Not necessarily.  Payment processors and financial institutions alike use the term high risk merchant to cover a broad range of situations that place merchants into a category where potential for monetary loss is higher than normal.  There is risk associated with every business and risk taking should be analyzed on an individual basis.  However, even the most high risk merchant service providers will tell you that their favorite merchant is a high risk business with a low risk signer.  Now wait… how does that make sense?  You can’t have low risk and high risk in the same sentence, can you?  You’re right, low risk and high risk do not go together.  However, the thought process behind this is that when you have an owner or business that has strong financials and credit ratings the probability the business will be run ethically, efficiently, and responsibly is much greater.  In turn, the chance for loss is assumedly much lower than that of the contrary.


How do you end up in the high risk merchant category?


It’s circumstantial and all businesses need to be evaluated on an individual basis, but there are guidelines that when followed provide a good barometer as to where you place on a risk scale.


For example, if you have a brick and mortar retail location and you primarily swipe cards; this is perceived to be the safest type of transaction.  If you sell strictly online you are perceived to be high risk because the card and purchaser is not in your presence when the transaction takes place.  Brick and mortar retailers with e-commerce businesses are less risky than those who strictly sell online, but more risky than those who only sell within the confines of their establishment.


This is just a scratch of the surface because your risk level can also elevate if your goods or services involve:

  • Billing in advance
  • Special certifications or licenses
  • Age verification
  • Regulation by a governing body
  • Legal scrutiny
  • Trial offers
  • Dependence on third party fulfillment, or
  • The industry, product, service, billing model or business model is known for being a harbor to fraud or chargebacks.

Unfortunately, these aren’t the only factors and risk appetite is different from one payment processor to another.  Yet, sometimes it’s not all about the business itself.


High Risk Is Not Solely Focused on the Business


In most cases, the nature of the owner is equally, if not more, important than the business.  All businesses and particularly high risk businesses need to be responsibly.  If the integrity of the owner’s ability to run a business effectively and responsibly is in question, you are most certainly going to be placed in the high risk category.  Some of what payment processors look at is:

  • Credit rating and credit history
  • Bankruptcies, divorces, leans, or judgements
  • Current financial state and financial history of the business and/or owner.
  • Current payment processing history
  • TMF or MATCH listings

For example, a business owner that owns a low risk business such as a restaurant but also has an issue with one or more of the aforementioned circumstances will most likely need a high risk merchant account.  Likewise, owning a high risk business such as an online tobacco store with no issue of these circumstances will also need a high risk merchant account.  The difference being that the owner with stronger credentials will have greater leverage with rate and fee negotiations as well as an overall easier time getting approved.


Different types of high risk merchants


High Risk Merchant: Owners of a business that do not display strong characteristics of responsible ownership. They don’t have strong credit or financials. There could be instances of instability or representations of poor decision making that alert merchant service providers to potential risk of loss.


High Risk Business Model or Billing Model: Most often easiest to recognize by transaction type of card not present.  This can be virtually any e-commerce, mail order, telephone order, or keyed-in transaction.  Advanced billing or recurring billing known as continuity including any type of trial offers.  This includes memberships, subscriptions, or multi-level marketing.


High Risk Goods & Services: High risk products and services fit into a wide variety of categories. Usually these products fall under the watchful eye of regulatory bodies such as the FDA, are experience legal pressures, require age verification, or are at risk for fraud or chargebacks such as high ticket items.


Some High Risk Payment Processors Close the Gap


Payment processors such as Painless Processing are quickly closing the gap in merchant services.  They position themselves to do everything possible for high risk merchants in order to keep them processing. They are known for being at the forefront of opportunities and pave the way for those opportunities to grow into movements and those movements into industries.  Whether it’s simply the ability to process payments or lower costs to ease cashflow restrictions; they do everything in their power to give merchants what they need.  They recognize the huge need and opportunity for high risk businesses and are enthusiastic about accepting more risk when other payment processors won’t. Painless Processing offers free consultations and savings quotes, an easy application process, and superior service.


Knowing this makes it easier to understand that even though you may be a high risk merchant it does not mean your business has to be risky and there are payment processors out there who understand your position.  They will work with you to help you achieve your goals and build your American dream.


High Risk Merchant Account Solutions