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What Makes a Business a High-Risk Merchant?



Five Things Great Business Leaders Never Say

What Makes a Business a High-Risk Merchant?

High-risk merchants are businesses that pose an inherently large risk for failure and loss.

Because of this, not many providers will work with high-risk merchants. This makes it difficult to seek financing options and reliable payment processing.

For a business to be considered high-risk, they must possess one or more of a few characteristics. This includes basic criteria like poor credit, a history of criminal activity, or other negative financial statistics.

Beyond basic criteria, risk level is determined by a few more significant factors. As a result, some businesses and industries are almost always assumed to be high-risk.

To help you understand how risk is assessed, we’ll take a look at a few high-risk merchant identifiers below.

Qualifying for MATCH

One of the quickest ways to be deemed high-risk is by qualifying for the MATCH list.

MATCH (Member Alert to Control High Risk) is a database created by Mastercard that oversees the credit behavior of businesses. In particular, it keeps track of merchants that have a poor credit history or have been terminated by a provider.

Some of the most common reasons for qualifying for MATCH include an abundance of chargebacks, association with fraud, bankruptcy, data loss, breaking the law, or otherwise failing to uphold merchant standards.

The biggest problem with MATCH is that you often won’t know when you are added. You’ll only end up finding out when you are rejected for a financial application due to your MATCH status.

Taking this into consideration, being on the MATCH list will certainly qualify you as a high-risk merchant because the list exists to keep track of potentially questionable merchants.

Unreliable Income Streams

Depending on unreliable income streams will also classify you as a high-risk merchant.

In particular, two types of income models are viewed as risky. This includes subscription models and fluctuating income (businesses that work with seasonal variances or have a dependency on other events happening).

Subscription models are concerning because you are relying on your subscribers to continue paying. There is no guarantee they will stay subscribed every month.

Furthermore, subscription models introduce recurring payments, which can easily be forgotten when using autopay. This can lead to customers failing to recognize charges to their accounts and requesting chargebacks, which directly affects your reliability of income.

Fluctuating income is also risky due to not being sustainable. This means you require a specific set of criteria to be fulfilled before you can make sales.

A great example of this includes selling antiques. Many antiques have value, but also tend to take a while to sell as you take the time to find a proper buyer.

This can easily result in very high sales one month when a few high-ticket items sell and very little or none at all in other months. This lack of consistency creates risk for merchant account providers and creditors because it may speak to an inability to consistently pay.

If your income isn’t fairly reliable each month, then there’s a great chance you’ll be seen as high-risk.

Questionable Legality

Industries that involve questionable legality will also result in a high-risk association.

This includes industries that may be legal in some locations but illegal in others. Good examples include gambling, adult entertainment, marijuana, and even firearms.

The primary issue with these types of businesses is that there’s a lot of grey area. Sales in one location may be legal, but selling to people in other locations may not be.

A good example of this would be selling marijuana online. This is legal in a few states, but only within state lines. If you were to unintentionally ship an order out of state, then this would surely result in legal consequences.

Industries that are not federally legalized are inherently risky because there is potential for breaking the law. Should this happen, this directly impacts a merchant’s ability to pay their debts and sustain their business.

Closing Thoughts

If you are classified as a high-risk merchant, it can make it extremely difficult for you to continue operations. You face many limitations and often don’t have access to secure or affordable payment processing.

Many different factors can qualify you as a high-risk merchant. This includes being eligible for the MATCH list, depending on unreliable income streams, and working in an industry of questionable legality.

While some businesses will always be seen as high-risk, others can prevent this by taking care of their credit and keeping a clean financial history. If you are considered high risk, look for payment processors that will work with you and that offer the security and flexibility you need.


Praneet is the CEO and Editor of the website He is a blogger and have varoius blog on various topic and he is from India who loves to read and write about Technology, Gadgets and Gaming. If you share the similar interests then you can follow him on Facebook | Google+ | Twitter

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