Finding a payment processor that will work with every business type and online store can be challenging. Many big-name processors, like Paypal, Stripe, Venmo and Square, do not offer their services to high-risk merchants.
The high-risk designation can make it difficult for large and small business owners, startups and service providers to find a way to accept customer payments.
This blog post will explore some of the options available to high-risk merchants. We’ll also discuss what makes a business high-risk and how you can increase your chances of being approved by a payment processor.
What’s Merchant Category Risk?
Merchant category risk is a rating that indicates a merchant may be at a higher risk for chargebacks or fraud. Chargebacks happen when a cardholder disputes a charge with their bank or credit card issuer. The issuer then deducts the amount of the chargeback from the merchant’s account.
A higher merchant category risk rating may subject business owners to additional fees and more frequent holds on their accounts. Banks and credit card issuers may be worried about losing money if the merchant can’t pay back disputed charges due to their high-risk designation.
Merchants can lower their risk rating by displaying clear and concise product descriptions at the point of sale (POS), providing excellent customer service and promptly responding to customer inquiries or complaints about one-off and recurring payments.
However, some businesses will be categorized automatically as high-risk. This often occurs for businesses in industries known for having a high rate of chargebacks or fraud, such as travel, gaming and adult entertainment.
What’s a High-Risk Merchant?
A high-risk merchant is a business that falls into one of many categories considered high-risk by credit card processors or banks. These businesses are typically characterized by a higher-than-average rate of chargebacks or fraud or by the type of product or service they offer.
Examples of high-risk businesses include online gambling sites, adult entertainment sites, and online pharmacies.
These businesses may pose a higher risk to banks and processors, so they often have difficulty obtaining merchant accounts or Shopify store accounts due to their status. Not getting a merchant account means they may have trouble invoicing and processing customers’ credit card payments. This is a significant problem for businesses that rely on credit and debit card payment options, almost every company today.
Does PayPal Accept High-Risk Merchants?
Because many people have a PayPal account, it’s a convenient choice for customers to pay without even taking out their wallets.
However, while creating a high-risk merchant account through PayPal is possible, there are some potential risks and downsides to consider.
First, PayPal doesn’t work with all high-risk merchants, decided at PayPal’s discretion, including CBD suppliers.
Additionally, PayPal has, at times, removed merchants from the platform without notice, usually due to instances of fraud or chargebacks.
If you decide to have a high-risk merchant account through PayPal, PayPal does offer specific services that can help protect you from chargebacks (for a monthly fee).
However, if you experience a chargeback, PayPal’s chargeback fees can be expensive.
Considering all these potential risks and costs can help you decide if PayPal is the right fit for your high-risk merchant account.
Does Square Accept High-Risk Merchants?
Square is a well-known payment processing company that offers businesses a simple way to accept credit and debit card payments through online payment options or a POS system in-store. Square charges flat-rate transaction fees to cover costs and offers an easy-to-use credit card reader or virtual terminal to use with Square accounts.
However, Square doesn’t work with businesses that sell marijuana-related products like CBD oil or businesses providing credit counseling, sports betting, infomercial sales, bill payment services, gas stations and bankruptcy legal assistance, just to name a few.
The bottom line is that if your business is engaged in any of these activities or any others that Square deems high-risk, you may not be able to use Square to process payments.
Does Stripe Accept High-Risk Merchants?
By default, Stripe refuses to process payments for businesses selling goods or services within the adult entertainment, gambling, cannabis, and other industries considered high-risk.
If you attempt to use Stripe and your business is flagged as high-risk, you’ll receive an email from Stripe notifying you that your account has been declined. In some cases, it may be possible to get a Stripe account by providing additional documentation about your business.
However, there’s no guarantee your account will be approved. In many cases, it’s not worth the effort. If you’re looking for a payment processor that accepts high-risk merchants, you may need to look elsewhere.
Why Does Stripe Freeze or Shut Down Merchant Accounts?
If your Stripe account faces closure, you’ve likely been deemed an unauthorized or banned merchant, an eCommerce merchant requiring delivery verification, or a high-risk merchant. By default, Stripe refuses to provide payment solutions if you have an unauthorized business. Meanwhile, eCommerce merchants may encounter termination until they verify their identity and address.
If Stripe labeled you as a high-risk merchant, here are some common reasons why:
- Offering digital goods and services: Many online businesses offer digital goods and services, like e-books, online courses, and software products. Digital products are easy to duplicate and distribute without permission from the creator. As a result, some people view them as high-risk.
