High risk processing accounts are more challenging to establish than standard risk accounts.  The reason for this is basic supply and demand.  There are far fewer banks that are willing to underwrite high risk processing accounts.  The banks that are open to establish high risk merchant accounts require due diligence documentation.

The documentation demonstrates that the business has the management skill and financial ability to adequately manage a high risk account.  This helps assure the acquiring bank will be protected from contingent liabilities in the case of fraud or chargebacks.

Merchants sometimes don’t understand that the acquiring bank is ultimately responsible for liabilities on the account.  Banks face substantial fines if merchants in their portfolios exceed chargeback thresholds.  If a merchant goes bankrupt, it is the bank which is left holding the bag.

Therefore, it makes good business sense for a bank to carefully underwrite a company before establishing a high risk merchant account.  And smart merchants will cooperate with the acquiring bank during the underwriting process by providing due diligence documentation is a timely and complete fashion.  The result will be a solid high risk merchant account that will be stable and secure.

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Banks are becoming increasing diligent in underwriting high risk accounts because there have been so many incidents of fraud in the establishment of payment processing accounts.  Ultimately it’s the acquiring bank that is left holding the bag for loss if a merchant is conducting fraudulent transactions.

For example, here’s one of the latest scams.

Cybercriminals stole the identities of 100 people who had stellar credit.  Using the stolen credentials, the criminals opened over 100 merchant accounts.  The criminals used dummy websites.  The company names were almost the exact same as real businesses, except the spelling differed by one or two letters.

Then, over the course of 4 years, the accounts were used to processing thousands of transactions.  The size of the transactions was small, ranging from 25 cents to 9 dollars.

Such low ticket transactions are often ignored by customers paying credit card bills because they don’t want to invest the time and effort required to dispute the payments.  Consumer lethargy is what the scamsters counted on and it was one of the reasons the operations were able to continue for so long.

By the time the scam was discovered, the funds from the accounts had been transferred offshore.  Recovering the money was never going to happen.  And the banks who established the merchant accounts were left with losses.  .

There are many reason consumers initiate a chargeback.  Some are legitimate.  Some are the result of fraud.  Consumers have the right to chargeback up to 6 months after the item appears on their credit card statements which creates future liability for the bank.

Certain industry categories are considered high risk by banks.  For example, ecommerce merchants selling adult entertainment content are considered high risk merchant accounts.  Other high risk industries include, but are not limited to, travel, direct sales, electronics, phone cards, auction sites, online charities, jewelry, long-distance carriers, herbal supplements, collectibles, subscriptions and recurring billing.

Some high risk merchants establish multiple merchant accounts to protect their business interests.  Like any business operation, it makes sense to have redundancy and backups in place for payment processing.  Multiple merchant accounts allow merchants to balance processing volumes among accounts.

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Sometimes an over-zealous attempt on the part of a high risk merchant account sales person results in incorrect setup.  Businesses must keep a close eye on how the account is setup in order to assure long-term payment processing success.

Some ISOs and processors accept liability on merchant accounts which gives these organizations greater flexibility in underwriting an account.  Sometimes it is easier to get an account approved through these channels but sometimes it can be more difficult because of the risk of liability.  Therefore, be wary of sales people who claim to be able to get accounts approved faster or easier because they assume liability because it may not be true.

In addition, make sure you keep a copy of your merchant application and make sure all fields are filled out correctly and honestly.   In eagerness to get an account approved, some unscrupulous sales people have been known to put false information on an application form.  For example, the industry classification may be wrong, processing projections incorrect, or products/services being sold not represented correctly.

Incorrect information on an application causes the account to be approved under false pretences.  Then, when the acquiring bank finds out, the account is terminated and the business is out of luck.

If a high risk account is applied for in the correct manner, proper setup of the account will follow.  This will lead to long-term high risk processing satisfaction.

Benefits of FX High Risk Merchant Accounts

• VIP Trader High Limit. Rapidly establish high limit sub-accounts for VIP FX traders.
• VIP Identification. Treat VIPs with special attention.  Set alerts and receive notifications a VIP trader is on the site. Give extra service or send targeted promotions to the VIP to increased spending.
• Trader Payouts. Build trader loyalty by paying out earnings via international bank deposits.
• Flexible Transmission Timing. Gives more time for off-line transaction analysis to enhance fraud protection.
• PCI with High Security, Relieves Forex merchants of the burden of storing card data.  Exclusive security features protects against hacking or cybercriminals.  .
• Authorization and Settle Options. Permits the division of a sale into “authorization” and “settle”.  This gives firms time to authenticate the end-user before the transaction is charged.

