When navigating the turbulent waters of credit card processing set-up, it can often be beneficial to consider how attractive your business is to these companies. The difference between availability of merchant accounts for companies in low and high risk industries is night and day. The unique situation allows either type their own advantages and obstacles. As a high risk account, the lower availability of processing companies makes it difficult to find a company that will suit your needs, is reputable and maintains good business practices. A company that specializes in high risk, such as Double Helix, will work with you and actively help you to mitigate your weaknesses. In order to do so, it is important to understand the reasons that industries are considered high risk and therefore how to overcome those weaknesses. Below is a general list of the main high risk industries and the reasons they are classified as such.
Adult: This industry is considered a reputational risk to many financial institutions.
Airline and Booking: This industry has a high degree of chargeback and card-not-present charges.
Auto Warranty: This industry is high risk for a variety of reasons including generally being ecommerce and being exposed to a high level of charge back.
Background Check: Companies are generally open to a great deal of chargeback.
Bad Credit: Banks are less willing to work with a business proprietor with bad credit.
Business Consulting: The designation due to the prevalence of big-ticket purchases and the lag between payment and the rendering of services.
Business Opportunity: The designation is because of the potential excessive chargebacks and the poor historic functioning of certain predatory companies.
CBD: This has a reputational risk because of the cultivation methods.
Coins and Collectables: The designation is due to the high average ticket size.
Credit Monitoring: The billing model is continual or monthly making the industry high-risk.
Credit Repair: This designation is due to high potential for chargeback.
Debt Collection: The industry is high-risk because of the reputational risk, the dissatisfaction with services rendered, and the recurring billing model.
Fantasy Sports: This is an ecommerce industry with very high potential for chargeback.
Firearms: Banks view firearms as a reputational risk.
Gentlemen’s Club: This industry is considered a reputational risk to many financial institutions.
Health & Beauty: This is often an ecommerce industry that may have recurring billing models.
High-Ticket Services: High average ticket size gives the high-risk designation.
Male Enhancement: There is a reputational risk. The industry is primarily online.
Nutraceutical: Because of the non-substantial results of the products there is a great potential for chargeback.
Online Dating: The recurring billing model for services rendered online make the industry high risk.
Online Gaming: The industry is based upon ecommerce and faces a great deal of chargeback.
Payday Lenders: The industry is subject to a great deal of chargeback and the clientele’s financial position is a reputational risk.
Pawn Shop: There is a reputational risk associated with the possibility of procuring stolen items.
Recurring Billing: If a merchant uses a recurrent billing model they will be classified as high risk.
Skin and Hair Care: Companies will be considered high risk if they are ecommerce or have a high chargeback ratio.
Travel: The industry is categorized as high risk because of the high average ticket size and the possibility of chargeback.
Subscription Box: This industry exclusively uses a recurring billing model and ecommerce.
Vape and E-Cigarette: There is a high reputational risk because of the health effects of the products.
Web Design, Hosting and SEO: This designation is because of the irregularity/high average of ticket size, the high regulation of the industry, and the lag between payment and rendering of services.
How Can My Business Mitigate?
If you can address the weakness in your business model, you may be able to negotiate rates and fees. For example, a pawn shop can develop stricter guidelines to decrease chances of obtaining stolen goods. A health and beauty company can eliminate recurring billing models which tend to increase risk. Any recurring billing model can take a monthly stricter opt-in approach.
Sometimes you cannot negotiate up front, but time can be on your side. Reducing the number of chargebacks is the number one way to lower your rate. If you spend 12 months striving for the lowest number of chargebacks, you can approach your current provider to renegotiate your rate.