The term “high risk” is used to indicate that we need to be careful with a certain activity, event, or situation.
When we say high-risk credit card processing, we can understand that this is a financially risky activity.
It sounds like something you should know about to avoid losing money or putting your money at risk.
So, what is it? Do you need it for your business? Is there anything special you need to know about it?
High-risk processing is not a new thing, and finding answers to these questions is not as hard as it used to be a couple of years ago.
Scroll down to learn everything you need to know about risky credit card processing.
What is high-risk credit card processing?
High-risk credit card processing refers to credit card processing for businesses that fall into the category of high-risk merchants.
High-risk merchants can come from various verticals, but there are things that all of them share.
Processors will view businesses that deal with a high chargeback ratio and struggle with returns as high risk by processors in more cases than not.
Instead of using a regular bank and no-risk credit card processing, these businesses have to use high-risk credit card processing.
It includes various things such as high fees and rolling reserves. Processors often use payment processing history to determine the risk of doing business with a specific company.
What determines the value of fees and rolling reserves?
Every high-risk credit card processor is different, as is every payment processing history.
Due to that, it is hard to talk about the fees and rolling reserves that might incur if you need to use such a processor.
Every business goes through an evaluation process, and fees and rolling reserves are determined based on processing history and business evaluation.
What is a high-risk credit card processor?
Simply put, a credit card processor is a company that acts as an intermediary between your business and your customers.
More precisely, between your business and credit card companies used by your customers.
High-risk credit card processors are the same as regular ones, but there is one significant difference.
They are willing to accept the liability of the increased risk associated with your business.
A regular credit card processor will reject you if you have high chargeback and return ratios.
On the other hand, a high-risk one is willing to do business with you under more strict terms.
Make sure to check this before choosing a processor
Before we start, you should know that high-risk merchant accounts are more expensive than low- and no-risk merchant accounts.
However, the fees are different with different processors.
What do you look for then? Here is what you need to check to find the best deal for you and maximize profits:
- Setup and registration fee — once your application is approved, the processors will ask you to pay the setup and registration fee. You won’t be able to accept debit and credit cards before you do
- Service and maintenance fee — processors will charge you regularly for their service and maintenance fee. Make sure to pay it regularly to prevent your account from being suspended
- Interchange fee — you will have to pay this fee for every transaction that goes through the processor
Fraud exposure is not the same with all card processors
Partnering with a high-risk credit card processor doesn’t render you immune to fraud.
Each of these processors is unique in terms of the technologies they use to deliver additional layers of protection for their clients.
One of the most sensitive areas is fraud management.
Fraud management can be approached in a couple of ways.
A processor can check the transaction history in regular time intervals, have a dedicated team to do it for each client, or run automated AI-based systems able to spot fraud in a matter of seconds.
Systems powered by AI and ML are able to quickly pick up patterns unique to specific business models and notify teams when there is something suspicious going on.
The best option is a combination of these.
A processor able to offer you all of this will help you minimize your fraud exposure.
Keeping the number of fraudulent transactions to a minimum will help you protect your interests and facilitate growth.
You still play an essential role
For a high-risk credit card processor to help, you need to do a couple of things.
First of all, you need to provide all the necessary documentation, especially the transaction history documentation.
Being honest with your future partner will help them understand your business and learn a lot about it through account history.
You need to inform them about your business background, the services you provide, and the products you sell.
Tell them who your target customers are as well.
Some frauds and scams are specific to certain geographical regions, and this information can help your future processor implement appropriate anti-fraud measures.
High-risk credit card processing is not rocket science.
These are the most important things you need to know before looking for a processor that suits you best.
You should be aware that this is a crucial business decision, and the more research you do and the more data you have, the better.
