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.
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.
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.
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.
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.
Free Logo Maker & Logo Creator for Startups & Online Entrepreneur
- August 2020 (1)
- July 2020 (15)
- June 2020 (7)
- May 2020 (6)
- April 2020 (11)
- March 2020 (18)
- February 2020 (13)
- January 2020 (12)
- December 2019 (12)
- November 2019 (9)
- October 2019 (9)
- September 2019 (14)
- August 2019 (6)
- July 2019 (10)
- June 2019 (17)
- May 2019 (12)
- April 2019 (21)
- March 2019 (11)
- February 2019 (15)
- January 2019 (9)
- December 2018 (5)
- November 2018 (6)
- October 2018 (8)
- September 2018 (9)
- August 2018 (11)
- July 2018 (10)
- June 2018 (11)
- May 2018 (11)
- April 2018 (10)
- March 2018 (6)
- February 2018 (12)
- January 2018 (12)
- December 2017 (2)
- November 2017 (14)
- October 2017 (13)
- September 2017 (6)
- August 2017 (16)
- July 2017 (9)
- June 2017 (10)
- May 2017 (21)
- April 2017 (13)
- March 2017 (5)
- February 2017 (3)
- January 2017 (4)
- December 2016 (1)
- November 2016 (4)
- September 2016 (1)
- August 2016 (2)
- July 2016 (8)
- June 2016 (5)
- May 2016 (7)
- April 2016 (19)
- March 2016 (18)
- January 2016 (1)
- December 2015 (11)
- November 2015 (2)
- Security4 weeks ago
The Car Tracker Guide: What Will You Do at First After getting your car snatched?
- Business2 weeks ago
Where is the HubSpot Auto Dialer Lacking?
- Gadgets4 weeks ago
Tonor TC-777 Microphone Review – Your go to Microphone
- Others3 weeks ago
Consuming Kratom for Your Health Benefits
- Business2 weeks ago
What Services Should a Payment Processing Company Provide to a Mobile Merchant?
- Blogging3 weeks ago
How to Start a Blog in 2020. Easy Guide on Beginning
- Router2 weeks ago
What Are The Different Types Of Routers? – Expert Explains
- Business2 weeks ago
3 Reasons for Which You Need a HIPAA Software!