- Belonging to an industry deemed high risk: Financial institutions see specific industries as inherently risky. These include the adult entertainment industry, the cannabis industry and the gaming industry. If your business belongs to one of these industries, you may have a more challenging time getting approved for a Stripe account.
- Operating internationally or accepting payments from various countries: If you do business in multiple countries or accept payments from customers in many different countries, you may be classified as a high-risk merchant. It can be more challenging to track down customers who live in other countries if there’s a problem with their purchase. Additionally, processors often find international transactions more expensive because they involve currency conversion fees.
Can You Use Venmo as a High-Risk Merchant?
In recent years, Venmo has become one of the most popular payment methods among millennials. The app allows users to quickly and easily send money to friends and family with just a few clicks.
Businesses can also use Venmo to charge customers. However, it integrates with PayPal Checkout. Therefore, if you have any problems using PayPal, you’ll likely have the same issues with Venmo. Additionally, PayPal owns Venmo, subjecting it to the same rules and regulations. If you’re considered a high-risk merchant by PayPal, you’re also regarded as high-risk by Venmo.
What Can You Do If Your Payment Processor or Payment Gateway Account Is Rejected or Shut Down?
Fortunately, there are many options available to high-risk merchants. While you may be unable to use Paypal, Stripe, Venmo or Square, Zenti is designed to work specifically with high-risk businesses. We offer many features thoughtfully designed to protect your business, such as chargeback protection and fraud prevention.
What’s High-Risk Merchant Processing?
High-risk merchant processing is a type of credit card processing typically used by businesses that are considered high-risk. This type of payment processing provides many benefits.
For example, they typically have lower rates of fraud and chargebacks and can allow businesses to accept credit cards from all major card brands.
In addition, many high-risk merchant processors also offer many value-added services that can help protect businesses from fraud and chargebacks. These services include things like fraud monitoring, data breach protection and chargeback insurance.
When it comes to payment processing, businesses need to be able to accept payments quickly and securely through in-person transactions and an online checkout process. However, they also need to be able to protect themselves from fraud and data breaches.
Payment processor services and integrations can provide businesses with the tools they need to do both. Fraud monitoring can help businesses detect and prevent fraudulent activity, while data breach protection can help mitigate the damage from a breach. Chargeback insurance can also help companies recover from fraudulent chargebacks.
Businesses can protect themselves from financial losses stemming from fraud and data breaches by using these services.
How to Be Successful as a High-Risk Merchant
To succeed as a high-risk merchant, you need to consider a few things.
First, you must ensure a good relationship with your acquirer or processor. They will be taking on the risk for you and need to be confident in your ability to repay them.
Secondly, your business needs to have a good customer base. It would be best if you offered something people want or need and are willing to purchase.
Lastly, you must manage your risks well and provide stellar customer support. This means knowing your customers and understanding their buying habits. It also means having a good fraud prevention plan in place.
If you can do all these things, you will be well on your way to becoming a successful, high-risk merchant.
Why Use Zenti vs. PayPal or Another Processor?
If you’re looking for a payment processor that can work with your high-risk business, Zenti is the perfect solution.
A few key reasons businesses might choose to use a high-risk merchant account provider like Zenti over the big four processors:
- First, high-risk providers generally have more experience working with businesses in high-risk industries, so they may be more equipped to handle the specific needs of your business.
- Second, high-risk providers often offer more flexible terms and pricing than the big four processors. This benefits businesses that need a little more leniency regarding things like credit card processing fees.
- Third, they generally allow you to process international payments easily.
- Finally, high-risk merchant account providers typically have a smaller customer base than the big four processors, so you may get more personal service and support from your provider.
Zenti is the best option for businesses that are classified as high-risk. We have a long history of working with high-risk industries and have the experience and expertise that other payment processors lack. We’re committed to getting you approved for a merchant account and helping you keep your account in good standing.
Using Zenti as your payment platform gives you peace of mind knowing that you’re working with a team dedicated to helping high-risk businesses succeed.
How to Apply for a High-Risk Merchant Account With Zenti
Applying for a high-risk merchant account with Zenti is simple and straightforward. Start with these steps:
- First, visit our website and complete the online application form. Once your form has been submitted, we’ll contact you to discuss your specific needs and requirements.
- Next, we’ll send you a contract outlining your account’s terms and conditions. Once you’ve reviewed and signed the contract, we’ll begin setting up your account.
- Once your account is activated, you can start accepting customer credit card payments. We’ll provide you with all the necessary training and support to ensure you can successfully process transactions.
If you have any questions about the application process or high-risk merchant accounts in general, please don’t hesitate to contact us. We would be more than happy to assist you.