As a payment processor specializing in the high-risk credit card processing and high risk e check industry, we can help.  Strong banking relationships allow Allied Payments to offer high risk merchant account services to many industries.  Understanding many of the problems facing merchants, our programs are designed to help merchants reduce the costs of chargebacks and fraud.

What is High Risk Payment Processing?

high-risk payment processing

Businesses can accept various payment methods, including credit or debit cards or check. Payments can be accepted through the merchant’s storefront or online using a payment gateway. Some types of merchants can experience trouble when applying for payment processing services. This can differ between industries, causing some businesses to find it nearly impossible to be approved for a merchant account.

Businesses that find themselves having problems obtaining payment processing services might consider partnering with a high risk processor. Payment processors in the high risk industry have different banks and relationships than traditional merchant services companies. This allows a high-risk credit card processor increased flexibility during the underwriting and risk management processes. These specialized services have opened the door for many medium to high-risk businesses to obtain reliable and affordable merchant services.

Methods of Accepting Payments for a High-Risk Merchant include:

  • Credit Card Processing
  • Check Processing
  • Cryptocurrency Processing
  • Payment Gateway

The most common means of making payments, especially online, is the use of debit and credit cards which continually sees growth year over year. Merchants approved for merchant processing services can quickly add these payment options to their business. Guidelines for underwriting and risk can become problematic for some types of businesses, making obtaining credit card processing difficult. These problems have led to the creation of high-risk credit card processing industry.

high-risk payment processor

Many high risk businesses today find check processing a favorable way to process payments online. With lower fees than credit cards and chargebacks being more difficult, merchants have increasingly gravitated towards e check processing. New banking networks have reduced government controls on check services, allowing banks to become more liberal with underwriting. Many of today’s highest risk businesses find checks the best means of accepting payments.

A truly unregulated currency, crypto payments allow merchants and consumers to remain completely anonymous. High-risk merchants experiencing difficulty due to legality or other problems with their business have turned to crypto as a reliable alternative. While not as widely used as payment cards or checks, cryptocurrency is popular with various types of businesses requiring high-risk merchant processing services.

What is a High-Risk Payment Processor?

Any high-risk payment processors, including a high-risk payment processor, that specialize in working with hard-to-place merchants. Many of these merchants would qualify for a general merchant account if they ran another business but are classified as high-risk because of their industry.  This can make accepting customer credit card payments difficult because most merchant services companies will not work with high-risk businesses.

A high-risk payment services provider can offer their merchants most, if not all, of the same features and functionality that another merchant might have with a lower-risk processor. These similarities include everything from acceptable payment types to account funding times. This is because merchant services companies work with the same payment card networks and service providers to offer services to all merchant accounts. The one place where a high-risk payment processor might differ is with their underwriting requirements.

Processors specializing in accepting high-risk merchants generally have a higher risk tolerance than other payment service companies. This means that their agreement with their acquiring bank allows them to take more risk on their merchants with the understanding that the merchants will be from various industries that do not fall under general business types. This is usually why high-risk processors tend to be smaller niche companies specializing in these industries that the larger providers tend to avoid.

What Merchant needs High Risk Payment Processors?

high-risk merchant processor

Businesses can require the services of a high-risk payment services company for various reasons. Depending on the types of products sold or the history of the business, any number of factors can affect merchant services. Understanding typical reasons that make a merchant high-risk might help merchants prepare their credit card processing applications.

Most merchants experience difficulty due to:

  • Industry: The products or services sold by the merchant are viewed as high risk. This is the most common reason for businesses needing a high risk merchant account.
  • Owner: The owner has blemishes in their financial history. Whether its a personal/business bankruptcy or being listed in the Terminated Merchant File (TMF).
  • Billing: Not all businesses operate the same. Merchants that charge customers using a rebilling/subscription model can face increased scrutiny from underwriters.
  • Chargebacks: A common problem plaguing many businesses in the card-not-present (CNP) and high risk industries.
  • Transactions: The types of transactions can affect the approval of an account. Whether the average ticket price is in the thousands of dollars or the merchant is processing a significantly high number of transactions, businesses might require a specialized payment processor.
  • Business Reputation: Many acquirers will look into the business during underwriting. Checking that the business’ values and practices align with the acquiring bank’s.
  • Industry Reputation: Some industries are shunned by acquiring banks due to the negative connotations that preceded them. Whether it’s adult-related, firearms or another type of business, a merchant’s only option might be a high risk processor.

Understanding Payments for High-Risk Businesses

The merchants classified as high-risk often operate their businesses with little to no problems or concerns. This means that the returns and chargeback ratios align with the limits set forth by the card associations. The problem these merchants have encountered occurs during account underwriting when the risk managers determine the products, services, or billing methods appear problematic for their guidelines.

