Is PayPal High Risk Merchant Account the right choice? Pros & Cons explained

If you are a high-risk business, securing dependable payment processing can at times feel like traversing a minefield. PayPal, one of the most recognized payment services in the world, can be a tempting option for businesses that are experiencing challenges getting approved for a conventional merchant account. So, should you use PayPal high risk merchant account business? The answer really depends on your business model, risk tolerance, and growth plans.

Understanding PayPal’s Relationship with High-Risk Businesses

PayPal doesn’t really offer "high-risk merchant accounts" in the traditional sense of the term. PayPal has its own way of doing things, whereby businesses create a normal PayPal Business account and PayPal considers the account through their own systems and risk policies. This means that while PayPal may initially accept you as a high risk business, they still control your account and can impose restrictions or holds as they see fit.

PayPal has a fairly comprehensive acceptable use policy that is often updated and addressed in a broad range of industries, including entertainment, gaming, pharmaceuticals, and cryptocurrency. It is important to note that many businesses that operate in gray areas or in emerging markets have been able to utilize PayPal without issue, at least on initial use.

Benefits of PayPal as a High-Risk Payment Processor

Brand Reputation and Trust

With PayPal's vast global market, they bring plenty of credibility to your business. PayPal is trusted by millions of users around the world, and having that trust can lead to higher conversions. In high-risk businesses, this is especially helpful as potential customers are often more skeptical about purchasing in the first place.

Fast Setup

With a typical high risk merchant account, it can take weeks for everything to be approved. You can be up and running with a PayPal Business account in a matter of days. Implementing PayPal is usually not too challenging, as they provide plugins and APIs for most e-commerce platforms. Whether you need to start processing payments quickly or you are simply interested in trying an alternate payment method, Trinity Consultings having a PayPal account is beneficial.

Payment Flexibility

Beyond PayPal accounts, PP supports many other payment types, including credit card, debit card, and bank transfer options. While this may be new for some businesses, it will often help decrease your cart abandonment rate as customers are able to choose their preferred payment method.

The Global Market

In terms of global reach, it is heavily marketed internationally as PayPal is active in over 200 countries. You can accept payments in multiple currencies, and there is no need for separate merchant accounts to sell in different countries. Your business is easily able to expand quickly into new international markets with PayPal as your payment processor.

Consumer Protection Schemes in Place

PayPal consumer protection programs can help high-risk merchants by helping customers feel comfortable buying, even if they perceive some risk. This extra security can overcome many of the customers' natural hesitation when it comes to dealing with a business they have not shopped with before or for unusual items and high risk merchants.

Drastic Disadvantages and Risks

Freezes and Holds

One of the biggest risks with PayPal as a means for high risk merchants to process payments is the potential for sudden freezes or rolling reserves. If your account shows unusual activity or receives complaints, PayPal can hold your funds for up to 180 days. These problems can cripple high-risk businesses with small margins.

Limited Recourse

PayPal does not provide much recourse if they restrict or close your account. Their decision-making process is often vague, and recovering frozen funds can be a slow, painful process. This uncertainty makes the use of PayPal a poor option for merchants that rely on a constant cash flow.

Higher Effective Costs

Even if PayPal's rates look competitive, once you consider chargebacks, disputes, and holds, the overall cost of processing with PayPal may be more than specialized high-risk processors. The chargeback fees and the costs even for the dispute process with PayPal can easily add up for the high-risk merchant.

Restrictive Policies

PayPal's terms of service change quite regularly, and what is acceptable today may not be so tomorrow. Many high-risk businesses have had their accounts suspended after a policy change, even if they were in good standing before the change.

Customer Support

PayPal's customer support has come a long way in the last few years and is by no means bad; however, when it comes to dedicated high-risk processors, PayPal's customer support is simply not of the same caliber. When you have issues, and you want personal assistance, and want to stop the potential harm that could happen to your account, it can be challenging to get that assistance in a timely manner. Even when getting assistance, the time it takes to solve the issue is likely a lot longer than dedicated providers.

Making the Right Decision for Your Business

PayPal can be a viable temporary alternative for high-risk businesses. It can be a sufficient option for the high-risk business, especially when starting out or testing a new market. It should be rare that your only payment processing option is. PayPal works best as part of a broader diversified payment transaction, alongside dedicated high-risk merchant accounts.

Use your decision of PayPal if you are processing comparatively low volumes of transactions, you are in a moderately clear risk vertical, or you are using it as a backup payment method. However, if you are a business registering with larger volumes, operating in a heavily regulated industry, or require predictable cash flow, investing in a provider with a specialized high risk account, will typically offer you better service in the future.

Summary

PayPal provides convenience and name recognition but poses considerable cost and risk for high-risk businesses. PayPal's varied business policies, suspensions, freezes, and lack of genuine recourse for your business make it unfit as a #1 payment processor for most high-risk businesses. Instead, think of PayPal as part of a larger payment processor solution that includes dedicated Paypal high risk merchant account providers that will understand your industry and business needs and provide a more stable service.

As a final reminder, remember that the cheap option or the easiest option is not necessarily the best option when it comes to high-risk businesses. Building a proper payment processing framework at the beginning of your high-risk business will save you a lot of headaches later and a lot of money!