high risk payment processor is no secret: high risk, high return. The downside is defending your business from unsavory, misguided and fraudulent merchants. It’s those merchants, who unfortunately, tend to be drawn to high risk merchant services providers, and something which those working in high risk merchant services must accept.
And we do, relying on stellar underwriting policies and procedures (more about that later).
Being a high risk payment processor, it comes with the territory
Recently we received an inquiry from a merchant who apparently owned a printing business, designing wedding invitations, brochures and pamphlets. He needed a point-of-sale merchant account, and we were happy to oblige. As the relationship progressed, however, we discovered more and more inconsistencies, such as:
- His business which was located in a residential complex (odd, but not terribly).
- He repeatedly called us, multiple times each day, to check the status of his merchant account which is a red flag in itself.
- In verifying his identity as the business owner, the KYC documents he provided pointed to someone else, which proved to be the deal-breaker.
The real loss for a high risk payment processors
In cases such as the aforementioned, the real and true loss is time – the amount of time that a high risk payment processor spends familiarizing, cultivating and coaching the merchant to processing payments, only to find the merchant was up to no good. Going a step further, that loss of time results in the loss of revenue, the time taken away from assisting a legitimate merchant to successfully, legitimately processing payments.
A message for fraudulent merchants
Back to our underwriting policies…
In cases where fraud is suspected, our underwriting procedures – or that of any seasoned high risk payment processor – are much more sophisticated than they were five years ago, or even two years ago. There are specific KYC documents we request, merchants need to submit without question or negotiation. Failure to deliver the required documents only delays the merchant account approval process and increases suspicion of the merchant and business. Nobody wins.
One thing the best high risk payment processors do
In a fraction of cases, a fraudulent merchant may succeed in getting a merchant account. As we mentioned above, vetting merchants has become more sophisticated in recent years. Fraudsters, however, do their collective best in devising new ideas to pass themselves off as legitimate.
For a high risk payment processor who is proactive in mitigating fraud, underwriting merchants never truly ceases. The underwriting process continues by frequently monitoring merchant websites and looking for significant changes such as:
- Sudden, significant increases in product prices (a tell-tale sign of transaction laundering)
- Appearance and sale of products that were not included in the original merchant account contract
Payment processors are also very proactive to call on the high risk merchant’s customers to get details out about their online shopping experience.
- Did they receive the product?
- Are they satisfied with the product?
- Was the product fairly priced?
About that print shop merchant
Finally, that print shop merchant we mentioned above? When he received his decline, that was the last we heard of him. Considering the aggressive manner in which he was pursuing a merchant account, one would think he would’ve expressed his disappointment. We cannot ascertain, of course, but we figure he moved on to another high risk payment processor to ply his trade.
To discuss why Instabill is the high risk payment processor for your business, speak live with a merchant account manager at 1-800-530-2444.