Advantages of Forex High Risk Merchant Accounts

• Rapidly establish and fund trading accounts
• Tracking, reporting, and account reconciliation is streamlined
• Cash flow is maximized
• Boost profits
• Acquire new customers
• Reduce operating expenses
• Accelerate business analysis

1. Discount rates.  A discount rate is a fixed percentage of the value of each transaction.  Discount rates for high risk merchant accounts are slightly higher than prices for low risk merchant accounts due to increased contingent liabilities associated with theses types of accounts.  Once a business shows the ability to manage high risk merchant accounts without excessive chargebacks for a period of six months, rates can be renegotiated.
2. Transaction fees.  Transaction fees are a per item cost associated with authorizing the transaction.  Transaction fees for a high risk merchant account are similar to those on a standard risk payment processing account.
3. Monthly statement fees.  The monthly fee is about the same for both high risk merchant accounts and standard payment processing accounts.  .
4. Gateway fee.  A gateway provides the secure connection between high risk merchant accounts websites and the banking networks that process the transactions. Rates for high risk merchant accounts gateway transactions may be slightly higher than with a standard payment processing account, depending upon the jurisdiction of the acquiring bank and the level of fraud protection applied by the high risk merchant.
5. Setup fees.  The vast majority of high risk merchant account providers do not charge a setup fee.  Be wary of companies that charge you for account application or setup.
6. Reserves.  Reserves are funds used to offset against potential chargebacks. Reserve accounts may or may not be required for a high risk account depending upon processing history, volumes, and industry classifications.   If a reserve is charged, it generally ranges from 5-10%.  Reserve accounts can be renegotiated once high risk merchant accounts payment processing history with the acquiring bank.

Now lots of merchants with high risk processing get upset about this suggestion.  They assert that some consumer requests for refunds are fraudulent.  For example, a customer may claim merchandise was never received.  Or the merchandise was defective in some way.  Or any number of reasons a consumer might give for requesting a refund.

Some merchants say it’s simply a matter of principle.  They are not going to give a refund if they suspect the consumer is not being truthful.

Of course, not all requests for refunds are untruths.  Sometimes, there are valid reasons for the request.

In any event, suppose you refuse to give a refund.  What’s the customer going to do?  That’s right.  They’re going to call their credit card company and dispute the charge, resulting in a merchant chargeback.  Even if the merchant eventually wins the chargeback dispute month or two later, the chargeback will still be reflected on previous months’ processing statements.

Lots of consumers never call the merchant asking for a refund.  They simply call their credit card company.  That’s always going to happen.  Some consumers know how to play the system.

But, if a consumer comes to you first requesting a refund, you are wise to accommodate the request.  Weigh the cost of a refund against the possibility of driving up charge back ratios on a merchant account.  Sometimes, you just have to eat a the cost of a refund.  In the long run, it’s a better choice than losing a merchant account.

Some dating sites are sexually oriented.  But the vast majority of internet dating sites do not contain explicit adult content.  What are the main reason dating sites are classified as high risk merchant accounts?

One reason dating sites are considered to be a high risk merchants is a subscription billing model.  After an initial trial period, recurring subscription billing is required to obtain more information on potential matches.

Subscription billing in general are prone to more chargebacks, which is one of the criteria for a high risk merchant classification.  Some online dating sites make it difficult for members to cancel subscription billing.  There may not be a customer service number displayed on the site. Or, the member must search through the site to discover how to cancel.  People do not want to take the time to do an extensive site search.  They simply want to cancel a subscription billing option.

The best strategy for dating sites is to make it easy for members to cancel subscriptions.  In this way, a dating site eliminates many chargebacks and maintains payment processing integrity.

When a subscription billing model is properly managed, many dating sites will not be considered high risk merchant accounts.  As long as chargebacks are low, most dating sites can move from a high risk merchant status to standard risk classifications, resulting in lower payment processing rates.

In changing from a high risk merchant category to regular account, dating businesses should seek a payment processor that provides special services for subscription billing models.  Select a processor that gives you ways to increase revenues from each subscription billing recurring payment cycle and helps retain customers.

Establishing relationships with high risk merchant account providers saves companies time and accelerates time to market.  High risk merchant account processing is a niche market requiring specialized industry knowledge.  Most companies do not have the internal resources in place that have this knowledge.  Therefore, businesses find it worthwhile to work with high risk merchant account providers that have the expertise to guide them to the right solutions.

Reputable high risk merchant account providers are paid by the banks and processors.  Therefore, businesses obtain the specialized services to place high risk merchant accounts at no charge.  Beware of high risk merchant account providers who charge money upfront for setting up accounts

Businesses are wise to also take advantage of the expertise of high risk merchant accounts providers regarding best practices for security, fraud-protection and compliance and changing payment processing regulations.

A single payment processing gateway controlling all processing eliminates the need to maintain and monitor more than one system. You get rid of repetitive administrative tasks and increase worker productivity.  Account management and reconciliation of all accounts is a breeze.  Customer service is improved.  And management reports can be viewed on based on individual accounts or globally.

Load balancing on a high risk merchant account payment gateway is totally automated, although manual manipulation is possible if desired.  A merchant configures parameters which direct the gateway to route transactions based on a single variable or combination of variables.