High Risk Businesses: How Huch Payment Processor Can Help
For traditional banks, financial institutions, and payment processors, high-risk businesses in sectors like iGaming, gambling, dating, porn, and others are risky because they could experience chargebacks, fraud, regulatory issues, or reputational risks.
Fortunately, high-risk businesses can benefit from payment processing options like Huch.
What Makes a Business High Risk?
Businesses that are more susceptible to chargebacks, fraud, or other financial losses are considered high-risk.
A company’s classification as high risk depends on a number of variables, including its industry, chargeback rates, processing history, and credit history.
List of High-Risk Businesses and Industries
The following is a list of high-risk industries that are frequently taken into account by payment processing companies, including online gaming, gambling, dating, pornography, escort services, and more.
- Escort services
- 1-800 chat sites
- Adult entertainment
- Airlines and booking
- Amazon stores
- Attorney referral services
- Auto warranties
- Background checks
- Bad credit
- Bankruptcy attorneys
- Business consulting
- Business opportunities
- CBD and cannabis products
- Casinos and gambling
- Coins and collectibles
- Continuity billing
- Credit monitoring
- Credit repair
- Crypto or forex trading
- Debt collections
- Event ticket brokers
- Fantasy sports
- Financial planning and advisory
- Furniture stores
- Gentleman’s clubs
- Government grants
- Health and beauty
- High-ticket coaching
- Import/export businesses
- Magazine sales and subscriptions
- Mail order businesses
- Male enhancement
- Membership organizations
- Merchants on the MATCH list
- Multi-level marketing (MLM)
- Offshore businesses
- Online gaming
- Pawn shops
- Payday lenders
- Prepaid debit cards
- Psychic services
- SEO/SEM services
- Skin and hair care
- Subscription boxes
- Tour operators
- Travel and vacation services
- Vaping and cigarettes
- Vitamins and supplements
- VoIP services
- Web design and SEO
- Weapons (of any kind)
Is Your Business Considered High Risk?
Your business may be categorized as high risk by credit card processing companies for a number of factors, including dubious products, a higher chargeback rate, stricter legal requirements, your business model, vulnerable customers, subscription businesses, online service-only businesses, poor personal credit, high dollar sales, a high monthly volume, and international sales.
How Huch Payment Processor Can Help
Huch is a payment processing service that focuses on serving high-risk businesses. It offers payment processing services, chargeback management, fraud protection, PCI compliance, and alternative payment methods.
Factors that Define High-Risk Businesses
Businesses may be categorized as high risk if they fall under any of the following categories:
- Questionable products: This includes businesses that sell adult entertainment, drug paraphernalia, and weapons.
- Higher chargeback rate: Certain industries, such as travel services and electronics, tend to have a higher rate of chargebacks.
- High legal regulation: Strict legal compliance is required for businesses in industries such as tobacco and nutraceuticals.
- Sales model: Businesses with questionable sales practices like MLMs may be perceived as scams.
- Vulnerable customers: Businesses catering to a riskier customer base, such as debt consolidation or credit repair services, may be considered high risk.
- Subscription businesses: High risk of chargebacks may occur for businesses offering subscriptions or free trials.
- Online service-only businesses: Providing only online services, such as SEO/SEM, may carry a higher risk due to the intangible nature of the service and high-value transactions.
- Bad personal credit: Poor personal credit may lead to a perception of financial irresponsibility in running your business.
- High-amount sales: Businesses with an average ticket size over $500 may be at greater risk for chargebacks, such as furniture stores.
- High monthly volume: Businesses processing over $20,000 a month may have a higher risk for chargebacks.
- International sales: Accepting foreign currencies can increase risk, especially for sales to countries with higher rates of fraud outside of the Europe, U.S., Canada, Australia, and Japan.
Comparison Between Low-Risk and High-Risk Businesses
Low-risk businesses typically have a lower chargeback rate (under 1%), average ticket size (under $500), sales volume (under $20,000 per month), do not sell internationally and do not accept foreign currencies.
The chargeback rate thresholds vary between card networks. The excessive chargeback rate threshold for Visa is 1.8%, while the standard chargeback rate threshold is 0.9%.
The high excessive chargeback rate threshold is 3% or more, while Mastercard’s excessive chargeback rate threshold ranges from 1.5% to 2.99%.
The chargeback rate cutoff for American Express is greater than 1%.
The MATCH list, which is a list of merchants whose accounts have been terminated because of an unacceptable level of risk, may be created if a merchant crosses the threshold.
