What You Need to Know About High Risk Payment Processing

If a business sells CBD, runs a subscription model, or operates in any industry that payment processors consider “high-risk,” they’ve likely faced tighter scrutiny from mainstream processors when it comes to approvals, account terms, and fee structures. High-risk payment processors specialise in working with these merchants, though they vary significantly in transparency, expertise, and long-term reliability.

This guide covers what determines risk classification, how it directly affects processing costs and approval rates, and the strategies that separate merchants who manage risk effectively from those who get buried by it.

What is a high-risk merchant account?

Several factors push a merchant account into the high-risk category. The most common:

• Business models that sell intangible services rather than physical products, processes high transaction volumes, or operates on a subscription or recurring billing basis. Industries like dating, gambling, and nutraceuticals fall here by default.
• Transaction profiles that involve cross-border payments, multiple currencies, or high average order values, all of which increase fraud and chargeback exposure.
• Business history that shows a low credit score, no processing track record, previous account terminations, or compliance issues. PSPs and acquiring banks weigh these heavily during onboarding, and poor records in any of these areas can trigger a high-risk classification regardless of your industry.

» Not sure where your business falls? Talk to our expert payments team

High-risk payment gateway vs. merchant account: What’s the difference?

A payment gateway and a merchant account handle two distinct jobs in the processing chain. Confusing them leads to poor vendor evaluations and unexpected gaps in your payment infrastructure.

What a payment gateway does

A payment gateway is the technology layer that captures, encrypts, and transmits payment data between your customer’s bank and your merchant account. It integrates with your website or app, encrypts card details using protocols like TLS and AES-256, and routes authorisation requests to the processor in real time. The gateway handles secure data transmission but never holds funds.

What a merchant account does

A merchant account is a specialised financial account that temporarily holds and settles your transaction funds. When a customer pays, the approved amount sits in this account before transferring to your business bank account, minus processing fees. An acquiring bank or payment processor provides this account after agreeing to accept the elevated liability that comes with your industry classification.

How they work together

The two components operate in sequence. The gateway captures and encrypts the customer’s card details, then transmits an authorisation request to the processor. Once approved, funds move from the customer’s issuing bank to your merchant account, where they sit during settlement. After verification and fraud checks, the merchant account provider transfers the net amount to your business bank account, typically within a few days.

How to manage high-risk payments

Effectively managing high-risk payment processing is crucial for businesses in industries prone to increased fraud and chargebacks. Here, we explore the essential strategies that can help high-risk merchants navigate the complexities of payment processing, ensuring smooth transactions and minimising potential financial risks:

Implement advanced fraud prevention tools

High-risk businesses must prioritise fraud prevention to protect their revenue and reputation. Use advanced fraud detection and prevention tools that monitor transactions in real-time, identifying suspicious activities. Features such as address verification services (AVS), card verification value (CVV) checks, and multi-factor authentication can significantly reduce the risk of fraudulent credit card payments.

Optimise your payment gateway integration

A robust payment gateway is essential for managing high-risk transactions efficiently. Ensure your gateway supports seamless payment integration with your existing systems and offers customisable features to handle high-risk scenarios. This includes support for multiple payment methods, such as credit cards, debit cards, and mobile wallets, to cater to diverse customer preferences.

» Discover your debit and credit card processing solution

Understand and navigate transaction fees

High-risk payment processing often involves higher transaction fees due to the increased risk. It’s important to understand the fee structure, including payment processing fees, chargeback fees, and rolling reserves. Work closely with your payment processor to negotiate favourable terms and manage costs effectively while maintaining compliance with industry standards.

» Want a clear breakdown of what you’re actually paying? Book a free demo with our experts

Enhance customer communication and transparency

Clear communication with customers about payment processes and policies can reduce disputes and chargebacks. Provide detailed information on your website regarding accepted payment methods, transaction security measures, and refund policies. Transparency helps build trust and ensures customers understand what to expect during the payment process.

Regularly review and update security protocols

Compliance with the Payment Card Industry Data Security Standard (PCI DSS) is mandatory for high-risk merchants. Regularly review and update your security protocols to safeguard against emerging threats. This includes maintaining up-to-date encryption standards, secure credit card storage practices, and regular security audits to ensure ongoing protection.

Leverage payment consulting services

Partnering with an experienced payment consulting service can provide high-risk merchants with tailored advice and support. Consultants can help optimise your payment processes, manage risks effectively, and implement best practices for handling high-risk transactions. This expertise is invaluable for navigating the complexities of high-risk payment processing and achieving long-term success.

