The importance of being able to accept debit and credit cards in today’s vastly technological climate is of the utmost importance. Commerce has changed over the years with the majority of people preferring to use credit cards over cash. Looking even deeper into the need for payment processing accounts, the shift to online transacting has been a rapid one, and eCommerce is gaining traction. By 2023, about 22% of all retail transactions will be eCommerce, and this number is growing exponentially. This leads to the need for card-not-present transactions, and by association, high-risk merchant accounts.
A high-risk merchant account is dubbed so due to various reasons. A lot of companies think that being labelled high risk is detrimental. However, there are both pros and cons to falling into the high-risk category. Let’s go through a few.
Fees involved: Due to the fact that the issuing bank has to assume the risk associated with your company, they will invariably charge more for their services. Merchant accounts for high-risk companies will come with higher rates than those posing a lower risk. These fees include much higher chargeback rates due to the nature of the business.
Merchant account reserve: This is an account necessary for the merchant to open. The bank will usually insist on it as collateral for chargebacks. This savings account will be used to pay any excessive chargeback costs that the bank incurs.
Exhaustive contracts: Being classified as high-risk will have you jumping through hoops that you never knew existed. The contracts are exceptionally detailed and will need thorough examination before going ahead. They will also include clauses that other merchants may not ever come across. Once again, this is due to the assumed risk your company poses.
Global Access: Usual merchant accounts are restricting in that they may not allow any form of international trade. This limits their access to new markets and sales channels. High-risk accounts allow networks to grow across the globe, allowing connections with world-leading countries such as China, who holds the leading market share on eCommerce trade.
Greater earning potential: Low-risk merchants will often have limits placed on them in terms of sales. This prevents them from high-ticket selling, as well as things like subscriptions and recurring payment schemes. This is not the case for high-risk merchants. Because the evaluated risk has already been identified, these companies can push the boundaries in terms of sales. There are already built-in protection mechanisms in their agreement with their payment processors, so the sky is the limit.
Chargebacks are not debilitating: Chargebacks are the enemy of the bank. If a low-risk business approaches 1% chargebacks in a month, the issuing bank may very well freeze their accounts, causing all transacting to cease. This is devastating for a small business, and in some cases may even spell the end. However, high-risk businesses have clauses and protection against chargebacks that prevent one bad month from sapping their funds. Chargebacks, although damaging, can be controlled.
After looking at both pros and cons, it’s plain to see that the cons, although daunting, are not necessarily detrimental. They are worth it when looking at the opposing cons. The cons are worth getting excited over, in fact. They are ways your business can grow, and they allow you to dream big.
At Octapay, we want you to dream big, too. We want your high-risk account to be as successful as possible – because your success is our success. We are the leaders in high-risk payment processing and will help the cons become distant memories. We will also ensure that you take full advantage of all the pros that a high-risk merchant account can present.
Call us today on +1 302 380 4048 OR +44 114 299 8909 and chat to one of our friendly experts. This is the start of a very exciting journey and we look forward to a lucrative partnership!