Operating a high-risk business is tough. Processing payments shouldn’t be one of your headaches. But let’s face it…
Payment processing is an ongoing headache for high-risk merchants. High fees, account terminations, chargebacks — the challenges never end.
Here’s the worst part:
The majority of business owners don’t know they’re high-risk until their payment processor drops them. It’s a game over moment that’s completely avoidable.
In this detailed guide, we’re going to cover:
- What Does It Mean To Be High-Risk?
- How To Overcome The Costs Of High-Risk Payment Processing
- Payment Challenges In High Risk: Proven Solutions
- How To Protect Yourself Against Payment Issues
What Does It Mean To Be High-Risk?
Let’s start with something many payment processors won’t tell you…
It’s not always fair.
Companies like 2Accept specialize in overcoming payment challenges in high-risk sectors by helping you understand why your business gets flagged in the first place. Payment processors apply a specific set of criteria to determine your risk level. Some of these factors are completely outside of your control.
Here are some of the most common risk factors:
Merchants in specific high-risk industries are automatically flagged as high-risk. These industries include gambling, adult content, CBD, travel, and subscriptions. The processor doesn’t care if your chargeback rate is 0% — you’re high-risk by virtue of your industry.
Processing high volumes of money also sets you apart. For the majority of payment processors, processing over $20,000 per month or having an average transaction size of over $500 automatically sets you in the high-risk category.
Chargebacks are a serious risk factor as well.
Most payment processors have an arbitrary chargeback cap of 1% of total dollar volume. If you exceed that percentage, your merchant fees double, triple, or even quadruple. Chargeback volume is up 51 percent over the past year. It’s more important now than ever to have control of your chargebacks.
It only gets more severe:
Merchants with no existing credit history are the most likely to be flagged as high-risk. New payment processors see your business as a risk. They don’t know you, and they see starting a business as an automatic risk.
The Real Costs Of High-Risk Payment Processing
Payment processing for high-risk accounts isn’t just expensive…
It’s a soul-sucking process.
Normal businesses pay normal processing fees. High-risk businesses have to tack on 2% or more to those fees. When your business is processing thousands of transactions per month, that 2% is a major chunk of change.
Did you know about these hidden fees?
Rolling reserves are standard practice for high-risk processing. 5-10% of your monthly revenue will be held by your payment processor for 180 days or more. Money that you can’t touch. Money you need to keep the lights on at your business.
Chargeback fees stack up quickly as well. Standard businesses get charged $15-25 per chargeback. High-risk businesses? $50-100 per chargeback. Multiply that by the number of chargebacks you’ve processed this year, and it’s a grim picture.
$1,000 setup fees are just the start of the pricing journey. Annual fees. Monthly minimums. Early termination penalties.
The list goes on, and it’s a terrible surprise when you get hit with one of those hidden fees.
Payment Challenges In High Risk: Proven Solutions
OK, this part is going to sound grim, but stick with me. We’re here to provide solutions.
The solutions we’re going to talk about really work. I promise:
Diversify Your Payment Processors
Don’t get locked into one processor.
One processor account termination should not be a fatal blow to your business. Experienced high-risk merchants have established relationships with 2-4 different payment processors at all times. Yes, it’s a greater expense upfront, but if one processor drops your account (and it will), you have systems in place to handle the new volume.
Fight Fraud Aggressively
Studies indicate 71% of businesses have experienced payment fraud attacks recently.
You need layered security protection. Address verification systems. 3D Secure customer authentication. Real-time transaction monitoring. Any number of fraud screening tools that identify fraud before it becomes an expensive chargeback.
Artificial intelligence-powered fraud detection is worth the price. AI-powered machine learning detects fraudulent transaction patterns humans can’t see. Identify fraud before it occurs and save thousands in chargeback expenses.
Master The Art Of Chargeback Management
Chargebacks will happen. Get used to it.
The real question is how you handle them. Documentation is key. Document everything from every transaction, customer interaction, every shipping confirmation. When a chargeback strikes, you need evidence to fight it immediately.
Use your billing descriptors on credit card statements to the max. Clear, detailed descriptors help customers identify who they are purchasing from. Chargebacks happen when customers don’t recognize a charge. Make it obvious.
Pay attention to customer complaints. Chargebacks start with a customer service issue. Solve customer problems immediately before they start dispute proceedings.
Choose The Right Payment Processor
Not all high-risk processors are made the same.
Look for these things:
Years of industry experience matter. Choose a processor who specializes in your industry. No one knows your challenges and regulatory requirements like a specialized team.
Do they offer chargeback management tools? The best processors offer real-time alerts, and chargeback dispute resolution services. You don’t need to be fighting chargebacks on your own.
Understand their fee structure. Hidden fees are the death of high-risk businesses. Transparent pricing and no surprises beat obfuscation any day of the week.
How To Protect Yourself Against Payment Issues
Protection starts with a close eye on data.
Track metrics like your chargeback ratio, approval rates, and transaction values. Key performance indicators (KPI) point out your problem areas before they spiral out of control.
Pay attention to customer feedback. Negative reviews and customer comments are early warning signs of chargebacks to come. Correct the issues before they happen.
Develop strict policies around:
Refund policies are clearly defined and easy for the customer to understand. A refund policy should never be a mystery.
Product descriptions are thorough. Photos are clear. Your customers have reasonable expectations of what they’re purchasing.
Shipping timelines are transparent with tracking updates. Shipping problems are a leading cause of payment disputes.
Stay Compliant
Compliance is not a matter of if but when.
PCI DSS compliance is a must for all high-risk businesses. Cardholder data protection is a necessary evil. Processors drop non-compliant businesses quickly. Invest in security from day one.
Regional compliance regulations matter. All regions have specific rules for payments. Cross-border payment processing is always more involved than domestic rules.
Build Relationships
Payment processors are not the enemy.
Talk to your account manager regularly. Business updates, growth plans, challenges, and concerns all build relationships and lead to better payment terms and quicker resolutions.
Be transparent about challenges. Withholding issues will never make them go away. Payment processors want to work with you to find solutions.
Wrapping This Up
Payment challenges in high-risk industries are real. But they’re not impossible.
Understanding your specific risk factors is essential. Adjust your business model and implement practices to manage these risks. Diversify processors, fight fraud aggressively, and master chargeback management.
Some critical takeaways to remember:
Track your metrics like your life depends on it. Metrics reveal the areas you need to improve.
Invest in the right fraud prevention tools. Prevention is less expensive than the cure.
Choose processors with deep industry experience. Specialized experience beats generic processing every time.
Build a relationship with your processors and bank team. Maintain good communication to prevent these disasters from ever happening.
High-risk payment processing is a challenge. But with the right preparation and strategy, you can build a stable payment processing system that underpins your continued growth. Implement these solutions immediately, before payment processing problems decimate your business.
You have control of your payment processing success. Take action today.
