Is Your Business Considered a High-Risk Merchant?


For a merchant business in this day and age, processing transactions doesn’t have to end with your current jurisdiction. Often times, you’ll receive orders from customers that live in other countries. To cater to these types of customers, you’d have to facilitate virtual transactions, wherein customers would make payments for your wares without making a physical contact with you.

To handle these sorts of transactions, you’d need a merchant account capable of accepting international payment. So what do you do? Approach any nearby financial institution, right?

Well, if only it was that easy!

For most financial institutions, the nature of your business will first have to be examined for its “level of risk” before they decide whether to honor or decline your request. Consequently, merchants are categorized as either high-risk or low-risk businesses.

This then brings us to the question of the day: “what kind of business is considered a high-risk merchant.”

Let’s find out!

What is a low-risk merchant?

To understand what a high-risk merchant business is all about, one has to first understand what a low-risk one is. And just as the name suggests, a low-risk merchant is a merchant business that carries a significantly lesser amount of risk. As compared with a high-risk merchant account, low-risk accounts often attract lesser fees and charges from banks. And their applications are mostly granted, unlike the high-risk merchants, which are often declined.

But what kinds of merchants are considered low-risk? Banks will consider your eCommerce business a low-risk if it satisfies the following conditions:

  • Your maximum monthly business revenue is $20,000
  • Your average ticket size is $50
  • You use fraud filters like 3D secure to prevent fraudulent activities on your store/site.
  • Your payment processing company also handles your payments page.
  • Your business operates in a low-risk industry like home appliances, grocery goods, food, fashion, apparel, books, pet, etc.
  • Your business exists majorly in low-risk regions like the USA, Canada, Australia, South Korea, Singapore, or any EU country.

What is a high-risk merchant?

Unlike in the case of low-risk merchants, there are no definite criteria for categorizing businesses as high-risk merchants because different payment processors use a different set of criteria. However, from the nature of a business perspective, most Card-not-present merchants are considered high-risk. This includes businesses like eCommerce stores, Forex, gaming, financial services, travel and lots more.

So, let’s say you want to get a forex merchant account for your forex trading website, you can expect the payment processing service to consider you as a high-risk merchant.

Generally speaking, though, two of the biggest criteria used in categorizing businesses as high-risk are chargebacks and fraud potential. If your business receives a lot of chargebacks or is too susceptible to fraud attacks, it will most likely be considered a high-risk merchant.

Simply put, the more the chargebacks on your eCommerce store, the higher the risk you bear.

Getting a payment service for your high-risk merchant

Due to the perceived risk associated with high-risk merchants, the only set of institutions willing to work with them are mostly acquirers and payment processing services, many of which charge huge fees to accept liability for the risk they’re taking on.

However, there are still some payment processors, like iPayTotal, who are willing to help high-risk businesses accept virtual payments without paying through their noses. They provide end-to-end high-risk merchant account payment solutions for businesses around the globe. Thanks to their healthy relationships with many National and International Acquiring Partners, they’re able to offer reliable debit, credit, and Echeck Processing to almost every industry considered high-risk.

Reducing the risk on your merchant

Of course, if your business is run in a country or an industry that’s considered risky, such a business will be labeled high-risk, no doubt. However, you have to remember that the rate of chargebacks and fraud cases happening in and around a business can also contribute to a merchant being tagged high-risk.

Therefore, you should strive to ensure that your business isn’t placed in the category of high-risk just because, at one point, you allowed a scammer to invade your site or didn’t manage chargebacks effectively. Always find new ways to minimize your chargeback rate, as well as mitigating the potential for fraud in your business. By doing this, you’ll be reducing your risk level.

Don’t know how to manage chargebacks appropriately? Can’t seem to stop fraudsters from attacking your store? Feel free to contact iPayTotal today; they have just about the perfect solution for you!

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