A high-risk merchant account is a type of merchant account that is specifically designed for businesses that are considered high risk by payment processors. These businesses may be in industries that have a higher likelihood of chargebacks, fraud, or regulatory compliance issues, such as online gambling, adult content, pharmaceuticals, and supplements, among others.
High-risk merchant accounts typically have more stringent underwriting requirements and may require additional documentation and information from the merchant. They also may have higher fees and more restrictive terms than standard merchant accounts.
High-risk merchant accounts are typically offered by specialized acquiring banks or payment processors that have experience working with high-risk businesses and are able to provide the necessary level of risk management and compliance.
It’s worth noting that acquiring banks and payment processors have different risk appetite and may have different criteria to consider a merchant as high risk. Also, having a high-risk merchant account doesn’t mean that the merchant is doing something illegal or unethical, it just means that their business is considered high risk due to the nature of their industry and the potential of chargebacks or fraud.
There are many industries that are considered high risk in payment processing. Some examples include:
- Online gambling and gaming: These industries are considered high risk due to the potential for fraud and chargebacks, as well as the legal and regulatory complexities surrounding online gambling.
- Adult content and products: The sale of adult content and products is often considered high risk due to the sensitive nature of the products and the potential for chargebacks.
- Pharmaceuticals and supplements: These industries are considered high risk due to the potential for fraud, chargebacks, and legal issues related to the sale of prescription drugs and supplements.
- Travel: The travel industry is considered high risk due to the potential for chargebacks and refund requests, as well as the volatility of prices and inventory.
- E-cigarettes and vaping products: These industries are considered high risk due to the regulatory and legal complexities surrounding these products and the potential for chargebacks.
- High-ticket items: Any businesses selling high-ticket items such as luxury goods, jewelry, cars, and real estate are considered high-risk due to the large amount of transactions and the potential for chargebacks.
- Multi-level marketing and network marketing: Due to the nature of the business model, MLM and network marketing merchants may have a higher chargeback ratio, which makes them considered high-risk.
- Cannabis and CBD: These are considered high risk due to the legal and regulatory complexities surrounding the sale of cannabis and CBD products, as well as the potential for fraud and chargebacks.
It’s worth noting that this list is not exhaustive, and other industries may also be considered high risk by payment processors.