Owning a high-risk business poses a unique set of challenges to overcome if you want to see success. However, there are options for navigating this perception with suppliers and financial channels. To understand the implications, it is useful to know why your business is considered high risk in the first place. Here are five factors that influence your risk levels, and what you can do about them.
Certain industries are written off immediately for standard merchant accounts and have to instead seek alternative options such as a high risk merchant account. This is largely owing to the nature of the consumer relationship with the business, payment methods, chargebacks, fraud potential, and projected takings. Take a look at the following to see the most common types of businesses that make the list.
- Gambling and betting establishments
- Tourist and travel-related industries such as airlines and hotels
- The adult entertainment 18+ industry
- Cigarettes, e-cigs, and vape shops
- SaaS models
- Events companies
- Real Estate
- Debt collection
From this selection, it is apparent that the risk is determined according to a variety of factors, as opposed to one singular component.
Subscription Methods of Payment
Subscription methods of payments are one of the most common reasons for falling into the high-risk category. Many of the industries listed above have this payment route in place because it makes sense for consumers. However, subscriptions are not guaranteed income and are often missed or canceled despite the product being received. This leads to chargebacks, which are capable of bringing any business under especially when demanded in a high capacity.
Fraud and Chargebacks
The retail, travel, events, and tourism industry see some of the highest rates of fraud in all areas of commerce. Fraudulent charges are almost always contested. The money still needs to be paid, so who pays it? This risk is too much for some merchants to accept, therefore your account gets rejected or canceled, and alternative routes are needed to process payment. This risk will always exist in these industries, as fraud is not going away.
If the business is based in a high risk country owing to economical or criminal factors, then you too will automatically be affiliated and therefore projected onto that list. Factors that influence this include money laundering and fraud policies and the restrictions on international payments.
Monthly Sales Figures
If your sales income on a monthly basis surpasses the set limits, this is a red flag for your account suppliers. For a number of reasons, anything beyond expected projections labels you a higher risk. This is because the business appears unpredictable, and the higher the incoming money, the more likely it is that fraud or similar is occurring.
Some of the high-risk businesses discussed above feel like cultural staples that modern society would be lost without. Yet, smart financial decisions are the backbone of society too, and therefore, where there is a risk, it has to be mitigated. Circumstances sometimes mean a special type of account is necessary, and that is just a part of pursuing a business goal in these areas.