How Risky is Your Business? Assessing Merchant Account Risk

When you are applying for an online merchant account, the type of industry that you are in will be weighed heavily during the process. After all, there is a certain amount of inherent risk involved in taking payments of any kind, but certain industries involve a little more than others; there are even some industries that very reputable providers won’t even consider due to their risk profile.

So what are the general designations? Here at First Atlantic Commerce, we’re outlining how your business may be viewed. Keep in mind, of course, that other factors such as your processing history and billing methods will always affect the outcome of your application, as well.

online merchant account concept -- hand holding map of the world saying "merchant account"

Low Risk

A general rule of thumb is that the more quickly the customer can pay for a product or service and get it, the less risky the transaction is. This applies especially to most retail and restaurants (clothing and jewelry excluded), where the average sale amounts are low and the goods are often available immediately or within a week or so (online purchases). Low-risk retail often implies the sale of low ticket items like media (books, movies, music), gifts, sporting goods, grocery, etc. where transactions average out at about $50 or less. Generally speaking, low risk means few returns or cancellations, few chargebacks, and limited risk of fraud.

Moderate Risk

Online sales tend to be somewhat riskier because of the potential for fraud; with that in mind, Internet-based businesses are also judged in terms of what they provide to determine risk factors, so it’s always a bit of a case-by-case scenario. Large payment amounts and longer wait periods before fulfillment are other factors that define risk and might affect a business’s classification or approval.

Jewelry falls into the moderate category, primarily because of the higher value. Other industries that fall into the moderate category include health and beauty products, utility payments, social gaming sites, gym memberships, tuition payments, telephone services etc.

One of the higher moderate-risk types of clients that we do accept are those in the travel industry. The reason that their businesses are more risky is that the wait times between the purchase of services and their fulfillment is unusually long. After all, many people book hotel reservations, flights, and rental cars well ahead of time. However, these clients are dealing in legitimate and fully legal services, so we are more than willing to accommodate those that meet our application requirements.

These industries will not necessarily be a problem for the right processor – they will merely want to ensure that your rates of chargebacks are within reasonable limits, your financial stability is good, and the other applicable factors are in order.

At First Atlantic Commerce, we take pride in offering merchant accounts to many businesses in these and other industries. In fact, we specialize in online and international merchant accounts, which means that we offer the best fraud protection in the business, offshore credit card processing, and payment options in multiple currencies.

High Risk

The highest risk accounts usually require a specialist processor. In the high risk category, discount rates are extremely high and security reserves are large. An example of high risk is pornography or adult materials. FAC does not process for high risk business.

At First Atlantic Commerce, we have high standards for all of our accounts, which is why we also do not process for the following:

  • Adult products or services
  • Sale of illegal substances
  • Illegal sale of controlled substances (i.e. pharmaceuticals that require a prescription)
  • Sale of marijuana
  • Sale of firearms or ammunition
  • Merchants with chargeback ratios over 1 or 2%

These are the general standards by which we judge the industries in which our applicants do business. However, as stated before, each unique client will have a different set of circumstances surrounding their enterprise and industry, and this cannot be discounted. Apply today to find out more about our process and to take the first steps towards having a secure payment gateway!



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