How To Get A Merchant Account In A “High-Risk” Industry {Updated}

As you can see, the vast majority of companies want to do business online these days. Obviously, business owners need to make it possible for consumers to buy their products and services on their eCommerce sites. A high-risk merchant account is essential for businesses operating in specific high-risk industries, ensuring secure payment processing for customers.

The task of business owners is to provide online buyers with everything they need to do shopping on their sites.

Without a doubt, you’ll be able to increase your sales dramatically if you implement online payment solutions into your eCommerce site and start accepting credit cards. By doing so, you’ll help your business grow.

A merchant account is some kind of a payment processing account. This element plays a very important role in the purchasing process. Clearly, a merchant account is a necessity for a business that wants to accept credit card transactions.

Getting a merchant account for a business that operates in a high-risk industry is not always easy. There are many things you need to consider in order to pick a good high-risk merchant account service provider. In this post, we’ll walk you through the process of getting a merchant account in a high-risk industry.

So, let’s get started.

1. What Is A Merchant Account And How It Works?
2. What Is A High-risk Merchant Account?
3. What Industries Need A High-risk Merchant Account?
4. What To Look For In A High-risk Merchant Account?
5. Top High-risk Merchant Account Providers
6. How To Apply For A High-risk Merchant Account

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What is a Merchant Account and How It Works?

A merchant account plays a very important role in the eCommerce business. A merchant account provides businesses with a payment gateway that allows sellers to accept payments from their credit cards on their websites.

Actually, a merchant account can be compared to a terminal in real life. Let’s assume that a person has come to your e-commerce site and now he/she is interested in purchasing your products or services.

Once a buyer is ready to make a purchase, he/she clicks on the “Buy” butter. After that, a user will be redirected to the transaction page. Lastly, a buyer will have to deal with a payment gateway. It’s the last step that a buyer has to take to complete an online transaction and make a purchase.

A payment gateway works like a terminal in real life. A consumer provides card details and payment is made. After that, funds are transferred to the seller’s bank account. It’s fair to say that a payment gateway connects the buyer’s bank account with the business owner’s merchant account. Businesses in high-risk industries need a reliable high-risk merchant account to ensure secure transactions.

The reality is, a lot of merchant account providers are available for businesses these days.

Merchant services are provided by the following companies:

• PayPal
• Stripe
• Square

That means that you’ll find it easy to pick a good merchant services provider, set up and run a merchant account for your business. If you run a low-risk business, you have nothing to worry about. It will not take you too much time to start accepting payments on your eCommerce site.

On the other hand, you are likely to face some challenges if your business falls under the category of a high-risk industry.

The reality is, the vast majority of companies don’t offer payment solutions to businesses that operate in high-risk industries. That’s the reason why you’ll need to consider high-risk merchant account options.

What is a High-Risk Merchant Account?

A high-risk merchant account is a payment processing solution that’s intended for companies that operate in specific industries (also known as high-risk industries). It’s worth noting that these types of businesses may have some legal restrictions.

The risk of a merchant account depends a lot on such factors as processing history, purchasing history as well as industry reputation. Therefore, the more chargebacks a business has – the higher risk is.

Is the chargeback ratio of your business lower than 0.9%? In this case, your business falls into the category of low-risk industry.

Is the chargeback ratio of your business higher than 0.9%? In this case, your business falls into the category of a high-risk industry.

What Industries Need a High-Risk Merchant Account?

Nowadays, it’s already hard to imagine doing business without accepting credit cards, isn’t it? You need to accept credit cards to be able to sell products and services on your shop online successfully.

However, sometimes finding a reputable merchant services provider for business can be hard. You will find it much more difficult to pick a merchant services provider if your business operates in a high-risk industry. Selecting the right high-risk merchant account can be challenging, but it’s crucial for payment processing success.

Businesses that pose a higher risk of fraud to the credit card processor need to consider a high-risk merchant account.

Among the top high-risk industries are:

• Airplane charters
• Car parts
• CBD
• Online gambling
• Firearms
• Fantasy sports
• Forex trading
• Nutraceuticals
• Tours
• E-cigarette and vape shops

Actually, this list could go on and on. It’s worth noting that business processors analyze businesses differently.

Each payment processor uses its own criteria to determine if a business falls into the category of high-risk industry or does not.

High-Risk Merchant Account Fees

High-risk industries are associated with problems like chargebacks, cases of frauds, refunds, etc.

That’s the reason why businesses that operate in high-risk industries usually have to pay higher fees as well as processing rates for merchant services.

You have to pay twice more for a high-risk merchant account compared to a low-risk merchant account. Plus, the banks may reserve a certain part of the credit card processed volume.

