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High Risk Merchant Accounts & Shopify Payment Processing
Let’s talk about alternatives to Shopify Payments.
For most business startups, launching an eCommerce website guarantees a boost in sales. Shopify currently leads as the best eCommerce platform in the industry. Its drag-and-drop features make it easier for all entrepreneurs to set up and administer their own online businesses. Shopify’s default integrated Payment gateway is called Shopify Payments and it enables business owners to take control of their payouts directly on their accounts. Most merchants that can use internal Shopify Payments, will due to the built-in simplicity and integration. Plus, Shopify does charge an extra fee if merchants use an outside processor.
That being said, as your business grows, especially if you’re in an industry that may be labelled as “high risk”, Shopify Payments might not be the best solution for you. In fact, Shopify Payments has been known to drop merchants with no warning, leaving them high and dry when it comes to accepting digital payments from their customers. It’s time to look for an alternative!
Risks Of Third-Party Aggregators For High Risk Merchant Accounts
Many people don’t realize that Shopify Payments is a white-labeled version of the popular “Stripe” third-party payment aggregator. This means that they process your transactions through their own merchant account which gives you less room for risk, chargebacks and anything they might consider to be risky. Paypal is another popular third-party aggregator.
That being said, as your business grows, especially if you’re in an industry that may be labelled as “high risk”, Shopify Payments might not be the best solution for you. In fact, Shopify Payments has been known to drop merchants with no warning, leaving them high and dry when it comes to accepting digital payments from their customers. It’s time to look for an alternative!
Payment aggregators, like PayPal and Stripe, are not the best processors for a high risk merchant. Not only is processing with a third party aggregator asking for a high risk account to get shut down, but money transfers can be slower than with a traditional account. Additionally, their restrictions and various policies can hold back the growth of your business.
Third party aggregators have a few issues when it comes to high risk merchant accounts. These include:
- Paypal and Stripe have ZERO phone support and very poor email support. This means that if an issue arises with your account or you have a confusing freeze on funds, you won’t be able to get someone on the phone. We often get calls from frustrated merchants just happy to get ahold of someone willing to help.
- Stripe, Paypal and other third party aggregators have a similar flat rate pricing structure. This means one flat monthly discount rate and no monthly fees. This pricing structure is GREAT for startups and/or low volume merchants. However, once a merchant grows to more than 4-5 thousand in monthly sales volume then switching to a direct merchant account makes a lot of sense financially. With a direct merchant account, you’ll be able to see a clear breakdown of exactly where your money is going. Monthly fees are often worth a lower per transaction fee or percentage.
- Third party aggregates work to mitigate risk on their own end. Sadly, this creates a long list of unsupported industries. These industries could include nutraceuticals, adult industries, multi-currency accounts and certain travel businesses, just to name a few. Our list of unsupported industries is much shorter because we’ve been in the business for so long and have learned what to look for and how to best mitigate that risk. Have you been cancelled? Check out this post for tips for what to do when Paypal freezes your account.
What Does It Mean To Be Labelled “High Risk”?
Shopify has outlined the industries it considers to be high risk in its Shopify Payments Terms of Service. However, their label is broad and can be subjective. Many people don’t realize that Shopify’s integrated payment platform is actually a white labelled version of Stripe meaning that their terms and conditions must follow the Stripe’s underwriting guidelines. These guidelines are strict and often lead to merchant accounts with ANY chargebacks or fraud to be quickly shut down.
Some e-commerce businesses such as airline tickets, adult materials, or magazine subscriptions fall under the “High Risk” category due to the increased prevalence of fraud or chargeback attempts. There are no standard criteria in tagging a business as “High Risk.” Shopify follows its own arbitrary rules in categorizing high-risk e-commerce accounts.
Strict guidelines and low thresholds of risk tolerance mean that Shopify can drop your merchant account and freeze your funds at any time without warning. Many merchants have experienced this and filed corresponding complaints. Although Shopify Payments can drop your high risk merchant account, you can still use your Shopify eCommerce platform. However, you will not be able to accept payments or process any transactions until you find another processor who specializes in high risk industries.
We’ve collected and outlined our top tips and tricks for high risk merchants on our blog HERE.
What Should I Do If My Shopify Merchant Account Is On Hold?
Typically your Shopify Payments account will be put on hold with no warning, email or explanation. You may wake up one day to the message “you are unable to receive payouts”. This can be frustrating and potentially livelihood-threatening. On the bright side, you likely will still be able to accept payments, you simply won’t be able to transfer them to your own bank account. In reality, any money you don’t have in your hand, isn’t really your money at all, so of course, accepting payments in this way isn’t helpful at all.
According to Shopify a hold can be put on your account for a whole host of reasons including identity verification, “risky” orders, unfulfilled orders, or violations of the terms of service. According to forums, Shopify will likely still bill you for the monthly fee even when your account is on hold. Ideally you would get someone on the phone to explain the exact reasons for the hold, but unfortunately this isn’t as easy as it sounds. Shopify Payments has no phone support.
Your best bet will be to email them for help at support@shopify.com. In the meantime, we recommend you proactively switch to a different payment provider. You will hopefully be able to resolve the issue with Shopify and receive your held funds. However, in the meantime you’ll be able to process with same day payouts. There are many eager processors that stand out as an alternative to processing with Shopify payments.
Durango Merchant Services As An Alternative To Shopify Payments
If you’re in a high risk industry, have been dropped by Shopify Payments, or would simply like to be proactive in protecting your processing system, you’ll want to find a dedicated high risk merchant account provider. Having an established high risk account helps to mitigate the risk of holds and freezes on your hard earned money. You’ll want to choose a processing partner that meets your needs, protects your business, protects your customers and understands your priorities.
Keep in mind that Shopify will charge an additional fee for the use of an outside payment processor. That being said, the promise of consistent processing and great customer service is worth paying a bit more for many merchants. There’s also a chance that a better processing rate with a high-risk specialized processor will help you break even from those additional charges.
For nearly two decades Durango Merchant Services has established a reputation of transparent pricing, fair rates, and PCI compliant processing. We provide a complete suite of tools to help your business grow including our top tips and tricks for mitigating fraud and chargebacks. Our team of experts are dedicated to above-and-beyond customer service to ensure you have the support that you need when you need it.
