Part 2 of Article which may help merchants understand the subjective "High Risk Merchant" label.
Link to Article: https://www.cascadiapay.com/high-risk-merchants/
So what kind of treatment can you expect to receive if you are considered a “High Risk Merchant” for some reason?
New Businesses, No Processing History
If you are a new business, with no processing history, in most cases you can expect to be completely ignored or misled. It’s all about the money, after all.
If you are a start-up merchant in a high risk category, you submit an application with no processing history, and you expect to process maybe 10K-20K per month, odds are you will either receive no response or you’ll get a response like “thanks very much for your application, we will review it and get back to you” with no follow up after that.
If you phone initially or in follow-up, you will be quickly blown off the phone call. In some cases you may have a sales agent who is anxious to convert any lead, and they’ll tell you “no problem, we can do this” and then once again you’ll never hear back from them.
Established Business, High Risk Merchant Category
If you are a high risk merchant with some business history and processing history, one of two things will happen in most instances.
In some cases you will be told that you cannot be provided with a merchant account because the provider does not accept your business model under and circumstances – at least this is an honest and clear answer.
In other cases, especially if you are able to demonstrate that you can generate higher sales volume, you will be promised that they can provide you with an account, but weeks will go by until you finally realize you wasted your time and they cannot provide the account. This can all be very frustrating, and we’ll get more into this aspect in the final “Who” section below.
What Kind of Fees and Terms should I Expect?
You should expect that there will be a reserve of at least 10% for 6 months. They call this a 6-month rolling reserve, which means they will keep 10% of your most recent 6 months’ total processing, releasing what they collected 7 months ago while still collecting in the current month. So they will always have 10% or your most recent 6 months’ total processing.
You may need to set up a company and a virtual office in another country, as card brands mandate that the merchant has a company and physical location in the same region and the Acquirer providing the merchant account. Setting up the other company could be anywhere from $1000 to $3000 one-time, with an annual renewal of about $1500 per year, and there are many agencies which provide this service. There are also agencies which provide virtual office, physical address, voice mail and postal mail forwarding, for about $1100 per year.
You can expect extensive background checks of you, your business, and your online “reputation”.
You can also expect some large providers like Paypal, Stripe and Chase to approve your account almost instantly, because the actual risk review is done after the fact, which leaves you at the risk of having your account cancelled and funds held at a later date after you have started processing when they tell you “we don’t accept your type of business”.
Depending on your product or service, you will need to provide appropriate licensing and regulatory compliance documents.
If your business is extremely high risk, you may have no choice but to deal with an “aggregator”. This is someone who has a large pool of sub-accounts which are assigned under one MID, and allocates the sub-accounts to various different merchants. So with an aggregated account, many merchants are sharing the same MID, and often this is being done without the knowledge of the Acquirer. Aggregated accounts are dangerous, because if a policy violation is caught, or one bad merchant creates a problem, the whole thing blows up and you end up losing any funds still held in the account.
The whole process will take time, you won’t get an account overnight, and you will be asked to provide much paperwork and documentation. This whole thing can take up to 6 weeks in some cases. However, if you find the right provider, it will be worth the pain.
Who can I Rely on to Help Me??
The good news is the world is a big place, and there are many merchant account providers out there.
It may be difficult, and it may take time, but if you are persistent you have a good chance of finding somebody that can help you.
Think of the difficulty in finding a merchant account for your “High Risk” business as a “disease” that most of these service providers have. You need to find a “cure” for the disease, but the service providers are all genetically different so only a handful can be “cured”.
All the various risk factors which are all viewed in different ways by the service providers are the “ingredients” for the cure.
You, as the merchant, are also unique, so you have your own very unique combination of risk factors. If you keep mixing your unique combination of risk factors together, and injecting this to various service providers, you should eventually “treat and cure” the appropriate service provider.
Here are some tips on how to find someone who can help you, and whether we here at Cascadia Pay can help you:
Play the Field
You are a high risk merchant, right?
