Selecting The Best High-Risk Merchant Account: Adaptiv & Nuvei
Nuvei & Adaptiv Payments Partnership
Credit: Adaptiv Payments
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If your business struggles with high chargebacks or operates in a volatile or heavily regulated industry, a high-risk merchant account may be necessary. This type of account helps you process payments securely and efficiently, even if you’re in a high-risk sector. Today, we’ll inform you on what makes a business high-risk, how to choose the right provider, and important considerations for managing your account.
Key Takeaways
- High-risk merchant accounts cater to businesses with elevated chargebacks, regulatory, reputational, or fraud risks, requiring specialized payment processing solutions.
- Common high-risk industries include nutraceuticals, e-commerce, travel, high-ticket sales, and cryptocurrency, often facing increased regulations and transaction fees.
- Key considerations for selecting a high-risk merchant account provider include fee structures, fraud prevention tools, and compatibility with payment methods.
Understanding High-Risk Merchant Accounts
High-risk merchant accounts are specialized payment processing accounts designed for businesses with a higher likelihood of chargebacks, regulatory risk, or reputational risk. Unlike low-risk merchant accounts, which cater to stable and less volatile industries, a high-risk account comes with higher transaction fees and a deeper underwriting processes. These accounts have additional risk mitigation measures such as reserve requirements and advanced security features to protect the merchant and the payment processor. Traditional processors see these kinds of businesses as not worth the risk and elect to decline their business.
Businesses in high-risk industries face these declined applications and increased scrutiny from financial institutions and processors and it can stressful to find a solution that works. The nature of these businesses makes them susceptible to higher chargeback rates and fraudulent transactions, which can be particularly frustrating for a business owner.
Despite these challenges there are great solutions out there. High-risk merchant accounts provide an important service by enabling merchants to process payments securely and efficiently, ensuring that even high-risk businesses can thrive.
Factors That Classify a Business as High-Risk
A business man running a high-risk business
Credit: Adaptiv Payments
Several factors contribute to a business being classified as high-risk:
- High chargeback rates, which suggest potential liability to payment processors.
- Operating on recurring payment models, such as subscription services, due to the propensity for chargebacks.
- Transaction volumes exceeding a certain threshold, leading to high-risk classification because of associated high-value returns.
- Extended fulfillment timeframes common in drop shipping, travel bookings, nutraceutical products, and made-to-order ecommerce items, which increase the window for disputes and regulatory scrutiny.
Industries like nutraceuticals, consulting, travel, and subscription are regularly categorized as high-risk due to regulatory scrutiny and market volatility. E-commerce platforms selling electronic goods or luxury items with higher volumes face more risk management assessments mainly due to their susceptibility to fraud.
Furthermore, startup businesses without a solid processing history tend to be labeled as high-risk due to their lack of demonstrated stability. A business’s overall risk profile, including its financial history and credit ratings, plays an important role in this classification.
Common Industries Deemed High-Risk
Certain industries are more prone to being classified as labeled high-risk due to their inherent operational challenges. Some of the most common high-risk industries include high-risk industry:
- Subscription services
- E-commerce
- Travel
- Online gambling
- International
These industries often face frequent chargebacks or fraud and this contributes to their high-risk label. For example, the travel sector and online gambling operations are highly likely to have chargeback issues and regulatory challenges.
Travel-related businesses also fall under this category due to the high rate of cancellations and subsequent chargebacks. Industries like tobacco and firearms also face higher regulatory scrutiny, making it hard to find long-term online payment processing solutions.
Additionally, businesses engaged in international sales are often classified as a high-risk business, particularly if they operate in regions with high fraud rates.
Pros and Cons of High-Risk Merchant Accounts
| Aspect | Regular Merchant Account | High-Risk Merchant Account |
|---|---|---|
| Processing Fees | Lower fees (typically 1.5-2.9% + $0.30) | Higher fees (3.5-5% or more + transaction fees) |
| Approval Process | Quick approval (24-48 hours), minimal documentation | Extensive underwriting, longer approval (5-10 business days), more documentation required |
| Chargeback Limits | Strict limits (usually under 1% of transactions) | Higher chargeback tolerance (up to 2-3%), with chargeback management tools |
| Rolling Reserves | Rarely required, full access to funds immediately | Often requires 5-10% rolling reserve held for 6-12 months as security |
| Contract Terms | Month-to-month options available, flexible terms | Longer contracts (2-3 years), early termination fees commonRetry |
High-risk merchant accounts have their advantages and disadvantages. On the plus side:
- Specialized fraud prevention tools for businesses in high-risk industries.
- Better customer experience through better transaction security.
- Ability to process payments in industries that traditional processors won’t touch.
This increased fraud protection and access to services can be a big win for high-risk merchants.
But the downside is higher processing fees, chargeback fees and longer contract terms. Many high-risk payment processors charge high rates for high-risk merchant services because they don’t like risk or lack experience with high-risk clients. This means higher transaction fees and chargeback fees for high-risk merchants especially when it comes to credit card processing. And a high-risk payment processor is necessary for those who do high-risk payment processing.
Transparency in fee structure is important to consumers as it helps them understand the cost.
High-Risk Merchant Account Fee Structures
Understanding the fee structures for high-risk merchant accounts is key to managing costs and budgeting. High-risk merchant accounts have higher fees because of the risk to the provider.
These fees can be fixed fees, variable fees and chargeback fees, each with its own implications for the merchant.
