Which accounts are considered high risk by payment gateways?

In a world heavily reliant on digital services, some high-risk businesses are struggling to get a payment gateway established. This concern stems from the fact that payment gateways view some merchants as “high risk” due to the nature of businesses and market behavior. This factor is an additional hurdle for businesses trying to become a profitable online business! Globally, there are up to 4.66 billion active Internet users! But, the mere lack of a reputable payment gateway can prevent users from making transactions on the given site! The market opportunity is unprecedented.

So which companies are marked high risk by payment gateways? Read ahead to find out which areas payment gateways routinely consider to be high risk! If your business falls into the following high-risk categories, we’ll walk you through high risk payment gateway options you can turn to when starting your business! You can make sure that it doesn’t have a hard time accepting payments and thriving in the global market regardless.

What are the high risk companies?

Online businesses thrive because each industry can achieve the highest number of transactions to generate the highest possible revenue, as it is proportional to the number of sales. If only the equation were that simple! A shared trust mediates the unison of a customer, a company and a bank. As they receive value, they make payments.

Every customer wants to get the most out of the product they ordered or the money they spent on it, making them attentive to product quality, delivery and service. Likewise, traders who want to generate high sales volume want to earn profitable income instantly. Any financial institution is no exception either. They ensure that both the customer and the seller retain the value of their agreement without any abuse, hindrance or disruption. This factor is essential because the institution can cover a maximum risk resulting from the payment process.

With online payment processing, financial institutions face similar risks as each risk costs them money. Due to these increasing risk factors, they ensure that these risks are minimized. It is impossible to contain them in all probability. But by limiting companies into three categories, Low, medium and high risk to streamline various companies. This categorization also allows companies to plan accordingly. Read on to assess whether your business belongs to these high risk groups.

What Makes Any Business High Risk?

To come to a definitive understanding of this classification of high risk businesses, you would need a thorough understanding of the factors that guide payment gateways. High risk businesses are generally classified into two categories, namely red and gray areas. It’s a simple sort once you understand the basis on which the two are delimited.

A high risk red zone business includes entire industries that are considered high risk. This risk is independent of your business history. The factors that play a vital role in this category are –

  • If the sector or industry is named in the list of high risk industries
  • If your business does not comply with all industry safety regulations
  • If your business is in an industry that has high chargeback ratios
  • If your business is part of a segment with a high turnover rate
  • If you do business in countries with high risk of chargebacks (e.g. Russia, Mexico, Brazil, etc.)

On the other hand, companies in the gray area are those where the history / performance of the company is a decisive factor. The factors that come into play here are –

  • Suppose you were previously labeled a Terminated Merchant (TMF). A TMF tag means that you have already lost a merchant processor due to the high number of chargebacks.
  • If your business is very new or has negligible credit card processing history.
  • If you happen to have a lower credit card history (which includes things like failing to provide collateral for loans or not paying required bills on time)
  • If you have an excessive number of chargebacks that exceed 1%
  • If you are an international trader and run a multi-currency business
  • If you are experiencing a large number of returns and refunds

The above aspects make companies unreliable, whether because of concerns that characterize an entire high-risk industry or personal factors related to the business, such as history, which can put the companies in danger. Still not sure if your business falls into these categories? Below is a list of merchants who are commonly reported by payment gateways.

Common high-risk sectors of activity

Regardless of the individual deciding factors, beginners looking to make their business successful may not be aware of the nuances. We are here for you! We have curated a list of commonly featured high risk merchants. Please note that there may be many more and high risk businesses are not limited to the full list below.

  • Smoke Head Shops / Cannabis Stores
  • Tobacco and electronic cigarette stores
  • Medications
  • Online games, online gambling and casinos
  • Online dating or other adult services
  • Forex trading or Bitcoin Mining
  • Subscription services
  • Telemarketing facilities
  • Travel and advanced booking services
  • Sports reservation

You might be wondering why industries like travel or booking are flagged in the list above. These industries typically have an excessive amount of chargebacks and frauds. For example, a friendly fraud associated with the booking industry is when users book or buy travel, use the booking but claim they never did in the first place.

To reduce these risks of causing damage, payment gateways bypass these high-risk industries and businesses. This attempt helps them stay aware and reduce any risk liability on their part. Here’s how you can contain it! Are your businesses in these sectors or could they potentially be at risk?

Go forward

If your business falls into the red or gray zone, as mentioned above, finding a high-risk payment gateway could help you decide which way to go. With about 1.92 billion online shoppers, there is no reason for your business to suffer if it falls into these categories. With high-risk payment gateways, you can rest assured that they are aware of the inhibiting factors, have the know-how in the event of risk, and can even accommodate them. This factor increases the likelihood of making a profit without being influenced by obstacles like getting a reliable payment gateway.

Once you find a trustworthy high-risk payment gateway, you can be free from transaction problems. You can rest assured that users who visit your business online will be able to transact seamlessly.

Interesting Related Article: “How To Make Payments Easier With A Payment Gateway”