What You Need to Know About High Risk Payment Processing

August 18, 2022

Ori Levy

Head of Business Development

Few things are guaranteed in business, but one thing we can be sure of is risk. There are many types and levels of risk and, unfortunately, perception matters. 

Is your business in a so-called high-risk industry? If so, you’ll want to read our article on the key things to know about high-risk merchant account processing, including what dictates risk levels, how this can impact your payment processing and why the right partner can make a big difference.

From meeting compliance requirements to ensuring a smooth checkout experience, the high-risk nature of an industry can lead you to require additional support from your payment service provider (PSP). When it comes to payment processing, high-risk merchants should consider the support of an experienced payments consultancy or service provider. Let’s dive into the key considerations

What makes a merchant account “high-risk”?

Merchant accounts that are considered high-risk usually share some commonalities. The business model is one of the first indicators. For example, if the nature of the business generates more risk exposure, by selling intangible services rather than products. 

These business models tend to see larger numbers of transactions per month, and high volume contributes to greater risk exposures.

Payment processing for industries like dating, gambling, and many other subscription services, generally falls into this category of high-risk merchant account processing. With additional data concerns and blurred lines surrounding legalities, those red flags put you at greater risk of fraudulent activity and chargebacks. Other factors that will greatly contribute to risk exposure include an international payment acceptance, low credit score, or no payment processing track record. 

Equally, your company’s reputation can influence perception from PSPs and stakeholders. A low credit score or an online presence saturated with negative reviews and fraudulent terminology that might suggest fraudulent interception are huge red flags. Compliance is another key assessment tool for risk assessors and stakeholders, and poor compliance records can push you towards a high-risk label.

Why being labeled “high-risk” can have an impact on your payment processing

Let’s get one thing straight: being considered a high-risk merchant (or what we like to refer to as higher risk isn’t always a bad thing. What we need to do is look at ways to manage this risk rather than remove it entirely. There will always be some level of risk in business management, but how you approach it is ultimately what matters.

So, what kind of impact does this have on your payment processing? The impact mainly stems from higher payment processing fees. Fees for high-risk merchant account processing are generally greater than with low-risk ones. 

There are additional considerations for the payment process in cases of high-risk accounts. For example, rolling reserves to counteract the risk of loss to the merchant, additional PCI considerations and regulatory demands.

Plus, if a merchant’s payment processing history includes incidents of fraud, or if they lost their previous account due to a high chargeback ratio, they may struggle to get a high-risk merchant account.If you operate with a subscription model, as mentioned above, this can increase risk. But with robust tools and the right payment gateways, most risk challenges can be overcome.

8 Essential Strategies for managing high-risk payment processing

Effectively managing high-risk payment processing is crucial for businesses in industries prone to increased fraud and chargebacks. Here, we explore 8 essential strategies that can help high-risk merchants navigate the complexities of payment processing, ensuring smooth transactions and minimising potential financial risks:

1. 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.

2. Optimise Your Payment Gateway Integration

A robust payment gateway is essential for managing high-risk transactions efficiently. Ensure your payment gateway supports seamless 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.Navigating the complexities of high-risk payment processing requires a proactive approach, combining advanced technology, strategic partnerships, and robust security measures. Partnering with a reliable payment processing provider like Fibonatix can further enhance your ability to handle high-risk payments with confidence and efficiency.

If you think you fall into the high-risk category or if you’re grappling with any of the issues mentioned above, don’t panic. This isn’t necessarily a hindrance to your business. With the right support, additional risk factors can be managed professionally – ensuring your business operates smoothly, reputation is managed and compliance requirements are met. 

A good payment processing partner that has experience working with high-risk merchant accounts can offer tailored rates and help you manage the costs of being a high-risk account more effectively. They can offer support in maintaining high volume traffic rates that the acquirer will accept and be willing to onboard.

Below are some of the capabilities a trusted high-risk merchant account processing provider will be able to support you with:

  • Sought-after expertise and payment knowledge – be sure your provider is a trusted authority on the subject of high-risk payment processing accounts and has built both a reputation and portfolio within the space
  • Bespoke solutions – look for a provider who can offer a portfolio of bespoke solutions, such as efficient payment card processing and alternative payment methods (APMs)
  • Risk management capabilities – can they provide technological tools to prevent high chargeback and fraud ratios? 
  • Transparent payment structures and payment consulting will help you eliminate the possibility of reputational damage and inefficiencies
  • Ongoing support – 24/7 and continuous support is a must from any provider since the high-risk nature of your account comes with many unpredictabilities
  • Strict security should be a top priority with greater risk exposure – look for a provider who can offer robust security solutions

When you find the right payment processing partner, you should be assigned dedicated account managers with varied expertise, who can offer cutting-edge payment solutions. A specialist payment consultancy should consist of experts specialising in payments compliance, risk management and dispute management.

Complex business models can equate to higher levels of risk. But that label doesn’t automatically set you up for failure. Hopefully, this blog has shed some light on the best ways to manage and counteract the potential risks that could lie within your business. With tailored support from an experienced provider, your business can succeed and operate efficiently, even with a high-risk, high-volume model.

Risk should be managed, not avoided. And a partner like Fibonatix can help you do just that. We have a portfolio spanning an array of industries and we support high-risk merchant account processing, helping businesses categorised as high-risk to boost sales and meet compliance requirements while avoiding financial and reputational damage. Our knowledge, expertise and bespoke solutions let us help you deliver a seamless payment experience.If you wish to get some further reading on this topic, feel free to download our Merchant’s guide to Chargeback Management, which explores the topic of chargebacks at greater length, including the main participants and the most common reasons consumers make chargebacks. Alternatively, if you’d like to discuss your account with a member of our experienced payments team, get in touch with Fibonatix today.

1. What defines 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.

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

Transaction fees for high-risk merchant accounts are typically higher due to the elevated risk of chargebacks and fraud. Payment processors may impose increased fees to cover the additional risk and administrative costs. These fees often include higher transaction fees, processing fees, and potentially rolling reserves to safeguard against losses.

3. 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.

4. 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.

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

When selecting a high-risk payment processor, consider factors such as their expertise in your industry, transparent pricing structures, strong risk management capabilities, and comprehensive support services. Look for processors that offer bespoke solutions, including advanced payment gateways, credit card payment options, and secure processing for various payment methods.

6. 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.

7. 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.

8. How do payment processors determine the fees for high-risk merchants?

Payment processors determine the fees for high-risk merchants based on various factors, including the industry’s risk level, the merchant’s transaction volume, and the potential for fraud and chargebacks. High-risk payment processing often involves higher transaction fees and additional charges to account for the increased risk. These fees can include payment processing fees, risk assessment fees, and rolling reserves to protect against potential financial losses.

9. 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.

10. 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.