Is Your Business Considered High Risk by Payment Processors? Here's How to Find Out
Payment processing is a crucial component of any business, but not all businesses are created equal when it comes to securing favorable rates and terms. While some businesses are considered low-risk by payment processors, others may be labeled as high-risk and face higher fees, processing limits, and increased scrutiny.
So, how can you determine if your business falls into the high-risk category? In this blog post, we'll explore the factors that may contribute to a business being considered high-risk and how you can avoid being mislabeled as such.
Factors That Contribute to a Business Being Considered High-Risk
Payment processors have different criteria for determining whether a business is high-risk, but some common factors include:
- The type of business or industry: Some industries, such as online gambling, adult entertainment, and CBD, are considered high-risk due to the legal and regulatory complexities surrounding these industries. However, it's important to note that just because a business operates in a certain industry, it does not automatically mean that it is considered high-risk.
- The business model: Businesses that operate primarily online or have a high volume of transactions may be considered high-risk due to the increased risk of fraud and chargebacks.
- Credit history: A business with a poor credit history may be considered high-risk due to the higher risk of defaulting on payments.
- Processing history: A business with a history of high chargebacks or fraud may be considered high-risk due to the higher risk of financial losses.
Common Misconceptions and Mislabeling of Businesses\
It's not uncommon for businesses to be mislabeled as high-risk, especially if the processor or bank lacks understanding of the specific industry. For example, nutra, health, supplement, and CBD businesses are often mislabeled as high-risk due to the general perception of these industries by some processors and banks. This can lead to higher fees and increased scrutiny for these businesses, which often operate within legal and regulatory guidelines.
On the other hand, high-risk businesses are typically considered to be those in the adult entertainment, online gambling, and overseas transaction industries. These businesses are considered high-risk due to the legal and regulatory challenges and increased risk of fraud and chargebacks.
Avoiding Mislabeling as a High-Risk Business
To avoid being mislabeled as a high-risk business, it's important to do your research and find a processor or bank that has experience and knowledge of your specific industry. This can help ensure that your business is not being unfairly labeled as high-risk and charged higher fees.
Additionally, be prepared to provide detailed information about your business and its operations to processors and banks. This will help them accurately assess the risk level of your business and find the best processing solution for your needs.
The Importance of Understanding Your Risk Level
It's important to understand your risk level when it comes to payment processing, as it can greatly impact the fees and terms you're offered. If you're unsure whether your business is considered high-risk by processors, consider speaking with a payment processing expert or reaching out to several processors for quotes and terms.
Even if your business is considered high-risk, there are still options available for secure and efficient payment processing. By doing your research and finding the right processor for your needs, you can ensure that your business has the payment processing solutions it needs to succeed.
What this means for your business
Payment processing is a crucial component of any business, and understanding your risk level is key to securing favorable rates and terms. While some businesses may be considered high-risk due to factors such as their industry, business model, credit history, or processing history, it's important to avoid being mislabeled as such.
By doing your research and finding a processor or bank that has experience and knowledge of your specific industry, providing detailed information about your business, and understanding your risk level, you can ensure that your business is not unfairly labeled as high-risk and has access to secure and efficient payment processing solutions.
So, don't let the fear of being considered high-risk hold you back from growing your business. Take control of your payment processing today and secure the solutions you need to succeed.