High-Risk Business Industries​

Key Takeaways

• The rise of digital payments spotlights the urgency for high-risk industries to secure cost-effective payment solutions that cater to their specific needs.
• Finding a fitting processor can be challenging due to heightened fraud risks and chargeback probabilities. Factors like new market entry, shaky credit histories, controversial offerings, reliance on global sales, and strict regulatory landscapes up the ante for these businesses.
• To mitigate risk perceptions, high-risk merchant accounts should maintain strong cash reserves and minimize chargebacks. This approach stabilizes operations and positions these high-risk businesses more favorably when seeking payment processing partners.

What are High-Risk Industries?

Businesses often find themselves in the high-risk category due to various key factors. Particular elements play a significant role in why payment processing for high-risk businesses needs special attention.. Here are the main reasons a company might need a high-risk merchant account or a high-risk payment gateway.

1. New Business Entrants: Start-ups and new companies lack a financial track record, making them risky for banks and payment processors.
2. Poor Credit Records or Low Credit Scores: Businesses with bad credit histories pose a risk to payment processors due to potential financial instability.
3. Controversial or Highly Regulated Industries: Companies in sectors like online gaming, pharmaceuticals, and nutraceuticals face more scrutiny.
4. Reliance on International Sales: Selling goods or services across borders increases the risk of fraud and chargebacks, necessitating secure payment solutions for high-risk merchants.
5. Previous Placements on the MATCH list: Being previously listed as a risky merchant can make finding a reliable payment processor challenging.
6. High Chargeback Rates: Industries prone to customer disputes and refunds, such as eCommerce, require specialized fraud protection and chargeback management.
7. Potential for Legal Issues and Regulatory Changes: Operating in an industry that faces frequent legal challenges or regulatory shifts calls for adaptive payment solutions.

These factors illustrate why businesses across certain sectors must seek out experienced high-risk payment processors equipped with industry-specific knowledge and tools to manage these risks effectively.

Top Industries Requiring High-Risk Payment Processors

Some industries face more risks than others, requiring more intricate payment systems. Here are some high-risk industries that need secure payment processing for high-risk businesses.

• Online Gaming: This industry is considered risky because of high chargeback rates, fraud risks, safety worries, and strict regulatory rules.
• Pharmaceuticals and Nutraceuticals: This swift growth in this industry shows why this sector needs high-risk payment processors. They also face strict regulations and a high potential for chargebacks and fraud.
• Travel and Tourism: This industry’s massive recovery after the pandemic accounts for at least 3% of the world’s GDP. With such numbers, companies in this sector face unique challenges like high chargeback rates and fraud risks, making specialized payment processing services essential for smooth operations.
• eCommerce: Selling expensive items online means dealing with big, fast-moving transactions, which attracts attention for chargebacks and fraud.
• Online Retail: This industry is susceptible to higher rates of chargebacks and fewer choices for payment processing.

Payment processing for high-risk businesses understands the ups and downs of these high-risk industries, making them crucial for the success of businesses inside such sectors.

Why are These Industries Considered High-Risk?

High-risk industries often face stricter contracts, high fee charges, increased chargeback, and fraudulent behavior. This makes traditional payment processing companies wary of working with them. Here are factors that makes a certain industry “high-risk.”

• Regulatory Challenges: High-risk industries like travel industries, online gaming, and eCommerce can quickly find themselves on thin ice if they miss even small law changes. For these companies, compliance to rules and regulations is a must.
• High Chargeback rates: When customers dispute charges, the company loses money. High-risk businesses pay $20 to $100 for each chargeback, which makes banks wary of transacting with them.
• Increased Fraud Potential: High-risk industries are susceptible to scammers trying to steal money or trick businesses into giving them goods without paying. This makes transactions more difficult and risky both for the customers and merchants.

Benefits of Using Specialized Payment Processors

Companies specializing in payment processing for high-risk businesses offer tailor-fit solutions that cut costs and beef up security for businesses in tricky fields. Here are services your high-risk payment processing company should be able to give your company:

• Customized Risk Management Solutions

High-risk payment processors bring specific risk management solutions made especially for high-risk businesses. This means your company gets to avoid scams or dealing with too many refunds an easier task.

Payment processors for high-risk merchant accounts are designed to protect your business from common to complex problems in high-risk industries, so you can guarantee that they have effective strategies for dealing with risks.

• Lower Processing Fees

Partnering with reputable payment processors brings big benefits, including competitive fees that help your business save money in the long run. This is crucial for high-risk industries where every cent counts.

Choosing the suitable processor not only gives you custom services but also ensures you’re not overpaying. It’s a financial win that supports your company’s bottom line, making it an essential step for businesses in high-risk industries aiming for long-term success.

• Enhanced Fraud Protection and Chargeback Management

Specialized paynment processing for high-risk businesses offer strong fraud protection and chargeback management by using real-time fraud detection systems and advanced encryption to keep payments safe.

