Fintech & Ecommerce

Understanding High-Risk Payment Industries

When starting an online business, it can be easy to assume your overheads will be low. Yet one unexpected drain on your resources you may underestimate can be payment processing. You may also be shocked to find out that you are considered a high-risk merchant. But what does this mean and how can you get around it?

What Are High-Risk Payment Industries?

The term ‘high risk’ can be misleading for consumers and business owners. It implies that doing business with a company may not be safe, or that customers may be at an increased level of having finances stolen if they use the service. Yet it is a term applied by payment processors, not always relating to consumer security but to an instance where things may go wrong. Generally, if something does go amiss, it is the processor that takes the brunt. Thus, they are less likely to allow these industries to use their service.

Even certain areas that you may not expect are considered high-risk merchants. If you have fast cars and parachute sales in mind, then you may be shocked to know that even furniture sales and self-storage companies fall under this bracket.

Many different factors decide how high-risk a merchant is. This is usually with companies that sell high-ticket items and may have several returns and cancellations. Sales over $500, chargebacks, high volumes of transactions, and foreign currency sales all contribute.

Combating High-Risk Stigmas

One industry that has worked extremely hard to combat being a high-risk industry is the iGaming sector. Largely due to the sheer volume of revenue they send the way of payment processors.

The volume of transactions going in and out of iGaming websites is huge in itself. This is not an industry that processes a transaction and sends an item, closing a sale. As an example, when people play slots for real money they make a deposit. This may then be changed into welcome bonus funds, and any winnings are cashed out and possibly redeposited regularly. This is in addition to any of the other bonuses that may be added on and cashed out.

Yet the industry did something extremely important to counteract it. It provided a choice to players. By giving lots of ePayment processors and building huge levels of revenue, major players like Visa and MasterCard were quickly drawn to the industry owing to the sheer amount of business they were losing out on. This increased choice now lets people make deposits quickly and easily.

What Can You Do?

If your sector is not making huge inroads to combat this, there is very little you can do. However, certain processors do cater to industries that are considered high-risk. This means your online business can function quite easily if it uses one.

Of course, there are drawbacks which you probably guessed, higher fees are one. Thus, when creating a business plan you need to factor this into your profit margins. Ensure you shop around for a high-risk payment provider and don’t just go with one that accepts you. Like any business, you will find different pricing structures and charges in the small print that could have a huge impact.

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