What is a High Risk Merchant Account?
When it comes to assessing risk, a financial provider/acquirer will look at both the business in question and the sector it works in.
They may even look into the credit worthiness of the company owners or directors.
If a company goes out of business before they can fulfil the order/booking, the acquirer assumes liability. This means that their is significant financial risk for the acquirer.
Therefore industries that have a delay between payment and delivery, such as furniture or travel, tend to be deemed as higher risk.
Financial institutes invest and rely heavily on reputation, and so any activities that could jeopardise this could also be deemed high-risk.
Some consider sectors such as Adult, CBD, Supplements and Gambling as high-risk to their reputation, as despite being legal, can be frowned upon by the wider audience.
Some sectors are also heavily regulated, which leads to the risk of the merchant, sometimes unknowingly breaching regulation or law, which again can have reputational risk and damage for associated partners.
Examples of 'High Risk' sectors include:
- Adult Entertainment
- CBD Oil or Cannabis Seeds
- Dating Services
- Drug, Supplements or Herbal Remedies
- Furniture (with long lead times)
If your business is deemed 'high risk' by the merchant account provider, is it likely that the mainstream account providers will deny your account application.
That is where Gala Technology can help, by reaching out to our network of high risk merchant account providers.
Other considerations for a high risk account is the business itself, its owners and directors.
Questions that may be asked are:
- How financially stable is the company?
- What is the trading history of the company?
- What is the length of time between order/payment and the delivery of goods/services?
- The credit worthiness of the directors and owners?