Fixed Fees
Fixed fees in high-risk merchant accounts are constant charges that don’t change based on the risk level of the business. These fees can include monthly account maintenance fees and gateway fees which remain the same regardless of the merchant’s transaction volume or risk profile.
Variable Fees
Variable fees on the other hand change based on the risk level of the merchant. These fees can change depending on the perceived risk of the merchant’s business operations and transaction history.
Chargeback Fees
Chargeback fees for high-risk merchants range from $20 to $100 per incident. These fees are to offset the costs of handling chargebacks and the risk they represent to the payment processor. A chargeback fee is usually applied to cover these costs.
Managing excessive chargebacks is key to minimizing these costs.
How to Apply for a High-Risk Merchant Account
A man applying for a high risk merchant account
Credit: Adaptiv Payments
Applying for a high-risk merchant account requires more work and documentation. You will need business licenses, financial statements, bank account information and proof of PCI compliance. Having these documents ready before you start the application will speed up the process and increase the chances of a fast approval from a merchant provider. The application process involves filling out an online form and may require physical paperwork.
When applying be sure to provide detailed and honest information about your business’s risk profile and financial history. Showing financial stability and having a plan to manage chargebacks will improve your chances of getting a high-risk merchant account. Not fulfilling all criteria may prevent approval of a processing account for high-risk merchants.
Tips for Approval
Approval for a high-risk merchant account can be tough but following these tips will help:
- Work with a high-risk merchant service provider to increase your chances of approval.
- Keep accurate financial records.
- Disclose all information to the payment processor to show trustworthiness.
- A credit score as low as 500 can still get approved for high-risk payment services.
Enhancing your website security can improve application chances. Key actions are:
- Using SSL certificates
- Review the payment processor’s website for services, pricing and customer feedback to ensure suitability
- Reduce chargebacks to maintain a good standing with payment processors
How to Choose the Right Payment Gateway
Choosing the right high-risk payment gateway is a big task for high-risk merchants. It directly affects your ability to process transactions and give your customers a good shopping experience. High-risk accounts will have more security features to fight fraud. This is crucial for businesses in unstable industries. Payment gateways must have robust security measures to protect sensitive data, including PCI DSS compliance and encryption. The right payment gateway can impact revenue, customer retention and make your business more stable.
A good user experience during checkout enabled by the right payment gateway will reduce cart abandonment rates. High-risk merchants should consider the following when choosing payment processors:
- Choose processors that specialize in their industry to get knowledgeable support and right services.
- Ensure compatibility with multiple payment methods.
- Select gateways that cater to their industry’s payment preferences.
Best Practices for Managing High-Risk Merchant Accounts
Regular monitoring of transactions is a top priority for high-risk merchants. In these industries, promptly identifying and addressing any suspicious activity or chargebacks is critical for success. High-risk merchants often experience stricter scrutiny and regulation from payment processors, making it necessary to implement robust fraud detection measures, such as verifying customer identities and utilizing secure payment gateways. Maintaining compliance with regulations like PCI DSS is vital for high-risk merchants to avoid legal issues and protect customer data through reliable processing, including debit card payments.
High-risk merchant accounts often require businesses to maintain a rolling reserve fund to cover potential chargebacks. Implementing clear refund policies can significantly help in minimizing chargebacks. These practices not only ensure compliance but also help maintain a good relationship with payment processors.
Nuvei Partners with Adaptiv Payments to Provide Reliable High-Risk Merchant Accounts
Industry Specialization and Expertise
Our risk and compliance team possesses deep expertise in the specific challenges faced by international, high-ticket, nutraceuticals, and travel agencies including future delivery risks, chargeback management, and the latest Visa/Mastercard regulations. Once approved for a high-risk merchant account with Adaptiv, you can count on a stable and dependable account, unlike providers such as Stripe, which may restrict or close accounts without warning.
Dedicated Account Management
With Adaptiv you get a personalized service, a dedicated account manager, and direct access to the underwriting and risk team. No more waiting weeks for generic responses like you see with other payment processors including Stripe and Shopify. Direct access to your support team at Adaptiv Payments gets you help when you need it.
Adaptability and Scalability
High-risk industries are dynamic and ever changing. Having a payment service provider (PSP) like Adaptiv that is attuned to industry trends and regulatory changes gives merchants a big advantage. With Adaptiv, Nuvei offers scalable merchant account solutions that can handle organic growth up to 20% monthly volume increases. For businesses that are growing rapidly or experiencing large volume surges, special arrangements can be made to support even higher volume.
Proactive Chargeback Prevention and Mitigation
Maintaining a healthy merchant account and processing environment is essential for the growth of your high-risk business. Nuvei and Adaptiv offer an early warning alert system for chargeback prevention and mitigation that proactively monitors merchant accounts to keep them healthy and in good standing. This service addresses potential issues before they become problems, minimizes disruptions, and protects the merchant's relationship with Nuvei and other financial institutions.
Partnership with Adaptiv Payments for Your Success
Nuvei has partnered with Adaptiv Payments to provide high-risk merchant accounts designed to support your success as a merchant. This collaboration combines Adaptiv’s expertise in managing high-risk payment processing with Nuvei’s advanced technology and scalable solutions, ensuring secure, reliable, and compliant payment acceptance. Together, they empower high-risk businesses to navigate industry challenges confidently while maximizing growth opportunities and maintaining smooth payment operations.