While the list of high-risk industries seems to increase as banks and payment providers seek to reduce risk, some industries have worked their way into gray zones. These industries, such as CBD, have seen their acceptance rates increase with more banks accepting them, and in return, see their fee structures lower than before.  Other high-risk products, such as e-cigarettes and Vape products, had accepted payments without much trouble. But today, they have found high-risk payment services becoming more difficult as Federal regulations have added more questions and opened processors up to more liability.

Today, the list of high-risk industries appears to be relatively static. Below are some of the most common types of merchants requiring payment services from a high-risk processor:

  • Adult
  • Alcohol
  • Continuity
  • Firearms
  • Tobacco
  • e Cigarette
  • Smoke Shop
  • Hookah
  • CBD (Online and Storefront Dispensaries)
  • Travel
  • Tech Support
  • Pharmacy
  • Nutraceutical
  • Kratom
  • SARMs
  • Peptides
  • Glass Pipe

Payment Acceptance as a High-Risk Merchant

If you are shopping around for a payment processor, the differences between accounts are minimal, if even. After approval, the account setup is the same, requiring API integration into the payment gateway. Most payment gateways work with many businesses and are not concerned with higher-risk merchants.

Customers making payments through a gateway, virtual terminal or card terminal will see no difference in their payment. Once the card is entered, it is processed in the same manner regardless of the type or risk level of the account. Customers will see the authorization on their account within minutes and the transaction will finalize within 2 business days.

Merchants will have the same options for accepting payments in the high-risk industry as any other business. Using a machine in their storefront or an online gateway integrated into their website will make accepting payments seamless for customers. When the payment industry is identical on the backend, merchants and customers will never know the classification of a merchant and what kind of account they are using.

How does Payment Processing Differ for a High Risk Merchant?

While many of the processes behind a transaction do not differ across merchant accounts, there are some differences that merchants might notice. One of the most obvious differences is that most merchants may notice a different application underwriting processing. Other high-risk merchants might notice is a difference to the upside in the fee structures.

At times merchants notice some differences in the application process. Depending on a merchant’s industry and known history, the processor might require additional documentation to understand the business fully. Many times the underwriters will want to see the chargeback and return rates, to make sure that they will not pose a problem with the card association’s requirements.

The costs for many of these high risk accounts can be higher when compared to other types of accounts. This includes higher discount rates and transaction fees billed by the merchant account and payment gateway. Sometimes these fees can be higher because extra security and fraud protection programs are used on every transaction to reduce losses for the merchants, processors, and acquiring banks.

Some high-risk merchants will be confronted with the need for a reserve to have their account application approved. This can be triggered by higher monthly volumes, past problems with chargebacks and returns, or low bank reserves. These reserves are placed for the bank and processor to protect themselves if the merchant experiences problems.

Application Requirements for a High-Risk Merchant

Application requirements for high-risk business types will differ slightly from general low-risk business accounts. High-risk bank and payment processor underwriters will often require additional documents, including extensive financial documents, statements for longer periods, and additional guarantees such as reserves. Some of the most common requirements to begin the underwriting process include:

  • ID: To confirm the applicant’s identity and verify personal information to perform credit and criminal checks.
  • EIN: To confirm the corporation (unless a DBA) so all reporting is done properly to prevent any issues.
  • Merchant Processing Statements: Most high-risk underwriters will want to view the last 3-6 months of statements to verify transactions, volume, returns, and chargebacks.
  • Checking Account Statements: Copies of the last 3-6 months is generally required for most accounts to help the underwriter understand how a company operates and how financially stable they are. Countless checking account balances often result in processors requiring a reserve to approve an application.
  • Voided Check: To confirm the bank account information for both transaction settling credits and debiting of processing fees.
  • Additional Financials: Depending on the size of the company, underwriters might request to see a copy of their most recent Balance Sheet, Income Statement, and/or Cash Flow Statement.
  • Other Licenses: Depending on the merchant’s industry, underwriting teams might require a copy of a Federal License (like a Federal Firearms License) or a State License (such as a Travel Agent or CBD Dispensary).

The best way for a merchant to reduce their perceived risk is to provide as many financials outlining their history to prove their strength as a high-risk merchant on their application.

Accept Payments with Merchant Credit Card Processing Today!

Merchants in any of the high risk industries are encouraged to contact our team to start the application process today. And while we can not offer high-risk merchant account services with instant approval, we can help you apply and be ready to process transactions quickly. Some of the largest FDIC-insured banks in the USA handle our high-risk payment services, eliminating the risk of lost funds.

Our team of highly trained high-risk payment professionals is ready to help prepare your business to accept payments. With some of the most advanced fraud protection and other high-risk features available to merchants, we focus on helping online businesses protect themselves from as many losses as possible.

Contact Allied Payments for more information about our high risk programs for various payment options or to receive a link to our online application. We can work with high-risk merchants located in the USA and abroad in a variety of different high risk industries.