If you run any type of business, either online or bricks and mortar, it’s essential that you have reliable access to a credit or debit card payment processing facility. With that in mind, securing a reliable merchant account is absolutely essential.
An issue that you might have to face if you operate in a certain type of industry or have specific business characteristics, is that you may find yourself categorized as high-risk.
In simple terms, if you need access to a merchant account that accommodates online gaming payment processing, that’s the sort of requirement that would put you in a so-called high-risk merchant account category.
In a nutshell, these merchant accounts are specifically designed for businesses that face greater exposure to chargebacks, fraud, regulatory scrutiny, or financial volatility. You may well be comfortable with your client base and profile, but it also makes sense to understand how your business is perceived, and why it might be considered riskier than other ventures operating in a different sphere.
To get the right type of merchant account that works for you, it is absolutely critical that you have a good understanding of how and why your business might meet a general high-risk definition. A good clue as to how your business type and sector is viewed would be if you’ve already faced challenges working with mainstream payment processors like Stripe, Square, or PayPal.
A Brief Overview of How High-risk is Defined
In general terms, a high-risk merchant account is essentially a payment processing solution for businesses that fall outside the low-risk profile most traditional processors prefer.
To be categorized as being a riskier merchant account proposition, you are probably going to be a business that is more likely to experience payment disputes, have to contend with regulatory complications, or display unpredictable financial behavior. All of these traits and behaviors are going to instantly make you less attractive to banks and underwriters.
To compensate for this perceived risk, you will often be subject to higher fees, longer approval processes, and stricter contract terms. However, a positive aspect to consider is that these accounts also offer more tailored support for industries with more niche needs.
What Gets a Business Labeled as High-risk?
There are several factors that can trigger this classification. If you run a business that operates in a sector with a history of high chargeback rates, has a number of legal gray areas, or where fast-changing regulations are frequently flagged, these are classic triggers for being classed as a high-risk merchant.
Having said that, a business model that relies on recurring billing, sells high-ticket items, or involves a decent volume of international transactions may also be considered high-risk.
It is also worth pointing out that even a brand-new company with no payment processing history could land in this category simply because they have no track record to assess.
What Sort of Industries are Regularly Classed as Risky?
There’s a number of Industries that are commonly considered as high-risk. These include adult entertainment, subscription box services, CBD and cannabis product sales, ticketing and travel booking services, tech support companies, cryptocurrency platforms, multi-level marketing, and nutraceuticals.
Although this is already a fairly extensive list, it is not an exhaustive one. For instance, another standout example is the online gaming industry. Running an online gaming platform, whether it’s skill-based, casino-style, or sweepstakes-driven, often places your business in the high-risk category.
Online gaming sites are seen as particularly high-risk for several reasons. A prime example of this would be with regard to chargebacks, which are usually more frequent than other industries. This is especially so when users dispute payments after losing games or claiming unfulfilled rewards.
Another issue is that the risk of fraud is also elevated, with stolen credit cards and account hacks being common challenges in the gaming world. Add in a complex and often inconsistent legal landscape, where rules can vary significantly between states or countries, and you quickly have a scenario that many traditional payment processors simply don’t want to deal with.
The bottom line for any online gaming businesses, or one operating in other high-risk sectors mentioned, a high-risk merchant account isn’t regarded as optional, it’s pivotal to being able to run your business smoothly.
No Need to Panic if your Business is Labeled as High-risk
Although you can expect a different experience compared to low-risk merchant accounts, there’s a perfectly acceptable solution out there, you just need to find the right payment processing provider that meets your needs.
First of all, the application and underwriting process will be more in-depth. You may need to submit financial statements, demonstrate previous processing history, submit business plans, and supply licensing documents. Once your application has been approved, your processing fees are likely to be higher than mainstream options. These typically range from 4% to 10% per transaction.
You also need to be mindful that, In some cases, the processor may hold back a percentage of your revenue in a rolling reserve to cover potential chargebacks. There may also be longer setup times and more frequent reviews of your account activity.
Although these terms may seem like a burden at first, they’re actually designed to provide more stability in industries where financial swings are common. High-risk merchant accounts often come with additional fraud protection, chargeback mitigation tools, and dedicated account managers who understand your business model better than a generic service provider ever could.
Finding the Right Payment Solution
A key point to take on board is that your goal isn’t just to get approved, it’s to find a partner who can support your business long-term without disruptions.
You don’t want to have the disruptive experience of being approved by a mainstream processor, only to have your account frozen or terminated suddenly when red flags are raised through activity. That kind of interruption can be very damaging to your business
It’s always a good idea to assess your risk profile in a realistic way and find a solution that meets both your immediate and future needs.
Remember, high-risk merchant accounts exist because not all businesses fit into a standard model. That’s okay because when you choose the right processor, you can get the infrastructure you need to grow and scale while managing your unique challenges.
Being labeled as high-risk doesn’t have to be a setback. It’s about finding the right fit for your business. Working with a high-risk merchant account provider can give you the stability and tools needed to operate with confidence.
