Recently we stumbled upon an article about what makes a business high risk during the vetting process for credit card processing services, and it only listed two factors:
- The nature of the product
- Frequency of chargebacks and disputes
While we couldn’t agree with those two points more, we can think of several additional factors that directly impact a merchant’s risk level and his/her chances of getting a merchant account.
The Fundamental Logic Behind Bank Approvals And Declines
What merchants need to fundamentally understand during the onboarding process is that an acquiring bank is taking a significant risk – the risk of losing money – by offering credit card processing services for your business. Hence, proof of profitability and the ability to mitigate chargebacks are paramount for merchants, particularly those classified as high risk.
The onboarding process can often feel like an inquisition. Acquiring banks and payment service providers will ask many questions, all in the name of whether your business is a worthwhile investment for them.
Risk level often comes as a surprise
Again, fundamentally, an e-commerce merchant, regardless of industry, who needs credit card processing services, is going to be categorized as a high risk merchant. E-commerce merchants are often stunned to hear this, but the logic is clear: Payment transactions where the card is not present always carry a higher risk factor opposed to those where the card is present.
- Higher chance that the credit card holder is not the rightful owner.
- Instances of friendly fraud are higher.
- Billing descriptor isn’t clear enough – customer doesn’t recognize the charge and files a chargeback.
- Risks in shipping process: Wrong address, theft or damage.
There are solutions, however, to mitigate each of these risk factors.
Credit Card Processing Services: What Makes You A Favorable Merchant?
If we had to choose the optimal merchant for whom to provide payment processing solutions, it would be one with the following qualities:
- Transparency: First and foremost, if a PSP or acquiring bank discovers a hint of dishonesty or a case where the merchant is not transparent, the merchant-acquirer-PSP relationship is immediately flawed, and the chances of securing credit card processing services plummet. High risk merchants need to be transparent. As a long-time high risk payment services provider, we will work with merchants on their risk levels.
- Adequate payment processing history: With six months or more of solid credit card processing history, a merchant is more than halfway to an approval. We’re not saying perfect processing history, but a low rate of chargebacks and refunds – we subscribe to Visa’s 1 percent of sales/100 per month threshold. We fully understand even the most diligent merchants incur chargebacks.
- Preferential to e-commerce, in addition to…: Even if a merchant wishes to accept credit card payments via mail order and telephone order (MOTO), we strongly advise they have a website in place that details exactly the product or service they’re selling. That fact alone is what makes acquiring banks nervous – a MOTO merchant could register as a nutraceutical merchant, but could be selling products entirely different (and illegal)
- A semi-accurate idea of monthly volume: Volume can be the difference of getting a domestic merchant account or offshore. Each has its benefits and caveats. Merchants with high volume issues who wish to open a merchant account with a domestic banking partner are urged to open a second or multiple merchant accounts.
- Registered in a specific country or region: Certain regions and countries have differing regulations when registering a business. For example, U.S. e-commerce merchants who wish to open their doors to European consumers must not only register in Europe, but establish a physical presence there with an office, staff member EU bank account and a telephone line (with which PPay can help).
With Five Minutes Of Listening, We’ll Have Solutions
When merchants, partners or prospects telephone our home office in Toronto, ON., Canada, we answer and put them through to a merchant account manager. We’ll have a few questions for you, and contingent on what we need to know, we’ll have an acquiring banking solution in mind with which we’ll begin the onboarding process.