STEPS TO GETTING APPROVED FOR A HIGH RISK MERCHANT ACCOUNT

Is My Business “Hard To Aquire”? Would I Need A High Risk Merchant Account?

You can be labelled as “high risk” for two reasons:

1. Your personal financial history (and the history of your business) 
2. The reputation of your industry

Sadly, you will face additional challenges in getting approved for a merchant account regardless of whether you carry the “high-risk” label due to the weight of past struggles or the guilt-by-association of industry reputation.

For this reason, any financial institutions won’t touch high-risk merchants at all. In fact, even some companies that assert themselves as high-risk specialists really only focus on a couple of high-risk industries. These consultants seek to take advantage of merchants with fewer options.

HERE ARE A FEW REASONS WHY YOU MIGHT NEED A HIGH RISK MERCHANT ACCOUNT:

• You’ve had a merchant account closed previously, for any reason.
• You have a high average ticket size.
• Other financial institutions have turned you down for a merchant account due to past fraud or bankruptcy.
• Your business has a high rate of customer chargebacks, returns, or customer complaints.
• You have poor credit.
• You are not registered with your industry’s local regulatory bodies, if applicable.

HERE ARE A FEW INDUSTRIES THAT TYPICALLY REQUIRE A HIGH RISK MERCHANT ACCOUNT:

• Your products or services are of ambiguous legality, may be illegal in some areas, or skirt the borders of illegality.
• The products or services you offer relate to the adult entertainment industry or another industry with a reputation that the payment processor may not want to be involved with.
• The products or services you offer inherently carry a higher likelihood of customer dissatisfaction or fraud, such as gaming, collectibles, or ticket sales.
• You offer products or services that have an extended period of chargeback liability, like subscription services (a customer can issue a chargeback up to 6 months from the end date of an annual subscription, for a total of 18 months).

How Do I Get Approved For A High Risk Merchant Account?

What will the experience of applying for a high-risk merchant account look like? How does it differ from applying for a standard merchant account, and what documentation will the merchant account provider ask for?

You’ve got questions. We’ve got answers.

LET’S TALK UNDERWRITING: WHAT IS THE UNDERWRITER GOING TO LOOK FOR WHEN I APPLY FOR MY ACCOUNT?

Knowing what to expect makes the underwriting and approval process much less stressful.

Is this seeming like a lot of things to worry about? Don’t panic if the underwriter asks you for additional information or documentation, or even wants to set up an interview! The underwriters are simply trying to fully understand your business and its needs.

WHAT CAN I EXPECT AS FAR AS RATES?

Check out our posts on rates and fees, interchange plus, as well as basis points. These will all give you a great overview of what to expect as far as rates. The more you understand, the more you avoid being blindsided or ripped off. Transparency is the name of the game.

CHARGEBACK RATIOS

Ideally you have a chargeback rate of less than 1 percent, though high-risk payment processors will generally accept businesses with a 1.5 percent chargeback rate, as long as that rate doesn’t reflect an increasing trend.

PROCESSING VOLUME

How much you process may require you to have a good credit score. For example, 20K a month may be ok for someone with poor credit vs. a business doing 250K per month. If you have bad credit, then smaller transaction volumes may be required until your business proves trustworthy and consistent.

BUSINESS PRACTICES

Underwriters worry about signs of bad business practices in your history. They look at your online reputation to see if you have some skeletons in the social media closet. It’s better to be upfront and explain it rather than hope they don’t find it. Poor rating with the Better Business Bureau, facebook or the Consumer Financial Protection Bureau, negative press or a history of lawsuits are all things to be aware of. Remember, it’s always better to disclose these issues to the underwriters upfront, rather than letting them discover them on their own.

BUSINESS STABILITY

Are there inconsistencies or instability in your business? These may include frequent attempts to change payment processors, sharing an account with another business or having another business’ transactions on your bank statements, and having the primary source of income come from some other company.

Wait! Approval Isn’t The End Of The Story!

A Quick Note On Fraud & Risk Management For High Risk Merchant Accounts:

After approval, you will need to maintain your account by developing and implementing chargeback mitigation and fraud protection strategies.

An increase in chargeback rates not only costs you money, but can threaten your ability to continue to accept card transactions, so it’s vital to have a plan to protect yourself.

• Let’s review the basics of chargebacks. Ultimately, all chargebacks have one of three base causes:
• Merchant error. Mistakes or oversights on your part that lead to customer dissatisfaction.
• Criminal fraud. Hackers and identity thieves steal payment card information and make unauthorized purchases.
• “Friendly” fraud. Customers issue chargebacks on legitimate transactions without good cause, either mistakenly or in an effort to get something for nothing.

Fraud detection filters and anti-fraud technologies can help reduce criminal fraud-based chargebacks, and performing internal compliance reviews can help you identify errors and inefficiencies in your own process that can create unhappy customers.

HOW MUCH COULD I SAVE IN CHARGEBACK FEES WITH 3D SECURE 2.0?

An excellent way to protect yourself from friendly fraud is with EMV 3D Secure 2.0. This easilly integrated software is an opt-in two-factor authentication method developed by credit card companies to streamline the customer experience while ensuring that legitimate cardholders are behind each transaction. Merchants are not liable for fraudulent transactions authenticated with this method, and cardholders cannot claim that authenticated transactions were unauthorized.