Within the high risk merchant processor industry, there’s plenty of complexities that make this ecosystem function. For hard-to-place businesses, navigating this world and choosing the right payment partnership can seem overwhelming.

Don’t worry – it doesn’t have to be so complicated.

The key to understanding what high risk merchant processor is right for your business is understanding the core characteristics that enable these relationships to exist. From there, businesses have a better sense of how they can ensure their processing partner is addressing the very risks they’re intended help merchants manage.

To help merchants better understand the inner workings of a high risk merchant processor, we’ve broken down how businesses are able to enable payment relationships with hard-to-place businesses. We’ve also gathered a list of features to look for when determining if your processor partner checks off all the boxes to help protect your business and your customers from unnecessary pitfalls.

Inside a High Risk Merchant Processor


Traditional processors and banks are quick to dismiss businesses that are labeled “high risk.” Businesses are left unsure of where to turn, since their particular model may fall into the category that many in the mainstream financial ecosystem believe have a higher failure rate. These include factors like a business without much financial backing or money in the bank, a lack of personal credit, increased chargebacks, and irregular or large transaction histories. Those are just a number of reasons businesses get labeled high risk.

Some of the types of businesses a high risk merchant processor might work with are those in the following sectors: Automotive, collections, credit repair, tobacco, online electronics, fantasy sports, online gambling, firearms, online furniture, vacation, etc. That’s just a sample that often needs to rely on a high risk merchant processor to manage their credit card transactions. The common theme between each of these businesses is there is a higher correlation between illicit activity and fraud — which means a greater chance for chargebacks.

Luckily, there are payments processing partners who are able to look beyond the traditional factors and take on the risk that other processors won’t. These are considered the high risk merchant processors. Just as the merchant must do, a high risk merchant processor must undergo extra steps to ensure a smooth payments relationship. But once that partnership is established and the business’ transaction model is understood, the nature of a high risk merchant processor isn’t all that different — at least from the perspective of how the merchant uses that processor.

For a high risk merchant processor to properly vet a business, this involves an underwriter who reviews an application for a merchant account. Similar to how an insurance underwriter evaluates the risk of a customer, a high risk merchant processor determines if there are any red flags that suggest the business is running an illicit operation.

What a high risk merchant processor underwriter looks for is the volume of unpaid chargebacks, any irregularities in business patterns that suggest funds aren’t legally managed properly, and how much exposure there would be to regulatory fines from the government or card brands. The processor will look for the funds in the merchant’s bank account to indicate stability, and track how funds traditionally would flow into this business — including the types of currencies and payment types.

A high risk merchant processor must also have the proper security protocols to fully protect the transactions they are processing. Since there is already some built-in-risk with these types of businesses, having core features like a secure license (SSL) can ensure payments are protected from unwanted threats. This not only protects the merchants they work with, but it ensures that same level of security is provided to their own customers, too.

Determining the level of payment volume able to be processed per month also varies between high risk merchant processors. Unlike a traditional business relationship that can determine the level of transaction volume their business would need to process on a monthly basis, a high risk merchant doesn’t have the same advantage. Nor does the high risk merchant processor enabling the payments relationship.

Managing risk is a balancing act in the payments ecosystem, and having the right high risk merchant processor helps mitigate that risk. The merchant can focus on growing its business, while the processor manages the proper steps to underwrite any unnecessary risk for all parties. This means the processor underwriter may take some time before they are willing to increase the approved payment volume a merchant is able to process monthly. Determining that level is the responsibility of the high risk merchant processor, but it’s up to the merchant to provide the necessary information and resources to create a transparent view of their financial health.

The High Risk Merchant Processor-Merchant Relationship


The concept of “high risk” doesn’t have to be negative. Of course, the fact that many traditional credit card processors and banks won’t take on high risk merchants casts a cloud over these businesses, often making it more difficult for them to find both a payment processing partner and a merchant account. That’s where high risk merchant processors are valuable — and create a viable option for businesses needing to process payments, without having to manage the hurdles themselves.

Since all businesses that accept credit cards need a merchant account, payment processor, and payment gateway, it’s only natural there would be an increased need for high risk merchant processors. The cost of providing these services varies depending on what banking relationships are established, what type of business is being conducted, the amount of transaction volume, and the types of products or services being sold.

The high-risk merchant processor-merchant relationship is all about serving legitimate businesses that might otherwise be deemed “too risky” by other processors. They are built to manage risk, which provides them with the proactive tools necessary to have insight into what the pitfalls of a high risk merchant might actually be.

This is where the payment gateway comes into the payment processing mix. All merchants, regardless of their risk level, must provide a seamless checkout experience. A high risk merchant processor also paves way for a high risk payment gateway that can ease the online payment integration for merchants needing this extra layer of protection. High risk merchant processors with this capability can also provide the necessary flexibility to help high-risk merchants achieve the customization and control they need to accept payments properly and securely online.

What makes it possible for high risk merchant processors to work with hard-to-place businesses is the trust built across the payments ecosystem between the payment processors and the banks and issuers. Because these established relationships exist, high risk merchant processors are able to operate seamlessly in the merchant landscape in a way that creates seamless interactions for every party involved.

For example, when working with SMB Global for high risk merchant processing and payment gateway needs, businesses are privy for features like our chargeback prevention platform that monitors your merchant account in real-time. This not only helps merchants fight chargebacks and win back lost revenue, it also helps hard-to-place merchants establish payment relationships with merchant processors. This makes them part of the mainstream financial fold and allows them to do business without having to worry about any unnecessary risk.


What to Look for in a High Risk Merchant Processor


The number of high risk merchants that fall in the hard-to-place category is broad, which means the solution to serve these businesses cannot fall into a one-size-fits-all platform. That’s why it’s important to work with a high risk merchant processor that is built with flexibility and scalability in mind. That means offering different payment processing and gateway solutions that can be tailor-fit to meet merchant’s needs based on their type of business or services they offer.

Finding the right payment processing partner boils down to experience in this market, which means a company that has established relationships with financial institutions who are willing to trust the intermediary payment processor to take on much of the risk associated with these transactions. Since a high risk merchant processor and gateway service as the middle-man between the merchant and the bank, it’s important to find a solution provider that values trust, transparency, and communication.

Those three categories are critical in helping merchants conduct their daily business without having to worry about the nitty-gritty nuances of a high risk merchant processor. Instead, they’ll leverage their vast banking relationships and payments expertise to get your merchant account approved.

Merchants needing high risk credit card processing also must look for a processor solution that can serve the diverse needs of their clients. This means more than traditional credit cards. Since your customer base expects to pay on their own terms, you should work with a high risk credit card processing solution equipped to offer other types of payment forms, such as ACH and recurring payments. This can be one way to lower transaction fees, make payments faster and serve your customers better.

What hard-to-place businesses must understand is there is a payment processing solution to fit their needs. Since high-risk merchants need customized solutions that are tailor-fit to meet their evolving needs, businesses shouldn’t fret if a traditional payment processor can’t fulfill their needs. The right high-risk merchant processor can offer merchants a better more streamlined path for business owners to take to get approved for a high risk merchant account, maintain their account, and start growing their business.

That’s the type of win-win any business is looking for, regardless of their level of perceived risk in the mainstream payments ecosystem.


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Anna Kragie is a content contributor for SMB Global. She previously wrote for PYMNTS.com, as a Sr. Content Producer, where she focused on financial services and payments innovation, fraud and security, emerging payments, and FinTech news, research and thought-leadership content across the payments industry.