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Merchant Accounts: Understanding Who’s Low-risk and High-risk

One of the things any ecommerce retailer must know is the variation between a low and high-risk merchant account. Like it or not, you can only choose between one of these two or you won’t be able to process payments online.

A merchant account is what allows a buyer to pay foritems and services straight from the business’s website. 

If a business registers an account, it is assigned a unique code, which makes it stand out among millions of enterprises all over the globe.  All transactions initiated through the firm’s website include this code. As soon as your application has beenaccepted, it is linked to your existing business account, so that you receive direct payment from the buyer’s card.

Features of a Low-risk

A low-risk merchant account is the right pick if;

  • You take only a single currency.
  • The payment vendor hosts your websites payment page.
  • You deal in low-risk items or services like stationery, household products, or apparel.
  • Your nation islow-risk like the US, Canada, Australia, countries in West & North Europe.
  • You are NOT prone to excessive chargeback levels

Features of a High-risk

You’ll need a high-risk merchant account if;

  • You are classified as TMF (terminated merchant file) due to too many refunds.
  • You’re a newbieretailer with a background of only a fewcard transactions.
  • You take more than a single currency.
  • You trade in items or services to buyers in countries linked to excessive fraud i.e., any nation outside the ones listed as safe above.
  • You credit history is poor.
  • You trade in seasonal goods or services.
  • Your sector is prone to too many refunds

How Processors Identify Risky Merchants

A payment processor will consider several factors when gauging the risk level of a merchant account. Most acquirers will turn you down if your account has the above-listed features.

But they also look at each business case. Not all companies from industries considered risky will be turned downed, and there many other firms that don’t appear in the list of high-risk sectors but may be classified as risky.

In a nutshell, an acquiring bankwill consider the following when scrutinizing risk levels:

  • Whether onboarding a firm will lead to bad press due to the items or services it sells
  • Whether onboarding a business willcome with financial and legalresponsibilitiesbecause of the items or services it sells
  • Whether a company is prone to too many refunds.

The bottom line

While there are many things that could lead to the categorization of a business as risky, the main reason most acquirers will consider your company high-risk is if it is susceptible to frequent returns from unsatisfied customers.

Author Bio:Electronic payments expert Blair Thomas is the co-founder of high risk payment processing company eMerchantBroker. He’s just as passionate about assisting businesses get a high risk merchant account as he is with traveling and spending time with his dog Cooper.

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