Mitigating Risks With High-Risk Merchant Accounts in the UK

Friday, October 8th, 2021

As an e-Commerce merchant in the UK, the only way to process credit and debit card payments is to have a merchant account. But what if you operate a business that is considered high-risk by most payment processors?

Unfortunately, high-risk businesses have an increased risk of chargebacks, personal information theft, and fraudulent transactions. As a result, most traditional merchant account providers are not keen on servicing these types of businesses. 

What Is A High-Risk Merchant?

A high-risk merchant is a classification given by a credit card processor for a business that operates within a “high-risk industry”. These industries are characterized by the unusually high incidences of chargebacks, its propensity for fraudulent transactions, and the use of stolen credit cards. High risk merchants are also subject to paying higher than average processing fees to offset the risks for the payment service providers. 

Some of the verticals associated with the high-risk industry include: 

• Telemarketing
• Dating Services
• Cannabis
• Adult Entertainment
• Online Gambling

What Is A High-Risk Merchant Account?

When a merchant has been given the classification “high-risk”, they will discover that finding a merchant account provider willing to partner with them will be an incredible challenge. 

High risk merchants experience both chargebacks and fraud so providers refuse to provide their services to them. They want to avoid not only reputational harm, but the great financial risk associated with these business types.

So where can high-risk merchants turn to for all their card processing needs?

Luckily, there are payment providers that specialize in the high risk industry to provide you all the services you need to take card transactions. Keep in mind that, as a high risk merchant, you will be subject to higher processing rates and fees, long-term contracts, and a rolling reserve. Also, do look out for some unscrupulous players who are out to take advantage of merchants desperate for an account. 

Inspite of having some disadvantages, acquiring a high risk merchant account positions your business to more opportunities for growth and revenue. Here a more benefits:

• They offer recurring billing (for subscription business models)
• Less restrictions on international transactions
• Enhanced fraud protection
• Load balancing (to minimize chargebacks and process increased sales volumes)

How To Reduce Risk As A High Risk Merchant

It is wise to tackle any risks related to fraud and chargebacks before you apply for a high-risk merchant account. Here are a few things you can do now before you approach a payment provider for a high-risk merchant account:

• Provide clear billing and refund policies on a prominent place on your website.
• Your company name on the credit card billing invoice should be identical to the name of your business.
• Keep your customers happy by answering any questions or resolving any issues quickly and efficiently.
• Shipping information must be timely and clear on the website. If there are any issues, communicate with your customers immediately and regularly.

Choosing A High Risk Payment Processor 

In order to select the best payment processor, there are a few criteria to begin your search. Here are some helpful tips:

• Research the processor’s “accepted business types.”

Sometimes certain payment processors do not serve all verticals. Make sure they actually serve merchants in your particular industry.

• Seek a processor that offers load balancing.

This feature allows you to distribute your transactions across multiple merchant accounts. However, they are all integrated into one single gateway. 

• Study your contract closely.

Some merchant providers do not display their fees and rates online. Ensure that you understand the fees and that they are fair. 

Final Thoughts

Operating a high risk business should not be an impossible feat. With the plethora of high-risk businesses enjoying both growth and financial success, there is no reason why your business should not join the ranks of highly profitable businesses.