Merchant accounts often go overlooked as critical components of eCommerce businesses. Payment gateways let you accept credit cards online. Despite this, it is common for new companies not to be aware of the terms and conditions attached to their merchant accounts.
Every company wants payment options available to customers shopping on their website to do business online. They must accept major credit cards and offer streamlined ways for customers to move through the shopping process. Suppose you specialize in CBD products; the cbd payment processor at highriskpay.com can make it much easier for you to accept payments from your clients.
What role does your merchant account play during the purchasing process, and when does it come into play?
Let’s say that you have a customer shopping on your site, and they find a product they would like to purchase. After going through the complete purchase process and finally clicking on the purchase button, the purchase is complete. During this stage, specific automation takes over, and your website tools act as a secure terminal. In the case of probabilistic cancellation, the transaction is called high-risk. Therefore, businesses with a high volume of transactions and cancellation rates require high-risk merchant accounts.
Continue reading to know more about the same and what businesses qualify for the high-risk merchant account.
What Is A High-Risk Merchant Account?
High-risk merchant accounts are payment processing services for businesses considered riskier by banks due to high chargeback rates, huge volume transactions, financial instability, fraud histories, bad credit ratings, and other factors.
Since the above factors increase a business’s risk, high-risk companies must pay higher fees and undergo more scrutiny to obtain merchant services.
Top High-Risk Industries That Qualify For A High-Risk Merchant Account
Consider looking at some examples of high-risk industries to familiarize yourself with what the industry looks like. Below are the types of businesses that will qualify for high-risk merchant accounts:
There has been a dramatic increase in sales of hemp products since the 2018 Farm Bill came into effect, allowing farmers more opportunities to plant hemp plants, which has boosted this industry’s sales. Since the legal landscape is constantly changing, it poses a high-risk activity, making this industry quality for a high-risk merchant account. Among the CBD products available are oils, ingestible, tinctures, flowers, and even CBD products for pets. The CBD found in cannabis is derived from THC, so the amount of THC in CBD is also subject to state regulations. Due to a legal groundwork of change and controversy, this modern medicinal and the ingestible product is considered high risk.
- Fantasy Sports
It has been a constant growth story for the online fantasy football industry since CBS launched its first pool in 1997. Fans gather from around the world annually to create their customized teams and compete to become the best coach, owners, and organizers. Many look forward to seeing who takes home the title, but many have money at stake. Gambling is what makes fantasy sports so risky. The potential bad credit and the massive volume of transactions make it perfect for a high-risk merchant account.
- Subscription Boxes
Any industry can create subscription box products that package and deliver a particular product to a specific niche of customers. There isn’t anything wrong with the products when it comes to subscription boxes, but it is the billing structure that makes them high risk. As a result of customers often leaving their orders on auto-pilot, ongoing monthly billing accounts for higher chargebacks. Refunds and chargebacks are not desirable for banks and subscription billing companies. Unfortunately, this industry circumstance makes life more difficult for merchants.
- Pawn Shops
Despite the emergence of new industries, brick-and-mortar stores also find value in the e-commerce market. For example, a pawn shop offers a wide range of unique products and payment options, mainly supplied with creations by local sellers.
In addition, there are some high-ticket items, such as jewelry or collectibles. For example, there are instances in which a customer may request a refund after receiving the product, claiming that it never arrived, and then ask for a refund. The risk associated with things like this is higher since there is a higher possibility of fraud and return.
The reason why people often use travel services is that they want their purchases to be insured and that they can minimize their risk of missing their vacation. The recent pandemic has taught us that travel plans are not always permanent, and it is riskier to make transactions if a disruption in the supply chain or service isn’t guaranteed. In addition, travel companies may have to deal with account troubles in the case of multiple canceled payments. In this industry, high-risk merchant accounts are an ideal choice for companies operating in this field.
As well as being at the center of political discussion, firearms are subject to strict age and legal restrictions. However, brand associations fall outside of these policies. When companies like PayPal are associated with illegal firearms transactions or tragedies, their brand value drops dramatically. Therefore, only high-risk merchants can process firearms and accessories payments.
Summing It Up
Whatever the size of your business is, processing payments is an integral part of your business. Having a high-risk business does not have to cause you to panic, and this is not as bad as it seems because many acquirers provide merchant services for high-risk merchant accounts.