Your business may be considered “high risk,” in which case, you will not be approved for a regular merchant account with a financial institution. High risk merchant accounts are offered for clients who may have one or more of the following characteristics:
1. Businesses vulnerable to frequent chargebacks
A high volume of chargebacks, money refunded back to the customer without your authorization, is one of the highest problems faced by merchants. A chargeback can occur for several reasons like identity theft or a credit payment claimed not to have been authorized. These forced refunds cause a loss of profit and product, and it is not guaranteed that the customer will pay what he or she owes after a chargeback is processed.
Accepting e-check payments makes it more difficult for customers to initiate a chargeback while they still can, and inconvenient to dispute charges. Merchants also don’t have to update bank account information as often as they do credit and debit card information.
2. Blacklisted companies
Some merchant accounts are terminated because of chargebacks, meaning they will not be accepted by most merchant account providers.
3. Industries with poor reputations
Debt collection agencies, for example, have a reputation for being annoying and overbearing. This affects consumers’ willingness to pay, especially if a collector is attempting to obtain money from services rendered years ago. This industry, in particular, is risky because there are many agencies that do not operate reputably and honestly, tarnishing the industry’s reputation as a whole, and preventing legitimate collection agencies from being approved for merchant accounts.
International merchant accounts are frequently considered to be “high risk” as well because of the lack of transparency commonly seen with offshore accounts. International accounts can be legitimate and beneficial businesses, but many international merchants have earned a reputation for avoiding reasonable and honest practices.
Collections agencies and other industries are known for a poor reputation must follow all laws and guidelines associated with their business and are more likely to be approved for a high-risk merchant account that can protect them from chargebacks and fraudulent payments. Such payments are made to deter bill collectors from contacting consumers, temporarily at least, and without services like Same Day ACH or verification services, these kinds of payments can detriment a business’ cash flow consistency.
4. Businesses vulnerable to fraud
Much like debt collection agencies, many businesses can be vulnerable to fraudulent payments. Fraudulent payments are made by identity theft (unfortunately, resulting in future chargebacks when the theft is discovered), or by phishing and scamming efforts. Consumers can also intentionally provide false credit or debit card numbers in order to immediately restore a subscription service; this may take several days to sort out with traditional ACH processing.
A high-risk merchant account that offers Same Day ACH will help such businesses discover and address fraudulent charges, and accurately provide customers with services they are or aren’t owed.
5. New businesses
Some newly established businesses are unable to set up a regular merchant account because their history of credit processing has not yet been established. Banks and ACH processing institutions do not want to assume liability of clients that have not proved themselves to be reliable and trustworthy.
6. Companies that primarily accept card-not-present transactions
MOTO payments, or card-not-present payments, incur higher risk than card-present transactions, such as those that occur in stores with physical payment terminals.
A reliable high-risk merchant account will process both MOTO and card-present payments, as well as e-check payments. For some industries accepting card-not-present payments is simply more realistic and convenient for its customers.
7. Businesses with recurring billing cycles
Businesses that charge customers on a monthly, or even yearly basis, are often susceptible to receiving payments late or not at all, similar to those industries that are vulnerable to false credit or debit card numbers. Without a consistent and reliable cash flow, your business is always at-risk.
Your high-risk merchant account should allow you to offer several payment options, including:
· Debit transactions
· Credit transactions
· MOTO payments
· ACH processing
These options ensure convenience for customers to pay bills on time, or be able to pay for products or services more easily. In addition to payment processing, your account provider should offer fraud and chargeback protection, so you can anticipate, prevent and fix fraudulent or otherwise problematic payments. Same Day ACH, for example, allows for erroneous payments to be returned and re-submitted the same day they are originated.
Apply for a high risk merchant account providers UK account here.