Don’t believe anyone who tells you right away “no problem, we can do this”. Anyone who tells you this is either a rookie who is hoping to convert a sale, or someone who knows there is not a great chance of getting you an account but wants to keep you to themselves until they know for certain they can’t help you.
If you hitch your wagon to a single provider you may end up waiting 4-6 weeks, getting the run around, until they finally come clean and tell you they can’t help you. If you are a high risk merchant you want to have as many fishing lines in the water as possible, and don’t believe anyone who tells you that they can get you a merchant account until you actually have the MID, start processing, and get paid.
Look into any and all options.
If possible, try to speak to people on the phone rather than by email. If you talk to providers in person, you have a chance to make a good impression on them and they might try harder to help you. Also, talking with the provider in person gives you the chance to evaluate how sincere and honest they are.
Don’t withhold any information or mislead the account provider in any way. You will get caught, either right up front, during the application review, or (worst case scenario) at some point after you start processing.
If there are any current or past issues with your business, disclose this.
If you have prior merchant accounts and processing history, provide it.
If you have had a prior merchant account closed, discuss it.
Don’t candy coat how you market and sell your product.
Get all the bad things out there right at the beginning of the process and you will save yourself time and also have no risk of having your account terminated (with funds held) and being put on some kind of merchant blacklist at some point in future.
Avoid Vague and Ambiguous Providers
If the provider won’t share certain information with you, this is not a good sign.
Ask them who the Acquiring Bank will be.
Ask them which gateway will be used.
Ask them if they have other accounts for the same merchant category.
Ask them to explain their payment cycle – are remittances daily or weekly, how many business days in arrears are you paid?
Are they able to provide you with your own unique billing descriptor?
If a Provider can’t or won’t provide you with this type of information then they are probably not someone you should work with.
Be Prepared – First Impressions are Important
Before you submit your merchant application or begin to speak to merchant account providers, make sure your house is as clean as possible.
Your website should be completely up to date, your Terms & Conditions solid, your order process fluid, documents and contracts up to date.
If you have sample order confirmation emails, marketing material, get this all ready.
Create a document which provides an overview of your business model and business history.
If you start working with a merchant account provider and your website or any other aspect of your business is half completed or non-existent, you might not even get your foot in the door.
Be Creative and Flexible
There may be ways you can adjust or enhance your business model to reduce the perceived risk factors.
For example, using 3D secure or Docusign, adjusting your delivery times, capturing but holding transactions until a verification process is completed, making changes to your Terms and Conditions.
With a creative and open mind, you may be able to overcome the risk factors flagged by the Provider.
Get it in Writing
Remember we explained Paypal, Stripe and other large providers seem to accept everything up front, do their risk reviews at some later point, then close the account stating “we don’t accept your product type”?
If you get to the point where a provider is telling you the account is fully approved, make sure you get some things confirmed in writing.
The biggest thing would be your product category and billing model. For example, you would want to send an email saying something like “just want to be sure the bank understands I am selling XXX product, doing recurring billing, I’m incorporated in XXX country and that they have confirmed my product and business model are acceptable”.
This way, if at some point in future they close the account because of an aspect of your business model, it will be very clear the error was on their end, not yours, and you cannot be placed on some kind of merchant blacklist.
Don’t Spend $$ Too Early
You may end up with an option which requires setting up an offshore company, virtual office, paying some kind of high risk registration fee, or setting something else up which will cost you additional money. Don’t spend any money on any of these things until the provider assures you, in writing, that the account is fully approved pending only those remaining items.
Well, if you have come this far then hopefully you can see that here at Cascadia Pay we understand the industry and high risk merchants.
Can we help you? Honestly, we will have no idea until someone on our end can have an in-depth discussion with you.
What we can promise is that we will deal with you honestly and respectfully.
We understand each merchant is unique and you will not be “pre-judged”.
If we can’t help you we will let you know right away, rather than keep you hanging for weeks.
If we are able to provide you with an account we will be open and up front about what will be required from you, what you will pay in fees, and all other aspects of the merchant account we can provide.