Which Industries Are Considered 'High Risk' In Processing?

As I’ve written before, the payment processing industry is in many ways a convoluted mess. Lack of transparency, a willingness to take advantage of business owners, and hidden costs are rampant. While it’s possible to sign a contract that’s in your business’ best interests—and the SwipeSum comparison process can help you do just that—it’s fair to say that navigating the world of payment processing is challenging even on the best of days. So you can imagine how much more convoluted things become for any company that’s considered “high risk.”

This post is from SwipeSum CEO Michael Seaman, a veteran of the credit card processing industry on a mission to give more power to merchants everywhere.As I’ve written before, the payment processing industry is in many ways a convoluted mess. Lack of transparency, a willingness to take advantage of business owners, and hidden costs are rampant. While it’s possible to sign a contract that’s in your business’ best interests—and the SwipeSum comparison process can help you do just that—it’s fair to say that navigating the world of payment processing is challenging even on the best of days. So you can imagine how much more convoluted things become for any company that’s considered “high risk.” Higher fees, fund freezes, being required to put up giant cash reserves—these are just some of the delightful obstacles that can face any business owner who doesn’t know how to navigate the payment processing world as a high risk entity. And here’s the rub: Many companies may not even realize they’re high risk until they get kicked off a payment processing contract, slammed with high fees, or rejected altogether. But it’s not all doom and gloom for high-risk companies. Here’s how to identify whether your company might be considered high risk—and how SwipeSum's comparison platform can help you land a good contract in spite of this designation.

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What It Means to Be “High Risk”

When processors assess your company’s level of risk, they do so based on a combination of your company’s specific risk factors and your industry’s general level of risk. When it comes to company-specific factors, processors will consider whether your company is equipped for credit card processing in the first place (e.g., does your company abide by the standards of major credit cards such as Visa and MasterCard?), whether you take payments strictly in person, online, or over the phone, your company’s return policies, your credit history, and any fraud detection/solution systems you have in place. If all or many of your transactions are conducted without a credit card being present (e.g. over the phone or online), if you have bad credit, if you have lax return policies, and/or if you don’t have systems in place to mitigate fraud, those are likely to raise big flags for most processors. Once you understand the potential factors that can result in an individual company being labeled “high risk,” it’s easier to see how entire industries can be branded in this way. Industries with a high level of risk tend to be ones in which the vast majority of companies involved embody the characteristics described above—e.g. accepting payments online or over the phone (i.e. “card not present”), processing a high number of returns or chargebacks, offering products or services that are subject to a lot of regulation, and/or being particularly susceptible to fraud. If your company or industry is labeled “high risk”, that doesn’t mean you won’t be able to find a payment processor willing to work with you. But it does mean you’re more likely to be subjected to higher fees and/or frozen funds or be required to put up a reserve, which might range upwards of $30,000. For some companies, paying into such a large reserve—or facing the possibility that the processor could hold onto, say, $40,000 of their money for months at a time—is potentially crippling. At SwipeSum, our experienced Consultants can help negotiate to get reserves reduced or eliminated altogether! Read about how we helped one satisfied client eliminate their processing reserves altogether.

The Most Common High-Risk Industries

In many ways, companies that know they’re operating in a high-risk industry are better off, because they expect to face more scrutiny and steeper costs from the outset. Examples of classically high-risk industries include:

  • Tobacco and e-cigarettes
  • Medical and recreational marijuana
  • Adult entertainment
  • Online dating
  • Gaming, gambling, and casinos
  • Offshore businesses
  • Financial consulting or investment firms
  • Airlines
  • Weapons retailers
  • Digital media (e.g. music or movies) downloading services
  • Vitamins and supplements

More stress arises for business owners who don’t realize they’re operating in a high-risk industry and therefore don’t expect to navigate the additional hassles involved when it comes to finding processing solutions. Industries that may (surprisingly) be considered high risk include:

  • E-commerce companies with a high rate of returns (e.g. online mattress companies)
  • Startups (especially tech startups)
  • Online retailers or people using Amazon, eBay, Yahoo, or Google Stores
  • Collections agencies
  • Rental and vacation rental agencies
  • Tech support
  • Travel agencies
  • Life coaching
  • Electronics

How the SwipeSum Process Can Assist Companies in High-Risk Industries

Finding the right payment processor for your company’s needs is challenging even when you’re operating in a low-risk industry. I advocate soliciting the help of experts in either case, but it’s especially critical if you’re in a high-risk industry. Whether you’re in classically high-risk industry or you’re surprised to learn that your company qualifies as “high risk”, SwipeSum can help. If this is your first foray into the world of payment processing or you’re reeling after being rejected by processors, we can help you develop an understanding of the processing industry and present your company to processors in the best possible light. We’ll also help you during the negotiation process so you can be confident every line in the contract is negotiated for your benefit. If you’ve been operating under a given processing contract for a while, our team of experts can help your high-risk company find lower rates and slash its reserve requirements, saving you large amounts of money and hassle. No matter your industry, if your company is considered “high risk,” then you need an expert by your side. At SwipeSum, our mission every day is to save you stress, time, and money so you can keep your focus where it belongs: on continuing to grow your business.

Michael Seaman

Michael is the co-founder and CEO of Swipesum. A veteran of the payments industry, Michael and his brother Stephen have led Swipesum since its inception in 2016. In his free time, Michael likes to play with his two daughters and skateboard.

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