The Lowdown on Low-Risk and High-Risk Payment Processing

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If you're doing business, your ability to process customer payments is crucial to your survival. Besides, the ability to do safely and quickly is vital for your success. This is where a high risk payment processing company comes in handy as it will connect you to a merchant account which, with its payment gateway, you'll bask in the radiant generosity of your clients. Payment providers and banks will first examine and assess the risks connected to your business before they decide whether or not to approve you for payment processing. If you're a high-risk business, you'll get higher interests. They can even refuse to give you a merchant account.

Are you a high-risk merchant?

Before being approved for a merchant account, payment processors will factor whether your business is associated with reasonable risks. They will look at factors such as your reputation, how long you've been in business, and more. Your business will be categorized as high-risk if:

• You, as a merchant, have poor credit.

• Your business is new, without a strong reputation yet.

• The industry you're in has a high chargeback ratio.

• You're dealing with a high fraud rate.

• Your business doesn't have financial stability.

• Most of your clients purchase months in advance, and the service or product is consumed much later.

On the other hand, payment processing companies will categorize your business as low-risk if:

• You have zero to low chargeback ratio.

• You're incorporated in a low-risk country.

• You're in a low-risk industry.

• Your business processes less than $20,000 per month.

• Your average ticket size is less than $50.

All in all, the risk assessment factors vary from processor to processor. However, the basic factors have to do with fraud and higher chargeback rates.

How risky is working with a high-risk merchant?

Let's face it! All businesses are risky. If this weren't the case, there wouldn't be words like 'liquidation' or 'bankruptcy' in the business world. However, the risk factor has less to do with your business' risk of failure because the risk analysis focuses mostly on chargeback potential and fraud.

Banks and other financial institutions are mainly interested in keeping a perfect track record with payment method providers like Mastercard and Visa, as well as with state legislators. High chargeback rates and fraudulent activities will attract liability on the side of the payment processing company, which can even make it lose its license.

How likely is your business to experience chargebacks?

The more the chargebacks, the higher the risk. Although the chargeback criteria vary from bank to bank, the main factors that the processors will assess to evaluate whether your business is high or low-risk are as follows:

• Industry type - Is your business in an industry plagued by a high frequency of chargebacks?

• Accepted and regional currencies - Low-risk chances are higher if your business is using a single currency and in a low-risk area such as Singapore, EU, USA, Canada, Australia, Japan, and South Korea.

• Truthfulness in business communication and advertising - Processors will assess what you claim your services or products will do for your customers. Based on these claims, they could feel you've promised more than you can deliver, which can result in higher chargeback rates.