- Finance 101

What is a high-risk merchant?

Merchants can be considered high-risk by payment processors for a variety of reasons. Being considered a high-risk merchant not only can be surprising for many businesses but also can prevent many processors from working with your business due to payment fraud concerns.

Performance Card Service has created an infographic that covers the reasons why merchants can be viewed as high-risk and what to look for in a processing partner.

What Is A High-Risk Merchant?

High-risk merchants are typically businesses that payment processors and merchant services providers consider to present excessive exposure to fraudulent transactions, default, legal issues or chargebacks. However, the kind of businesses that fall under this category aren’t always what you expect.

Here’s a look at some factors that could cause a business to be considered a high-risk merchant: 

Your business’s financial history. If your business is a startup venture, you likely don’t have an established financial history demonstrating your credit worthiness — but that can make you a high-risk merchant in the eyes of payment processors. Likewise, you could be a high-risk merchant if your business has had past financial difficulties, including a history of missed payments or default.

Your business is overseas. Merchant risk is determined in part by a payment processor or merchant service provider’s ability to verify the nature of your business, and its presumed legitimacy based on your location and online footprint. As a result, businesses that are located internationally may be considered high-risk merchants.

Your sales transactions and customers. If the bulk of your transactions expose your business and its merchant services partners to a high likelihood of payment fraud — because they involve card-not-present transactions that make it difficult to verify account ownership and/or checks as a form of payment — you could be considered a high-risk merchant.

The nature of your business falls into a high-risk category. Products and services that fall into certain categories can inherently make your business high risk, especially if your products or services involve adult content, regulatory standards, legal and compliance issues, or the transmission of sensitive data. Businesses that involve nutraceuticals, lending or credit services, e-cigarettes and even online dating sites could all fall into the high-risk merchant category.

If your business is considered a high-risk merchant, it can be to your benefit to seek a merchant services partner that specializes in this space. Not only can the right partner provide customized solutions to ensure you’re able to accept the forms of payment you need to succeed, but it can recommend appropriate measures to protect your business against security and fraud risk.

What is a high-risk merchant?

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