I’m a High Risk Merchant: What Now?
Let’s face it – payment processing can be a risky business. In an effort to mitigate the inherent risk of fraud, unrecoverable chargebacks, and other potential losses, the payments industry has long been classifying merchants according to their performance against a number of measured variables. This classification has very real implications for business owners, and those deemed high risk often experience difficulty achieving competitive placement in the world of payments. Less favorable pricing, lengthy funding holds, large reserve requirements, and even the inability to maintain an account on a processor’s platform, are just a handful of the hurdles that higher risk merchants face. Below we’ll outline key steps that we advise high risk merchants to consider in an effort to effectively advocate for their business.
Find the right high risk payment processor: In an industry rife with misunderstood fees and pricing ambiguity, you could throw a rock and hit a payment processor that specializes in high risk processing. While not all of these “specialty” processors are unscrupulous, it is no secret that high risk merchants have less ability to shop the market and thus are often preyed upon by less savory members of our industry. Ask for a thorough explanation of the account setup, to include the proposed pricing structure, to ensure you’re landing in a good place.
Communicate Openly: An experienced payments professional should ask a series of detailed questions as part of your discovery meeting. A thorough understanding of how far in advance you accept payments, the delivery method of your products or services, the true nature of your business, and the methods with which you accept payments, are critical to understand prior to establishing your account. Failure to fully assess your unique variables could result in funding holds or future adverse action that may otherwise have been avoided.
Mitigate Risk: In an effort to proactively hedge loss exposure, implement measures to mitigate risk. These may include amplified customer screening, enhancing fraud prevention, enforcing additional verification requirement for eCommerce and MOTO transactions, and implementing a robust chargeback management system.
Stay Compliant: High risk industries are often subject to additional regulatory requirements. Ensure that you are intimately familiar and in compliance with any industry-specific rules and regulations. Annual PCI compliance questionnaire completion and attestation is critical, and is a Card Brand requirement for all U.S. merchants regardless of risk classification.
Maintain Transparency: Ensure that pricing and all applicable policies, including the manner in which you handle refunds, are clearly communicated to customers prior to rendering payment. Managing customer expectations helps to put you ahead of potential issues and reduces the propensity for future chargebacks.
Seek Expert Advice: Consider seeking guidance from financial professionals or consultants who specialize in your particular high risk industry. Specialists may be uniquely positioned to provide insight and strategies to help you thrive despite potential challenges.
The Bottom Line: While a high risk classification poses unique challenges, a reputable payment processor will be delighted to invest the time to fully understand the variables impacting your business, and partner with you to achieve a comfortable, long-term payments solution. If you’re a high risk merchant seeking a reliable partner, we’d love to connect. We’re here to help you chart your path toward continued success.