Why High Risk Industries are Avoided by Payment Processors

June 6, 2018 | Financial Problems

What do high priced ticket sellers, travel agencies, adult entertainment, online dating websites, medical marijuana practices, subscription boxes, and vape retailers have in common? They’re all high risk industries.

Ultimately, banks and low-risk independent sales organizations (ISOs) avoid associating themselves with these and other high risk business types. This makes payment processing a challenge for so many businesses in a variety of industries.

Especially those industries that are considered as having a”reputational” risk need to work harder to obtain a payment processor that is willing to back them up. Although these companies might be just as valid and have the financial records to prove their viability and profitability, they are still very likely to experience rejection in seeking a payment processor. The exact same is true for many different businesses you might not think would be considered in high risk industries, for a complete list of merchants in this category or to see if your business in one of the high risk industries, click here.

eCommerce with Future Deliverables:

Obviously, many e-commerce websites operate on the grounds of future deliverables. While payments can be provided with such relative ease online, and with the desired convenience of making purchases from home or your phone, products or services from you can be delivered at a later date post receiving payment.

Online dating services and subscription box companies are prime examples of businesses that require a high risk merchant account. While there are lots of secure e-commerce businesses with stellar reputations, these high risk businesses are still prone to excessive chargebacks.

Additionally, if an e-commerce website has a yearly membership service or a billing model that take payments on a recurring schedule, the danger of chargebacks only increases. For the great majority of traditional payment options, chargebacks translate into unsustainability or even untrustworthiness.

High Risk Industries with Reputational Risk:

Another example of what makes high risk merchant accounts a necessary component to the success of these industries. Adult entertainment, CBD oil retailers, and people prone to experience information theft, like sites that sell pricy or custom goods, are categorized as high risk due to being a reputational risk.

And let’s not neglect the medical marijuana business. Although marijuana is positioned to be legalized in 2018, traditional payment processors continue to be reluctant to align themselves with this relatively new sector, which is classified as high risk. Stigma still exists, therefore companies specializing in medicinal marijuana have to find payment processors, like PayKings, that specialize in high risk merchant accounts and who have experience and expertise in your industry.

When a company presents reputational risks, conventional suppliers are reluctant to forge a business relationship together. It’s not surprising to learn that banks and low-risk independent sales organizations (ISOs) place an emphasis on their public image, so they don’t want to risk tarnishing it, nor negatively influence how potential or prospective customers see them.

High risk businesses are simply that and they pose too much risk for traditional banks who aren’t willing or equipped to offer high risk merchant accounts.

Businesses Dealing with High Priced Products or Services:

Automobile warranties and companies in the airline and travel booking industries fall under the high risk category as well. These business models are among just two of the most expensive purchases you can make.

The higher the expenses paid out to any specific industry, the larger the opportunity of chargebacks there are. Basically, if you’re a dealership or airline who falls on some tough times, the absence of sales will signal poor financial performance to conventional payment processors. As such, they tend to levy hidden and extra fees on you and this helps them deal with the fluctuations in sales.

In closing, though a variety of companies in the high risk category may struggle to find a conventional payment processor, alternative solutions do exist. You will find payment processors with experience working alongside businesses in this category, and PayKings is one of them – we can help set you up with a high risk merchant account and get your business accepting online payments in no time at all.

June 6, 2018 | Financial Problems