Businesses are considered high risk if they have a high charge back rate and accept card-less payments such as online payments, phone payments, etc. Certain types of businesses are riskier than others such as telemarketers, online gambling and casino web sites, adult service providers, internet auctions, e-cash businesses payment gateway for casino , advance booking web sites, etc. Credit card processing agencies charge higher rates for their services to businesses with a high risk profile.
What makes a business high risk?
High risk businesses are the kind that:
have a bad credit rating
have high turnover
have high customer dissatisfaction rates
offer money-back guarantees
have business processes that make them susceptible to credit card fraud
Can a high risk business have a credit card processing solution?
Just because a business is high risk does not mean credit card processors will not consider it. Merchants need to shop around for agencies that work with high risk businesses. A high-risk business usually has to pay a much higher rate for a processing solution than other low risk businesses. The credit payment processor looks into:
length of time in business
volume of charge backs
If the business has been running for some time, vendors assume you are aware of credit card fraud and can recognize a prospective threat. In addition, if charge backs are less, the processor assumes your business though high risk must be doing something right. Some payment processing firms keep a reserve amount to protect themselves from loss. The amount of reserve varies with the type of business and the risk involved.
How can a good credit card processor make transactions safer?
If a business accepts online payments through an ecommerce application, it is a target for fraud. Good internet credit card processing companies have systems in place to detect suspicious activity and potentially costly fraudulent transactions. The transactions can be held back for manual approval. Many credit processing vendors call customers or the business to check the genuineness of the transaction before processing it.
Many payment gateways have an Address Verification Service (AVS). The address submitted with an order is compared with that on file for the credit card holder. Doubtful orders are held back for manual review.
Many internet credit card processing companies offer advanced services such as IP address blocking, shipping address verification filters, IP shipping address mismatch filters, CCV handling filters, amount filters, etc. The more sophisticated and secure the solution, higher is its cost.
All credit payment processors are not open to working with high risk businesses, but there are many who will, albeit at a higher cost. Amongst high risk businesses, credit processing agencies give preference to those that have been in business for some time and show lower than average charge backs for that kind of business. A reliable and secure payment processing solution reduces the risks of fraud and protects the business and its customers from loss.