There are different fees associated with high-risk merchant accounts. These include:

• Setup fee
• Monthly or annual fee
• PCI fee
• Early termination fee
• Chargeback fee
• Administrative costs of processing the chargeback

So, high-risk merchant accounts are more expensive comparing to low-risk merchant accounts. If your business operates in a high-risk industry, you must be prepared to pay the commission rate of up to 15%.

Another important thing that you need to be aware of is that high-risk merchant accounts come with such a thing as the rolling reserve. The rolling reserve is some kind of protection.

When credit cards are processed, a bank takes up to 5-10% of the amount charged. These funds are secured by a bank for 6 months. If these are no chargebacks, fraud cases, or other types of unexpected activities within this period of time then the money is released to a seller.

Keep in mind that merchant account fees are described in the contract. So, read it carefully in advance before signing up.  Does your business process a lot of transactions every single day? In this case, you can negotiate rates with a payment processor. A high-risk merchant account offers specialized solutions for industries that face increased financial risks.

What to Look for in a High-Risk Merchant Account?

A lot of high-risk merchant services providers operate on the market these days. So, you may find it difficult to make a choice. When selecting high-risk merchant accounts, you need to pay close attention to such things as pricing and customer support.

Obviously, you should give preference to payment processors that offer the lowest service rates. Try to figure out what processing rates (price per transaction) as well as account fees (monthly or annually) you have to pay for using the service. So, search for information on fees and costs.

And of course, you need to select merchant service providers that support their clients 24 hours a day and 7 days a week. Make sure that customer support representatives are highly trained in working with high-risk merchant accounts.

First of all, you need to check the merchant services provider’s site and get familiar with the services provided by the company. Also, you should check the company’s online reputation and see what people say about a merchant account provider of your choice. Finally, you need to read the contract (a copy of the company’s standard Terms and Conditions) carefully.

Top High-Risk Merchant Account Providers  

The reality is, only a few merchant services providers work with high-risk businesses. So, getting a merchant account in a high-risk industry can be a difficult task. But most importantly, you should aim to pick a merchant account provider that offers high-quality service at affordable prices.

Now, let’s take a closer look at some of the best high-risk merchant services providers available these days. We’ll talk about the pros and cons of each high-risk merchant services provider. So, you’ll manage to compare companies one to another and make conclusions. Explore all of your options carefully and make the best possible choice.

Payment Cloud

Payment Cloud has been around since 2010. The company provides merchant services to businesses that operate in high-risk industries. The provider doesn’t require high-risk businesses to pay any account setup fees. Payment Cloud has a high success rate.

In order to get the information on the merchant services provider’s processing rates and account fees, you need to contact the company and get a service quote.

Payment Cloud has a network of 3-rd party processors and the acquiring banks. Payment Cloud is a partner of Dharma. It’s important to note that Dharma no longer accepts high-risk merchants. However, the company refers to its high-risk businesses to the partner, Payment Cloud. Stripe is another payment processor that refers to its high-risk merchants to Payment Cloud.

Durango Merchant Services

Durango Merchant Services is a company that specializes in high-risk merchants. The company is best known for its good reputation on the market, great customer service, and low service prices.

Durango’s gateway, Durango Pay, can be integrated with the numerous payment processors. The gateway supports almost all popular online shopping carts. Durango Merchant Services offers such features as recurring billing, Authorize.Net emulator, and many others.

If you choose to deal with Durango Merchant Services, the company will assign you a dedicated account manager. So, you’ll deal with the same person all the time.

You’ll not be able to find the information about rates and fees on the company’s website. It looks like the company doesn’t have standardized fees. As we have already said, Durango deals with a vast variety of processors. So, the prices depend a lot on the processor’s terms.

Host Merchant Services

It also makes a lot of sense to consider services provided by Host Merchant Services. As you probably know, the company specialized in web hosting services earlier.

The company resells the Authorize.Net gateway and supports other 3-rd party gateways. Host Merchant Services doesn’t offer merchant services to high-risk accounts.

However, the company offers payment solutions for businesses from certain high-risk categories. So, you’ll be able to take advantage of the company’s services if your business falls into one of these categories.

If you are a high-risk merchant, then you must be prepared to pay higher rates as well as additional service fees. There are no setup fees and no early termination fee.

Host Merchant Services provides its clients with 24/7 customer support. The company supports its customers by email, telephone, and chat.

Among other good high-risk merchant services, providers are Soar Payments, Easy Pay Direct as well as SMB Global.

How to Apply for a High-Risk Merchant Account

The process of integrating payment solutions into a website consists of two stages. First and foremost, you need to find a reputable high-risk payment processor. Next, you have to apply for a high-risk merchant account.

You have to fill out an online application and submit it to the acquiring bank. If you get an approval from the acquiring bank, you’ll be able to accept payments from your customers either online or mobile.

