High risk merchants often find the method of obtaining payment processing capabilities to be a stressful, frustrating experience. Many feel the application process involves a lot of wasted effort.
Fortunately, there are several things that can help ensure application success.
Tip #1: Understand Why You Might Be Rejected
The application process is essentially an intensive evaluation of your financial situation. Basically, the processor is trying to determine if you’ll be able to fulfil the terms of the agreement.
If the processor doubts your financial stability, your application will be rejected. It’s as simple as that.
Therefore, it is beneficial to conduct an objective evaluation of your situation before applying. That way, the process won’t reveal any unpleasant surprises.
If you don’t have financial documentation to prove the legitimately of your request, you’ll have to use personal credit to vouch for your business. But, it’s possible your personal credit score will be insufficient.
If you know your credit score is low or your credit history is unflattering, you might want to work on improving it before applying for processing.
Tip #2: Recognize Your Risk
Processors recognize that there are many characteristics that can influence risk, but there are a couple of business qualities that are fairy universal in determining whether or not your venture will be a wise investment. Those are the products you sell and the method you use to sell them.
If you sell one of the following products, you’re almost guaranteed the label of “high risk.”
- Pharmaceuticals
- Nutraceuticals
- Tobacco
- Adult entertainment
- Gaming
If you use either of the following sales methods, you’ll also be considered high risk.
- Affiliate marketing
- Outbound telemarketing
One reason these industries are considered risky is because of the regulations that are associated with them. For example, online pharmacies and telemedicine service providers need to be licensed and they can only sell certain products.
A representative from Low T Medical Clinic’s Nashville location explained how some of their erectile dysfunction services can be facilitated online, but others must be conducted in the office. And the requirements for Nashville’s erectile dysfunction treatments vary from their low testosterone treatments, so the business structure is understandably complicated—and one a payment processor would evaluate carefully.
The gaming industry is another that is often handled with caution because regulations outline which countries a business can and can’t operate in. A processor will want to make sure the business is adhering to all regulations.
Any merchant that is considered “high risk” will need to work with a high-risk processor—not all companies are willing to accept this risk. And not all high-risk processors are willing to work with every merchant; some rejections are inevitable. However, the situation isn’t as dire as it seems on the surface.
As Brendan MacDonald, product manager at Gala Coral Group, explained, merchants in highly regulated industries have an abundance of customer data on hand because they are legally required to obtain certain pieces of information. While this data can’t help prevent risk, it is immensely beneficial when it comes to disputing illegitimate chargebacks and recovering lost revenue.
Tip #3: Create a Chargeback Mitigation Plan
When applying for payment processing capabilities, the underwriter will try to determine the risk associated with your business. One characteristic that is often used to determine risk is chargeback rates.
If your business has experienced a high volume of chargebacks, you’ll struggle to acquire additional MIDs.
One way to make your business seem more appealing is to get your chargeback rate under control. Work with a chargeback management professional to create a mitigation plan. This tells the card networks and your potential processor that you are making a serious effort to get things under control.
The mitigation plan will likely include chargeback alerts. Alerts allow you to refund the customer before the bank files a chargeback. This usually produces a significant and quick reduction to chargeback issuances.
Tip #4: Share the Information the Processor Requests, When it is Requested
The initial application will likely require the inclusion of supporting documentation. Be sure to provide everything the processor requests.
After the first submission, the processor is likely to request additional information. Provide exactly what is asked of you when it is requested. A delayed response will needlessly prolong the process—and could even cause the application to be rejected.
A representative from UniBul explained the difference between transaction activity and a monthly statement—and why these two documents are not interchangeable. You must be prepared to show your previous processing statements. Transaction activity is enlightening, but doesn’t share enough of the information a processor would need to make a decision. Information like monthly sales volume, average transaction amount, chargeback rate, and decline rations will be taken into consideration during the application process.
Tip #5: Be Honest
It’s common knowledge that applying for a high-risk merchant account is a painful process—for everyone involved. Some merchants are so desperate to be approved, they are dishonest about things they fear might be a deal breaker. In reality, the dishonesty is more damaging than the indiscretion that is hidden.
If you are slow to provide information, argue about the application necessities, or appear to be withhold essentials, the processor will take note. Fraud runs rampant among high-risk merchants. If, from the very beginning, you appear susceptible to unethical activity, you’ll certainly be denied.
Be honest about everything. Don’t withhold any information. In the long run, you’ll be better off.
High-Risk Processing Doesn’t Need to be High-Drama
It is challenging to obtain processing for your high-risk business, but challenging doesn’t necessarily mean impossible. Do your best to submit a compliant, honest application that is optimized for financial stability.
Do you have any additional tips? Use the comments section below to help other merchants ensure success.