DO THE BANKS LIKE HIGH RISK BUSINESSES?

A business is considered to be “high risk” when there is a higher potential to cause financial loss to the bank than other businesses. There are many owners of high risk businesses who still wonder if they will be able to get a merchant account for their business. However, it is possible to get a merchant account for your high risk business and it is called as “High Risk Merchant Account”.

There are lot of restrictions for a “High Risk Business” to get a merchant account. Therefore, it is advisable to take the advice of an expert. He will know exactly how risky your business is and then put forward the right points to the right banking officer. Also, you may want to have the merchant accounts to work at more than one geographical location and jurisdiction. Like all other business operations, some degree of redundancy will protect you and your business from future mishaps.

What is it about high risk businesses that worry the banks?

The answer is very simple. All Banks are highly concerned about the high level of chargeback’s that occur in these businesses. A chargeback is nothing but a dispute from the credit card owner to get his funds back due to various reasons. The customer has up to 180 days to file a complaint about a transaction. As a result, the bank is responsible for any liabilities that may occur until 6 months of any purchase.

There are several reasons for a customer to file for a chargeback. Only a few of them are valid. For example, a customer hasn’t received the merchandise that he has paid for or even unhappy customers will file for chargeback’s. When the customer calls the bank and files for the chargeback then the merchant has to pay for it. He will also have to pay fines for the chargeback’s.

In most of the cases neither the consumer nor the business can be blamed for the chargeback’s. The chargeback’s can happen because of cybercrime, fraud and identity theft.

The highest number of cases occurs due to identity theft. Every year many million Americans get affected due to identity theft. The stolen information is available on the net for as less as $5.

The merchants can also dispute chargeback’s and can also win it. However, every chargeback that is filed against a merchant is seen as an unsatisfied customer by the bank. When this reaches a high level then the banks get worried. This is why the banks put a cap on the number of chargeback’s for each merchant, which is 1%.

It is the fact that there is much more chargeback’s than the 1% in case of “High Risk Businesses” which is a cause of concern for the banks. Therefore, any bank will hesitate to do business with such businesses. However, all hope is not lost because you can open the “High Risk Merchant Account”, mostly provided by 3^rd parties or other financial institutions.

Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.