High Risk Payments: A Risky Business?

Imagine yourself as an entrepreneur studying new burgeoning industries for your next endeavor. You are researching the next best products to maximize market share and anticipate new demands. During your probe, you come across something that causes you to pause. You discover that the industry deals in “high risk payments.” Is this really something that should cause you to turn tail and run, especially if the industry is booming? Well, let’s explore what high risk means, and how high risk merchant accounts play a role in helping build your new burgeoning business safely.

High Risk Payments, What’s in a Name?

When acquiring banks classify a business as a high risk industry, they are focusing specifically on payment processing. For loans or other related fields, this term may be shared. And by payment processing, they specifically relate to debit and credit card payment processing. With debit, credit card, and other forms of electronic payments rising in popularity and preference amongst consumers, banks are wary of the risks associated with these high risk payments in certain industries.

High Risk Factors

High Risk Factors

There are a few factors banks and payment processors take into account before approving a business for a high risk merchant account. Here are some of the factors that acquiring banks flag during their underwriting process.
  • eCommerce Businesses: These are exclusively card-not-present merchants. Without a sales representative taking active measures to ensure the identity of a customer, these eCommerce businesses are rife with fraudulent high risk payments from debit and credit card transactions.
  • Industry Regulations: These types of businesses deal with products that are under constant government scrutiny and regulations. For example, the vape industry, firearms merchants, and alcohol vendors.
  • Reputational Risks: Though not illegal, these industries have reputations in mainstream society as taboo or “hush-hush.” Obviously, the adult entertainment industry falls into this category along with vape companies, firearms, and multi-level marketing models (or MLM) are just a few that frequently accept high risk payments.
  • High Ticket Size Chargebacks: These businesses face higher than usual or high ticket size chargebacks compared to other industries. These businesses include travel booking businesses, high-ticket coaching, business consulting, and web design/SEO services are common in this category of high risk payment processors.
  • Continuity or Recurring Billing Models: Consumers often forget about or are not aware of a continuity billing model after they have signed up for a one-time service. Common industries are subscription boxes, shopping & membership clubs, background checks, and credit monitoring services.
  • Bad Credit: No one is perfect, and some businesses and business owners have a history of dealing with bad luck or a down-turn of the economy. Banks rarely believe in second chances, but some payment processors, like PayKings, believe in sustainability.

No Risk, No Reward

As shown above, many of the highest-grossing global industries can be labeled by payment processors as high risk. The vape industry alone is projected to boom to $61 billion by 2025 and the adult entertainment industry takes in billions of dollars year after year. However, before you decide to set up your high risk business, you need to ensure you can get approved to accept debit and credit card payments through a high risk merchant account. Where many banks and payment processors like PayPal decline you due to high risk. The payment processing experts at PayKings have relationships with 20+ acquiring banks and know the ins and outs of high risk industries and will work our hardest to get your high risk merchant account approved at the best rates. We make business less risky. Apply for your free quote today!

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