As offering a merchant account to businesses provides some degree of risk to the supplier, some businesses are branded “high risk” and therefore might not be considered. This can be for several reasons, including startups, who have no history to judge, poor credit ratings, relating to a company director or the business itself, or the type of industry the company operates in. There are, however, some specialised providers who offer merchant accounts to businesses in these circumstances.
Which Industries Qualify as High Risk?
Industries that are considered high risk relate to those who are likely to process a high number of cancelled transactions; this may be due to customers changing their mind or outside influences. The travel industry, for example, often incurs cancellations due to weather, strike action and the higher likelihood that customers will cancel their plans. Travel industry transaction cancellations are ten times more likely than those of a restaurant.
Other industries include:
- Debt collection agencies
- Ticket sales
- Online industries, such as pharmacies and auctions
- Gambling, both online and in person
- Adult products and services
- Foreign Exchange
- Payday loans
Pros and Cons of a High Risk Account
As you might expect, high risk accounts are not structured the same as a standard account. Understanding these pros and cons is therefore important to fully comprehend before signing any contract.
The main advantage to high risk merchant accounts is accessibility. For some businesses it is simply not possible to obtain an account otherwise. As not being able to process card payments is not a sustainable business model for most in the 21st century, these accounts are essential.
Due to the higher level of risk, such accounts are more expensive to obtain and run. There is also likely to be a longer period of settlement, meaning you will not get access to payments as quickly. Your minimum monthly transaction value may also be higher, although this tends to only be an issue for very small businesses, particularly start-ups.
Higher costs include setup fees and annual fees, however these may become smaller over time if the risk is adjudged to be reduced. Some may even need to pay an application fee that is not refundable if unsuccessful.
You may also have to provide a rolling reserve, which can be fairly high. This can be a problem for two reasons. Firstly the initial cost of setting up the account is higher as a result, and secondly you are denied access to this capital for the duration of the contract.
Higher transaction fees are also common and these can add up to a significant amount over time. It is therefore vital that you consider even what appear to be small differences in these fees.
5 High Risk Merchant Account Suppliers
Thankfully the high risk merchant account supplier market provides many options to businesses in need of such an account. Some providers are not as reputable as others and hidden fees are commonplace with some. The most highly regarded high risk account providers include:
With decades of experience in helping high risk businesses, Web-Merchant provide both merchant accounts and secure payment gateways at affordable rates, some as low as 3%. They support multiple currencies and also provide a free virtual terminal for online payments.
Although based in America, Epoch provide high risk accounts to European businesses with 24/7 support. Transaction fees start high, up to 15%, but fall over time, often to rates lower than some standard providers. Gateways are PCI DSS compliant, providing robust security, and they do not require a rolling reserve to access the account.
ROK Payment Solutions
With no hidden charges and bespoke contracts, ROK provide potential clients with a high degree of feedback and support, as well as transparent contracts where costs are easy to understand. Applications are decided on efficiently, sometimes within 3 days, and multiple currencies can be processed. Although payments are slower than with standard accounts, they are processed bi-monthly, allowing you to plan your finances more accurately.
While Radiant are not exclusively a high risk merchant account provider, they do have services that are specifically catered towards high risk industries. Radiant are aware that, although all high risk sectors face similar issues in accessing merchant accounts, their needs are not always the same. This industry tailored approach has garnered positive reviews and a growing reputation.
Easy and quick to set up, it can literally take minutes for some, Cash Flow are one of the most straight forward providers of high risk merchant accounts in the UK. Rates can be lower than most standard merchant account providers, 1.29%, and contracts are flexible enough to grow with your business instead of restricting you with terms and conditions that no longer suit your circumstances.