High-risk businesses often face significant challenges, such as high fees and increased scrutiny, which can slowly accumulate as expenses. Whether you’re a start-up with little history or in a high-risk industry, finding the right payment processing solution can be a major hurdle.

This guide will break down what high-risk merchant accounts are, including the different pros and cons for businesses to consider. It will also explore how Vendo can support high-risk merchants with dedicated payment processing services adapted to their unique needs.

What is a High-Risk Merchant Account?

A High-Risk Merchant Account is a service specifically tailored to meet the needs of businesses that operate in industries deemed high-risk by key financial institutions.

These businesses are classified as “high-risk” for various reasons, often due to their greater vulnerability to fraud, chargebacks, and regulatory scrutiny. As a result, they require additional security measures and face higher fees to manage these risks.

What Makes a Business High-Risk?

A merchant is classified as high-risk based on a range of factors, including its industry, transaction methods, business history, product type and even location. Being labeled high-risk doesn’t imply that a business is unreliable, but rather is a reflection of the financial risks involved for payment processors. 

While industries like adult entertainment, online gambling and CBD products are notably considered high-risk, even household names like Netflix fall into this category due to the perceived risk of subscription based models.

The Benefits of a High-Risk Merchant Account

Fundamentally, high-risk merchant accounts enable businesses in more challenging sectors to accept payments where traditional processors may reject them. This type of account also offers specialized support adapted for the needs of businesses deemed high-risk.

Some of the distinct advantages of a high-risk merchant account include: 

• Higher Transaction Limits: These accounts can often accommodate higher per-transaction amounts and larger transaction volumes overall, which is ideal for businesses with high-value items or heavy sales activity.
• Custom Fraud Protection: Built-in fraud detection and prevention tools, such as the advanced AI powered system developed by Vendo, help to protect businesses from financial losses due to fraudulent activities.
• Chargeback Management Tools: Specialized chargeback prevention systems help minimize losses from disputed transactions, reducing the financial impact on the business.
• Global Payment Acceptance: High-risk merchant accounts frequently support international transactions, enabling businesses to cater to a truly global customer base. 

 Drawbacks of High-Risk Merchant Accounts

While high-risk merchant accounts offer many advantages, they also have certain limitations. They tend to have stricter requirements and come with higher costs than traditional accounts, which can place financial pressure on businesses.

Here are some of the key challenges of high-risk accounts for businesses to take into consideration:

• Higher Fees: Payment processors such as Visa and Mastercard typically charge higher processing fees overall for high-risk accounts, due to the increased likelihood of chargebacks and fraud. High up-front setup costs, individual transaction fees and chargeback fees can all impact profit margins over time.
• Rolling Reserves: Some high-risk merchant accounts will have specific cash reserve requirements such as rolling reserves, where a portion of revenue is retained as a security measure to cover potential chargebacks. This can limit cash flow, especially for startups or smaller businesses.
• Limited Payment Options: High-risk businesses may face limitations on the range of payment methods they can offer customers, which can impact customer satisfaction and sales volumes.
• Stricter Contracts: High-risk accounts often come with longer-term contracts and early termination fees, limiting a business’s flexibility to switch providers.

Although these drawbacks can add a layer of complexity to business operations, high-risk merchant accounts are essential for businesses in many industries. Businesses can overcome many of the associated challenges by partnering with a payment processor experienced in high-risk industries.

 Customized Support For High-Risk Merchants

As an industry leader in high-risk payment processing, Vendo Services offers comprehensive, tailored solutions to help businesses succeed despite their risk classification. Vendo supports merchants with a unique combination of intelligent payments and a distinctly human touch: 

1. Expert Support and Industry Experience: Vendo’s team of industry experts have in-depth market knowledge and stay on top of regulatory changes in order to share important insights and tools to help merchants maximize revenue. 
2. Smart Fraud Prevention: Vendo’s comprehensive AI-powered fraud prevention tools help minimize chargebacks and fraudulent transactions. By offering robust fraud monitoring and real-time transaction tracking, Vendo can protect your business from financial losses while maintaining the trust of your customers. 
3. Diverse Payment Solutions and Competitive Fees:

   Vendo offers a variety of payment solutions, including PIX, SEPA, Cryptocurrency, and credit cards, to provide merchants with flexibility for their customers. Our innovative Pay by Bank solution stands out as a leading payment method, allowing merchants to bypass traditional credit card fees and reduce transaction costs by up to 75%. This comprehensive approach ensures that merchants have access to a wide range of secure, cost-effective payment options to meet their business needs.

Vendo can support your high-risk business with the payment processing services you need for success. Our compliance guide for onboarding high-risk merchant accounts has a useful checklist of the standard information needed when opening an account, to help make the process as smooth and seamless as possible. 

The Bottom Line

High-Risk Merchant Accounts are a vital service for businesses operating in industries that are more susceptible to fraud, chargebacks, and other financial risks. While these accounts come with unique challenges like higher fees, increased scrutiny, and certain limitations, they also provide the tools and flexibility needed to manage payments securely.

Vendo Services is uniquely positioned to help high-risk businesses overcome these challenges. With industry expertise, advanced fraud protection and seamless integration options, Vendo makes payment processing easier and more secure, allowing high-risk businesses to fulfill their growth potential. Contact us if you’re interested in exploring your payment processing options as a high-risk merchant.