High-Risk Merchant and High-Risk Merchant Accounts

Some merchants are considered high-risk because they have the potential to be a financial or regulatory liability for the acquirer. These merchants need a specific type of merchant account.

How is Risk Evaluated?

Merchants are evaluated before receiving a merchant account to determine how much risk the business poses to the acquirer. Several variables are taken into consideration. The following are some, but not all, of the characteristics that are considered risky:

  • The merchant is registered in the MATCH List database because previous merchant accounts have been terminated.
  • The business is new and has very little payment processing history.
  • The merchant’s industry is known to have a high rate of chargebacks or is classified with an MCC the card brands have deemed high-risk.
  • The merchant sells products or services using a subscription billing model or free trial offers.
  • The business sells to international customers in certain high-risk countries.
  • The merchant sells custom goods.
  • The merchant has a high average ticket amount.
  • The sales model includes delayed or future delivery of goods.
  • The merchandise the merchant sells poses a reputational risk to the acquirer.

High Risk Merchant Accounts

High-risk merchants aren’t eligible for traditional merchant accounts. They must contract with a payment processor that offers high-risk merchant accounts.

There are both pros and cons of payment processing with a high-risk merchant account.

High-risk merchants typically pay more in transaction processing fees and chargeback fees to compensate for the danger they could potentially cause to the payment processor’s bottom line. They are also more likely to have money held in a reserve. However, high-risk merchants are usually allowed a higher chargeback-to-transaction ratio.

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