Unpredictability or risk is as part of all business venture as profits. Some hazards seem avoidable; however, in business, some risks offer considerable gain considering a particular situation might not be as clear-cut as presented suggesting high returns other than a high threat. It is this notion that high-risk payment processing through a high-risk merchant become beneficial for the merchant.
It is a requirement to have an active merchant account with an acquiring financial institute before accepting online payments. Marchant accounts are basically categorized into two namely low-risk and high-risk accounts. A business that runs a low-risk rating is more likely to be offered banking services by every financial Institute. Nonetheless, the same cannot be said for high-risk merchants. Business entities that are titled as ‘high-risk’ go through exceptional processing agreements; subsequently, a great deal of payments service providers avoid processing particular payment means such as electronic or online with such businesses.
The high risk payment processing criteria for business entities that are placed in the high-risk category are susceptible to higher chargeback possibilities. Consequently, they pay higher processing charges, which substantially relate to their risk factor. Additionally, all terms in the high-risk payment processing criteria are determined by the processor’s (financial institutes) underwriting guiding principle. These regulations are stringent and in the instance a high-risk merchant of any sort be it individual or organization does not have their ducks in a row, then the process is harder than normal. For example, other than higher setup fee, high-risk payment processing requires a scheduling of a rolling reserves scheme that is considerably unfavorable considering they stipulate withholding up to 5 or in some cases 10% of monthly sales for 180 days. This, therefore, restricted access to revenues for a long period that is s source of significant cash flow issues for the merchants.
With such a high number of issues, it may seem that disadvantageous for high-risk business to have merchant accounts. However, there as stipulated earlier some risks are worth taking and owning a high-risk merchant account serves as an advantage. Most merchants who hold the prospects of thriving in the growing eCommerce community seek the aid of high-risk payment processing since the advantages of potential expansions overshadow the disadvantages of higher processing charges. High-risk merchants are allowed the luxury of taking part in card-not-present transactions, they are allowed to process multiple currencies, in addition to conducting their business to clients in regions outside the United States, Western or Northern Europe, Japan, as well as Australia just to mention but a few growing markets. The revenue prospective of eCommerce transactions make high-risk merchant accounts appear appealing. To make the deal much more attractive, high-risk merchants are allowed to offer recurring expenditures, make earnings in excess of $20,000 on a monthly basis, they are permitted credit card transactions that go beyond of $500 each as well as retail any of their merchandise or service so desired. From the explanation, the benefits present profit-making opportunities to high-risk merchants despite simple inconveniences.