It’s imperative for commercial projects to possess payment processing tools and merchant accounts; using them clients may transfer payments. Procedure for connecting trading accounts largely depends on their type and purpose of its use. Connecting high-risk merchant accounts may be quite a challenge, as this account is required by firms whose activities are connected to higher risks. In this case, access to the services of banking institutions may become a certain difficulty.
What activities are high-risk?
Firms with high risks have higher fees and more return transactions. Cooperation with such enterprises can be quite expensive for a banking institution. In particular, we are also talking about the high probability of fraudful operations within company itself and with its trading accounts. Next-mentioned types of commercial deals, mostly, are high-risked:
- run operations related to distribution of alcohol, vape products and electronic cigarettes;
- the main products sold by the company have questionable content from the point of view of morality, for example, goods or services for adults;
- services that require a subscription – a high return rate;
- multilevel marketing;
- entertainment services;
- online lending;
- sports betting.
In addition, if the company’s activities are sufficiently extensive and related to foreign currency operations, it will also be marked as high-risk, since it is easier to make any fraudful operation within its framework.
To gain credibility and your ability to open merchant accounts with high risks, ensure returns ratio is at a minimum level. Account providers set their own requirements, however, for all, an important indicator is the ratio between payments left with the seller and returns.
Enterprises whose operational volumes exceed the average established norm may also be high-risk. Limiting sales is not good business practice. However, entrepreneurs need to know that a high trading volume may justify a firm being classified as a high-risk enterprise.
In addition, if an enterprise doesn’t have a commercial history, it may be categorized as high-risk. Accounts providers attempt to verify financial info regarding your firm. In this case, you will need to give one or another fiscal statement, extracts from banking establishment with which you cooperate, and credit rating data. If the information seems doubtful or unsatisfactory, the company-provider may refuse in high-risk merchant account connection.
How can recognition as high-risked affect a startup?
Of course, categorizing a commercial project as high-risk may have a significant impact on startups.
- Higher commissions. If businesspersons intend to deal with high-risk cards, transaction commissions will likely be slightly differ.
- Tighter requirements for the company’s reserves. High risks require that the firm has a certain cash reserve in stock. This amount will guarantee that any debt arising from the activities of the enterprise will be repaid from its funds.
- Necessary confirmation of the firm’s solvency. You will need to give the provider extensive extracts from payment history, credit data, advance payments, confirmation of transactions’ nature received from a banking institution, and so on. Application procedure may be significantly lengthened.
It is difficult for a startup to minimize the number of chargebacks, because commercial project doesn’t yet have sufficient experience and is only on the threshold of its development. In addition, a startup almost certainly cannot have a long and extended history of operations.
Initiating a partnership with merchant account provider, be sure it can help you identify risk factors and reduce chargebacks. Businesspersons need to choose payment mechanisms suiting your needs, and providers with expertise of operating with high-risk structures.