The MATCH List
The MATCH (Merchant Alert to Control High-risk) list is a list of merchants who have been terminated by credit card processing companies for various reasons, including excessive chargebacks, fraud, and noncompliance with card network regulations. Once a merchant is on the MATCH list, it becomes difficult or impossible for them to obtain a new merchant account with another provider.
Consequences of Being High Risk
As a high-risk merchant, your business may face some consequences when trying to secure a merchant account. However, it is still possible to find a provider that specializes in high-risk merchant accounts.
Here are some things you can expect when operating in a high-risk industry:
- Limited Provider Options: Not all merchant account providers accept high-risk merchants. It’s essential to find a provider that specializes in high-risk merchant accounts to avoid unnecessary hurdles.
- Tougher Application Process: You will need to submit more information and supporting documents about your business. Your financials and credit card processing history will be scrutinized more closely, which can result in a longer underwriting process.
- Avoid Payment Processors: Providers like PayPal or Stripe may shut down your account if they see you selling prohibited products, putting you on the MATCH list and making it harder to get payment processing.
- Higher Processing Rates: You can expect to pay higher processing rates to account for the risk you pose, which can range from 3.5% – 5% for high-risk businesses and higher for ultra-high-risk industries like adult entertainment, firearms, and e-cigarettes.
- Stricter Terms: You will face a long-term contract (usually 2-3 years) and an early termination fee. You may also face reserve requirements, where a portion of your funds will be set aside to protect the merchant bank in case you don’t pay your chargebacks.
Finding a provider that specializes in high-risk merchant accounts is crucial if your business operates in a high-risk sector like iGaming, gambling, dating, porn, or credit cards. You should also be ready for a more rigorous application process, more expensive processing fees, and more stringent terms.
Huch as an Alternative for High-Risk Merchants
Huch is a payment processing provider that focuses on offering services to high-risk merchants in niche markets like CBD products, dating, gambling, and iGaming. To meet the unique requirements of high-risk businesses, Huch provides a range of services, including fraud detection and prevention, chargeback management, compliance, and risk management solutions.
- Enhanced Security: Security is a top concern for high-risk businesses. The real-time account validation and transaction monitoring offered by Huch’s open banking APIs reduce chargebacks and fraudulent activity, which is crucial in such sectors.
- Compliance and Risk Management: Huch’s solutions for compliance and risk management are designed to satisfy legal requirements and reduce the risks involved with high-risk businesses. Their team of experts makes sure that retailers adhere to the most recent laws, avoiding any legal problems.
- Flexible Payment Options: Huch offers flexible payment options, including recurring payments, one-time payments, and more, that can be tailored to meet the unique needs of individual businesses. This enables high-risk businesses to provide a variety of payment options to customers, enhancing their shopping experience.
- Cost savings: Compared to conventional credit card processing, Huch’s use of open banking APIs results in lower costs. High-risk merchants can now process payments more affordably and effectively, assisting in the expansion of their businesses, thanks to this cost-saving strategy.
For high-risk businesses looking for a reliable partner with increased security, compliance and risk management solutions, flexible payment options, and cost savings, Huch is a great payment processing option.
High-risk merchants can work with Huch to get the payment processing services they require to expand their companies while lowering their risk of financial loss.
- What is a high-risk business?
A high-risk business is any business that is deemed by credit card processors to represent a higher-than-average risk of financial failure due to factors such as the industry they operate in.
- What makes a business high-risk?
Several factors can make a business high-risk, including a bad credit card processing history, a high chargeback rate, or operating in industries such as iGaming, gambling, dating, porn, and CBD products. Some MCCs (merchant category codes) that pose elevated risks include gaming, prepaid debit cards, pharmaceuticals, tobacco/E-cigarettes/cannabis products, and ticketing and events.
- Is there such a thing as a “low-risk” business?
Yes, a “low-risk” status is the default setting for businesses that do not fall into high-risk categories.
- Which industry has the highest risk?
It’s difficult to determine, but industries such as iGaming, gambling, dating, and porn are considered high-risk due to their association with potential financial fraud and chargebacks.
- What can I do to avoid the high-risk designation?
If you operate in a high-risk industry, you can prevent as many chargebacks as possible to keep your chargeback ratio low.
However, working with a payment processor such as Huch that specializes in providing services to high-risk merchants and offers customized payment processing solutions, fraud detection and prevention, chargeback management, and compliance and risk management solutions can help mitigate the risk associated with these industries.
Huch offers flexible payment options that can be tailored to the needs of individual businesses, including alternative payment methods and open-banking APIs, which can help reduce the costs associated with traditional credit card processing.