What Makes You High Risk as a Merchant?

By  //  August 25, 2022

Share on Facebook Share on Twitter Share on LinkedIn Share on Delicious Digg This Stumble This

There are many reasons why you may be considered a risk as a business. So many factors come under scrutiny that any discrepancy or past mishap will likely affect your external representation. 

What is a High-Risk Merchant?

A high-risk merchant is one that poses a higher risk to suppliers, and payment systems. The main risk factors are chargebacks, fraud payments, and the number of returns from customers. There are many factors that determine your risk status, and these are explored in more detail below. 

A New Company

The age of your company will decide how you are perceived by payment processors and banks. If your business is relatively new, they have no way of understanding your return projections, sales potential, and customer interactions. The predictions for the first year of your company may fall flat and never come to fruition, or they might more than double the expectations first laid out. There is no real way of telling which route a company will go down, and the only thing that can paint a clearer picture is time. 

Your Target Demographic and Chosen Industry

Certain industries are seen as having a higher risk than others. Gambling industries like casinos are seen as particularly high risk, alongside subscription style services, 18 plus industries, and travel companies. The reasons for this are straightforward; it is because there are just too many unknown factors involved. Travel companies, for example, are restricted by weather conditions, economic factors like inflation, and people’s ability to afford vacations. 

Your Business Credit Profile 

How you have handled money in the past is considered heavily when deciding which service to give you. If you have multiple failed ventures, for instance, this will be called into question and your reputation will be tarnished accordingly. 

What is the Impact?

The impact is multi-faceted:

■ You will be subject to higher fees. 

■ You may have to sign up for a longer term on any contract. 

■ There may be more stringent stipulations. 

What are Your Options?

If your business ends up falling under this category, there is not much you can do to rectify this immediately. Once the decision has been made, the consequences are more long-term actions than anything short-term. 

Specific Accounts

Some companies will not consider you a viable client, and your options may be limited. There are such things as high risk merchant account options which, as discussed above, will be subject to elevated fees and other conditions. 

Repair Your Financial Profile

Showing that you are more established and financially savvy while maintaining professional practices with regard to budgeting, credit lines, and sales trajectories will improve your chances of becoming less of a risk to banks and similar in the future. 

High risk merchant accounts are decided by lots of things and consider multiple factors. To avoid having to pay the extra fees and being branded as high risk, follow through with your business plan and fulfill your sales potential with accurate profit reporting while ensuring your credit is well looked after too.