What are the common challenges experienced using High Risk Merchant Account?

High risk merchant accounts are essential solutions for providers in industries that financial firms consider high-risk, such as entertainment, forex trading, and subscription services. While high risk merchant account allow companies to accept payments online, there are specific challenges that they face. Understanding what these challenges are is important as it will allow them to help mitigate risk, improve cash flow and manage stability.

1. High Transaction Fees

When it comes to high risk merchant account, one of the biggest issue is the costs of higher transaction fees as discussed compared to conventional merchant accounts. Because of the greater risk of chargebacks and fraud, payment processors eliminate their own risk exposure and instead increase transaction fees, monthly prices, and setup fees too find comfort in warranted risk. Eventually, as these fees are accumulated they can really impact a company's profit margin, especially if you are a small or early stage company.

2. Rolling Reserves

High risk merchants will likely have rolling reserves with their processor. A rolling reserve is when a processor holds back a percentage of their monthly volume for a specific amount of time. The purpose of the reserve is to give the processor an additional protection mechanism against refunds, chargebacks, etc. This is of benefit to the processor but not so much to businesses’ working capital as these funds will be frozen when they could be dedicated to operation vs when funds are routinely held back in the reserve – this could affect your ability to grow or simply your ability to run a business.

3. More Account Reviews and Holds

High risk merchant accounts are reviewed by processors versus less risky accounts. More frequent reviews could lead to account holds - this could happen due to a sudden rise in activity or volume, or higher than accepted chargeback ratios. These hold scenarios can cause disruption to cash flow and lessen customer trust.

4. Chargeback Management

Chargeback ratios are the part of the acquiring relationship you need to take extra seriously. Excessive chargebacks can cause your account to be "kicked out." Clearly businesses should and will address fraudulent opportunities with implementation of things like, fraud prevention practices, customer service initiatives, etc. but will still produce chargebacks regardless whether or not fraud was involved - ex; confused customer, misunderstanding about subscription renewals impacting, active, or remain complaints or contested satisfaction events.

5. Limited Processor Options

Not all payment processors are willing to work with high-risk businesses, and because of this there are fewer providers - and this severely restricts your options and leverage. In many situations, a business may only ever have the option to accept whatever is offered on the terms of processing to even have the ability to process.

6. Reputation and Trust Issues

Having a high-risk label can directly impact a business's credibility. Some consumers may be apprehensive to do business with companies that utilize a lesser-known payment gateway and if the checkout experience is not a seamless experience, and unbranded, this too may cause some discomfort.

Conclusion

A high risk merchant account is required for a business operating in a regulated or volatile industry such as Trinity Consultings which is proactive - working with reputable providers, managing chargebacks and being compliant , can assist in avoiding many of these common pain points and challenges to keep things running smoothly.