With access to these specialized support services, companies enjoy transacting with their customers, without worrying for unwanted chargebacks drops and fraud risks.

How to Choose the Right High-Risk Payment Processor

Picking the perfect high-risk payment processor can be a lengthy process, but it’s all worth it once you find the best high-risk payment processing company to commit to. When choosing a handle for high-risk merchant accounts, make sure to check the following:

Industry Experience and Expertise

Choosing a high-risk payment processor with deep industry experience and expertise matters a lot. These processors have seen it all – from fraud scares to chargeback surges. They are already familiar with the specific challenges high-risk industries face.

More importantly, they come prepared with solutions that work for your unique needs. Think of them as seasoned guides in the tricky world of high-risk payments, holding the map to navigate through regulatory hurdles and fraud minefields.

By doing thorough research and asking peers about reliable processors, you land partners who are not just service providers but assets equipped to propel your business forward.

Compliance with Industry Regulations

High-risk industries must stick to certain laws and guidelines, like PCI DSS, which keeps payment data safe. In high-risk sectors, staying within the lines of industry regulations isn’t just good practice—it’s crucial for survival.

Payment services that know their way around these tight rules can help your business do well. They make sure you meet all requirements without stress. This support lets you focus more on growing your business while they handle the complex compliance details.

Integration with Risk Management Tools

Choosing the right high-risk payment processor means finding one that works well with risk management tools that AI-driven algorithms and real-time monitoring to spot fraud before it happens. The best processors can fit into your existing system, making sure every transaction is checked and secure.

A payment processor dedicated to high-risk industries must understand the importance of advanced detection features as part of their service. This kind of support can make a big difference in fighting fraud and keeping chargebacks low.

The Future of High-Risk Payment Processing

The future of high-risk payment processing is getting exciting, with new trends and tech rising. Here are updates and changes you need to look out for.

Emerging Trends and Technologies

Credit card processing is moving fast — think AI, blockchain, and biometrics. These aren’t just buzzwords — they’re the future of high-risk payment processing. Thanks to these advanced technologies, imagine a world where every transaction is quick and secure.

As of 2020, 28% of American small businesses started accepting cryptocurrency like Bitcoin. By May 2022, there were about 260,000 Bitcoin transactions daily in the U.S. This shows us where payments are headed—more digital, secure, and faster than ever before.

Regulatory Changes

New rules are coming for high-risk industries. Big groups like the UK’s Financial Conduct Authority (FCA) and the US Department of Justice (DOJ) say these industries need better checks due to increased fraud risks and large transactions.

These changes mean businesses have to follow new rules and make sure they’re safe from fraud. This will help them stay out in front, even as things get tougher with more checks on the way.

Vellis as Your High-risk Payment Processor

Choosing the right high-risk payment processor is vital for businesses in high-risk sectors. This choice can often mean the difference between smooth operations and constant hurdles.

Vellis stands out here, having teamed up with various payment service providers that open their arms to high-risk merchants. Our partnerships highlight years of experience handling the unique challenges these industries face daily.

Committing to a payment processor that has deep roots in your industry can significantly ease your business journey. Vellis does just that, bringing expertise and specialized services to the table to ensure businesses survive and thrive despite being in high-risk industries.

Conclusion

High-risk industries often face more considerable risks of fraud or chargebacks. This is because they work in areas that have a lot of rules, sell controversial products, rely on international sales, or are just starting and don’t have a good credit history yet.

With digital payments growing fast and only 22% of people still liking to use cash, these industries need unique ways to handle money safely. These high-risk businesses need to choose the right high-risk payment processing company that understands their unique needs and offers specialized solutions to their problems, helping lower processing fees and gaining access to specialized services in fraud protection and chargeback management.

Investing in a high-risk payment processor that aligns with your business’s demands ensures stability, compliance, and growth in challenging markets. Process with Vellis today to achieve these!

FAQs

1. Why do some businesses use high-risk payment processors?

High-risk businesses utilize high-risk payment processors mainly because regular banks usually do not work with them due to higher risks of fraud or chargebacks.

2. Can using a high-risk payment processor help my business grow?

Yes, it can help your business reach more customers and handle payments safely.

3. How do I find a reliable high-risk payment processor for my business?

Look for ones with good reviews from other businesses in your industry and compare their rates and services.

References

Quintana M. High risk payment processors for payment gateways. ECS Payments. https://www.ecspayments.com/best-high-risk-payment-gateway/. Published March 7, 2024.

Malhotra S. Understanding High risk processor Services: A detailed overview. https://www.linkedin.com/pulse/understanding-high-risk-processor-services-detailed-shavi-malhotra-qjjvc. Published June 14, 2024.

Payments E. The future of High-Risk Payment Processing: Emerging technologies and trends. Medium. https://medium.com/@epsilonmarketing45/the-future-of-high-risk-payment-processing-emerging-technologies-and-trends-5af3c1c8f06b. Published August 22, 2023.