I frequently talk with merchants who don’t understand why their business is high risk, but to me, knowing is second nature. Working closely with Instabill’s banking partners has given me the ability of knowing exactly what acquiring banks look for when determining a business’s risk factor.
Banks look at the different features of your business that may potentially jeopardize the integrity of their bank’s name. Your risk factor could be the result of one feature or a combination of several. Let’s take a look at the different features banks consider when labeling you a high risk merchant.
Chargebacks and Refunds
One feature acquiring banks consider when determining your risk factor is how many chargebacks and refunds your business may receive. If you own a business that has a long period of time between customer payment and delivery of goods—like furniture sales or a travel agency—then this will definitely raise your risk factor. The delay of delivered goods gives customers time to change their minds about their purchases and request chargebacks or refunds. Learn how to prevent chargebacks, and how to fight them.
Type of Industry
Some industry types have strict age regulations–adult entertainment, tobacco, cigars, alcohol—that will cause acquiring banks to label your business as high risk. The replica industry is high risk because unscrupulous merchants may try to pass off their goods as originals. Internet gambling and online casinos are high risk because it is illegal in the United States, although hopefully not for much longer.
Payment Processing History
If you already have a payment processing history of high chargebacks and refunds, this will land your business in the high risk pool. Having a terminated merchant account will also grant you access to that pool. Your payment processing history will say a lot to acquiring banks about what they can expect from you. Don’t get too discouraged, though. We can work with you even if you do have a bad payment processing history.
Payment Methods
Some payment methods are more high risk than others are because they raise the risk factor of fraud or buyer’s remorse. Acquiring banks consider card-not-present transactions (e.g. online payments, mail order/telephone order payments) very high risk because the cardholder is not present to sign the receipt for their credit card purchase. Since there is no signature required, it’s much easier to get away with a fraudulent, unauthorized purchase.
Payment methods that automatically charge customers each month, such as subscription-based payment methods or continuity billing, also raise your business’s high risk level. The customer may not recognize the charge and initiate a chargeback or, after several months of authorizing charges, they may want to cancel the service.
Processing Solutions for the High Risk Merchant
Offshore payment processing is a great solution if you are a high risk merchant. Offshore banks often have fewer trading restrictions, and their tax exemptions are an added bonus! Lucky for you, Instabill has a trusted network of offshore banks that we work with every day. If you need help getting a merchant account, contact us online or call us toll-free at 1-800-318-2713.