It’s worth noting that the process of applying for a high-risk merchant account itself is simple and it doesn’t take too much time. Below, we’ll walk you through the process and describe the steps that you need to take in order to apply for a high-risk merchant account.

Do the research. Initially, you need to spend some time doing research. Analyze the high-risk merchant service providers that operate in your industry. Make a list of high-risk merchant account providers.

Learn more about merchant services. Let’s say that you already have a list of high-risk merchant service providers. Now, it’s time to get in touch with them and learn more about their services.

It makes a lot of sense to ask the company’s representative questions about service fees, gateway integrations, approval time, etc. Lastly, you have to make the final choice!

Obviously, you should give a preference to a high-risk payment processor that meets your needs in the best possible way. Also, you need to pay close attention to customer support.

Make sure that you’ll be able to ask a high-risk merchant account provider questions and get answers to them anytime. So, deal with companies that provide their customers with 24/7 customer support.

Submission of an online application. At this stage, the acquiring bank will collect the information about your business. Your job is to submit an application to the bank.

Register and create a company’s online profile on the bank’s website. As a result, you’ll manage to fill in, save, and submit an online application to the bank. In your application, you have to provide the answers to many questions such as:

How many years has your company been around?

Where is your company located?

How many sales does your business get monthly or annually?

And of course, you have to provide the correct answers to all these important questions. After you fill in all fields in your online application, submit the application to a bank. Now, all that you have to do is to wait for the approval.

Have a call with a customer service representative. After you submit your application, you must be prepared for a security check. A customer service representative will call you within a short period of time.

It’s important to know that such a call is made for security purposes. This type of security check is done to reject fake applications and prevent fraud. So, merchant account providers always take these kinds of things very seriously.

During a call, a customer support representative will ask you questions to verify the information that you’ve provided in the online application. So, your job is to answer all his/her questions and give a customer support representative the accurate information.            

You may need to provide additional documents. A merchant account provider may also require a business owner to show other documents.

You have to prepare such documents as a copy of your passport, processing history, the license number, the name of the organization that issued the license as well as incorporation certificate, and shareholder certificate.

As a business owner, you also may be required to provide the so-called COAs (certificate of analysis) documents. Sometimes, a business owner has to prove the fact that he/she lives in a country where his/her company is registered. It’s important to note that each merchant account provider has its own requirements.

The review process. Let’s say that your online application and documents have been submitted. A bank package will be submitted by a high-risk merchant account on your behalf.

Now, the review process begins. The big question is – how long does the review process take? The speed of the review process mainly depends on your business and bank resources. In most cases, the bank review process takes up to 2 – 10 days.

Stipulations. At this step, the acquiring bank may ask you to provide any additional information about your business (such as current utility bill with the corporate address, proof of domain ownership, etc). Also, you may be required to make some changes to your website’s pages.

Underwriting. Have gone to this stage? If so, you are about to get bank approval. At this stage, a bank will check your agreement. Plus, the bank’s representatives have to make sure that your transactions can process smoothly. A bank can also update your account on its side. Service fees are finalized at this stage as well. Actually, you can’t affect the speed of this process. Now, all that you can do is wait.

Getting approval from a bank. After underwriting is complete, your application will be either approved or rejected. Your account will be set up if you get an approval from a bank. If your business has been approved, the payment processor will contact you and inform you about this news. Now, it’s time to do business online.

Taking payments on your website. After approval, you can start selling your products or services online. So, you can process the payments on your website now. Also, you’ll be able to see how much revenue has been generated to your business.

A high-risk payment processor will provide you with access to the portal that allows you to monitor transactions as well as chargebacks and returns. It’s incredibly important for business owners to follow the agreement that they have signed with a bank.

Let’s say that you’ve added new products to your business site. Or, maybe, you’ve decided to change your brand? One way or another, you need to inform your high-risk payment processor about your plans. Keep them up to date on all the changes that happen to your business.

Bottom Line

No matter whether you are just taking the first steps in eCommerce business or run an established company, you’ll need to process payments to be able to sell products or services on your online shopping site successfully.

There are both low-risk and high-risk merchant account providers. However, it’s incredibly important for you to be selective when it comes to getting a merchant account in a high-risk industry.

Obviously, you should aim to find a payment processor that can provide your business with cost-effective financial solutions and meet your requirements in the best way. But most importantly, you have to deal with companies that have built a solid reputation on the market.

Now, you should narrow down your list of high-risk merchant account providers. Analyze the pros and cons of every payment processor carefully and compare merchant account companies one to another. Hopefully, all of this will help you make the right choice and if you have any questions or would like help setting up your e-commerce site, contact Finepoint Design for a free quote.[/vc_column_text][/vc_column][/vc_row]