Use business intelligence and analytics

Harness the power of business intelligence tools to gain insights into transaction trends, customer behaviour, and potential risks. Analytics can help identify patterns that may indicate fraudulent activities or inefficiencies in the payment process. Use this data to refine your strategies, enhance security measures, and improve overall payment processing efficiency.

Explore alternative payment methods

In addition to traditional credit and debit card payments, consider integrating alternative payment methods such as digital currencies, mobile wallets, and buy now, pay later (BNPL) options. Offering diverse payment options can attract a wider customer base and provide flexibility for handling transactions, reducing dependency on high-risk payment channels.

» Set up recurring payments on a platform that handles multi-currency billing and automated retries from a single dashboard

Audit your payment setup and fix what’s costing you

Start with a self-audit. Review your current chargeback ratio, processing fees (including every line item on your statement), and approval rates. If your chargeback ratio sits above 0.65%, your effective processing rate exceeds 6% after hidden fees, or your approval rate has dropped below 90%, those are concrete signals your current setup needs attention.

Then pressure-test your processor relationship. Ask your current provider three questions: What is my all-in effective rate, including every fee? What specific chargeback prevention tools do you offer for my industry? What happens to my account if my chargeback ratio hits 0.9%? If you get vague answers or silence, that tells you something.

Fibonatix offers bespoke payment solutions to merchants in industries that most processors avoid or misunderstand. We pair dedicated account managers with every merchant to build processing strategies around your specific business model, not a generic risk category.

» Consult with our experts for a transparent assessment of your current payment setup

Disclaimer: Fibonatix is a UK-based, FCA-regulated payment service provider (FRN 768776) specialising in merchant accounts for B2C businesses globally, while our B2B offerings are exclusive to the EEA. Verify our regulatory status on the FCA Financial Services Register.

FAQs

What is a high-risk payment processor?

A high-risk payment processor specialises in handling transactions for businesses deemed to have a higher risk of fraud or chargebacks. This can include industries such as online gambling, adult entertainment, or subscription services. These processors offer tailored merchant services and higher levels of security to manage the increased risk associated with these transactions, ensuring compliance and minimising fraud.

How do transaction fees differ for high-risk merchant accounts?

Fees run higher across the board. Processors charge more per transaction to offset the elevated chargeback and fraud liability, and often layer on additional costs: rolling reserves to safeguard against losses, separate chargeback fees per dispute, and administrative charges tied to enhanced compliance requirements.

Why are chargebacks more common with high-risk payment processing?

Chargebacks are more common in high-risk payment processing because these industries often deal with higher volumes of transactions and services that are more susceptible to disputes. Effective chargeback management tools and strategies are crucial for mitigating these risks and maintaining a good standing with payment processors and credit card companies.

How can I reduce fraud in high-risk payment processing?

Reducing fraud in high-risk payment processing involves implementing robust security measures such as real-time fraud detection, secure payment gateways, and PCI-compliant practices. Partnering with a payment processor that offers advanced fraud prevention tools and expert payment consulting can also help manage and mitigate fraud effectively.

What should I look for in a high-risk payment processor?

Prioritise four things: demonstrated expertise in your specific industry, transparent pricing with every fee disclosed upfront, strong risk management capabilities, and responsive human support (not just a ticketing system). Bespoke integration options and support for multiple payment methods matter too, but stability and transparency should come first.

How do I integrate a high-risk payment gateway into my business?

Integrating a high-risk payment gateway involves working with a processor that provides flexible integration options, such as APIs or plugins compatible with your existing systems. Ensure the gateway supports all necessary payment methods and adheres to security standards to facilitate seamless and secure transactions, thereby enhancing the payment process for your customers.

What are the benefits of using a high-risk payment processor?

Using a high-risk payment processor offers several benefits, including tailored payment solutions, enhanced fraud protection, and specialised support for industries with increased risk. These processors provide high-risk merchant accounts with advanced security features, such as robust payment gateways and secure credit card payment options, which help mitigate the risk of chargebacks and ensure smooth transactions.

What security measures should a high-risk merchant account have in place?

A high-risk merchant account should have robust security measures, including PCI compliance, real-time fraud detection, and secure payment gateways. Additionally, implementing multi-factor authentication and encryption for credit card payments can help protect sensitive customer data and reduce the risk of fraud, ensuring a secure payment process for all transactions.

Can high-risk payment processors support multiple payment methods?

Yes, high-risk payment processors can support multiple payment methods, including credit card payments, debit cards, mobile wallets, and digital currencies. They offer flexible payment options to cater to a diverse customer base, providing seamless payment experiences across various channels. This versatility is crucial for high-risk merchants to meet customer demands and manage transactions effectively.