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Differences Between Low-Risk and High-Risk Merchants and What They Mean for Payment Processing


Credit Card Processing - XPAY Mockup

You may want to offer credit card payments to your customers. However, you must first determine whether you are a high-risk or low-risk merchant to know how you will proceed. For example, high-risk merchants may find it hard to qualify for traditional processing providers.


With over 72% of consumers nowadays preferring contactless payment processing, the ability to process credit transactions is vital. So what happens if you are categorized as a high-risk merchant? And how does it affect your transactions in the future? Finally, what are the best high-risk merchant processors at your disposal?


With that, read on to find out the differences between low-risk and high-risk merchants and what they mean for payment processing.


What Are High-Risk Merchants?


The term high-risk may sound alarming at first, but that isn’t the case. It simply refers to businesses that are considered high risks to the banks because of potential chargebacks. Often, you get this designation because of the industry you are in and the product or service you sell. It has nothing to do with what your business has done nor its performance.


New business can also be considered as high-risk. Without a lengthy history to back you up, banks might deem you financially unstable to reduce the risks of chargebacks. The same is applicable for home-based businesses or freelancers. And if your business deals with the following, then you should consider applying for a high risk merchant account:

  • High chargeback ratios

  • Poor credits

  • Short credit card processing history

  • Accepts multiple currencies

  • Has average monthly sales volume is more than $20,000

  • Operates in high risk countries

  • High fraud rates

Other examples of high risk merchants are travel businesses, nutraceuticals, loans, gambling, and ticket brokers.


Payment Processing for High-Risk Merchants


High-risk merchants tend to go through extra measures to offer payment solutions to their customers. They also tend to have higher online payment processing fees during transactions. Likewise, they often undergo lengthy scrutiny before they get approved. Other businesses can even limit the number of transactions from them or require them to have a certain amount of cash reserves.


If you’re considered a high-risk merchant, don’t let that dishearten you. In fact, there are also several benefits to being identified as a high-risk merchant—more so than low risk ones.

For one, it gives you more flexibility when accepting payments. You can offer recurring payments, process higher sales volumes, and sell a wider variety of products and services. You can also perform international transactions, paving the way for your business’ global expansion. The key is to wisely choose the right high risk payment gateway and merchant services provider for your business.


What Are Low-Risk Merchants?


Being classified as a low-risk merchant doesn’t automatically mean you are more reliable and stable than high risk ones. It simply means that you have minimal financial liabilities or impact during payment processing. Belonging to a certain industry can also be the reason for your designation. Some examples of industries considered to be low risk are professional services, hospitality, retail, restaurants, and automotive.


Paying online with a credit card
XPAY accepts all merchants from high-risk to low-risk.

Low-risk merchants also tend to have zero to low chargeback rates. The same is true with fraud rates. And unlike high risk ones, you only accept one type of currency for all transactions. Other characteristics to look out for are:

  • Makes less than $20,000 per month

  • Operates in a low risk country such as European Union countries, USA, Canada, Australia, and Japan

  • Average credit transaction is less than $500

  • Minimized returns

  • Uses 3D Secure to prevent fraud


Payment Processing for Low-Risk Merchants


Low-risk merchants tend to have faster payment processing because they don’t get scrutinized as closely. They also have lower payment processing fees and more lenient terms and conditions during transactions. When it comes to payment processors, there are several secured merchant services credit card processing available such as Visa or MasterCard.


However, there is a downside to being a low-risk merchant. For one, you have limited options for payment acceptance. Likewise, you can only deal with local transactions, stunting your potential to expand internationally.


The Right Payment Processor For You


Whether you are a high-risk or low-risk merchant, you need to find the right payment processor to offer a safe, secure and convenient payment processing solution to your clients. Nowadays, there are various payment processors for each category. Just make sure to choose an appropriate one for your business.


One great example of a payment processor that caters to high risk merchants is XPAY. It offers multiple payment processing solutions that can accommodate any type of business and industry considered to be high risk. It protects and secures your merchant account by pairing you with a solution that can accept the liabilities associated with your business. It also supports integrations with platforms such as WooCommerce, Google Play, and Magento.


Ensuring Safer Transactions


If you operate in a business management career and industry, you will realize that all businesses face various nuances in payment processing. If you find your online business categorized as a high-risk merchant, you don’t have to worry as you can still set up a merchant account on a reliable payment provider. By finding the right solution, you can minimize risks of fraud and high chargebacks.

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