If your business involves a lot of risks as far as financial institutions that oversee financial transactions are concerned, then you may find your company is listed as a ‘high-risk’ business. Within that term can contain several variables that add up to that final decision. These can range from the amount of fraud that occurs in your industry to the unproven financial gains that your new venture may involve.
Below are some commonly asked questions about being a high-risk business.
Why is being a high-risk business a bad thing?
It’s deemed a bad thing because of the difficulties in obtaining things that other businesses can do with ease. Getting a standard account is a rarity for a high-risk business, and they tend to need to work with a merchant accounting service that can monitor problems and help to facilitate secure and faster payment transactions.
And while a high risk payment processor is vital for a business that’s deemed high-risk, it’s not quite the kiss of death many people would have you believe. You’ll be expected to solve chargeback problems faster than other companies, and you’ll need to work with a reputable high-risk business specialist to make the process simple and less problematic.
What are red zone and grey zone categories?
Most businesses are placed into these two categories if they are deemed as high-risk.
Grey zone companies might receive more attention and focus on their business history. If your company has a long financial history then you shouldn’t have much trouble finding a good payments provider to work alongside. Unfortunately, newer businesses can struggle to find one.
A business that finds itself in the red zone has usually not kept to the mandated regulations that are expected of them in strict industries. But other businesses will find themselves there for simply being a business that encounters a lot of chargebacks from around the world (like a travel company, for example).
Am I being penalized for having a lot of chargebacks?
It may seem a little unfair to get tarnished with the high-risk brush simply because of chargebacks. However, like many frustrating parts of the business, it’s best to accept that they’re an inevitable part of running a business and that the amount of chargebacks your industry gets isn’t always as personal as it may feel to you at the moment.
Some people are always going to rescind charges for goods or services rendered. And while it’s frustrating at times, it’s essential to keep an eye on your chargeback ratio. If you go above 1%, you could be added to further risk lists.
Why are Merchants Service companies so important?
It doesn’t really matter which high-risk industry you’re a part of, you’re going to need to find a Merchants Services company to make all of your processes easier, smoother, and more secure for your customers.
Your business aims should be to be as successful and well-known as possible, not fretting over matters that experienced Merchants can take care of in a fraction of the time. The less burden you have on your shoulders, the better you’ll be able to build your brand and delivery a premium service to your customers.