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What are High-Risk Payment Processors: Who Needs Them?


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Payment gateways have evolved into a crucial component of the internet payments sector over time. For those who are unaware, a payment gateway makes it possible to transfer money electronically between different bank accounts.

It functions as a go-between between a merchant and a payment processor. In essence, it is in charge of securely transferring encrypted user data from e-commerce sites to payment processors.

A business may easily integrate a payment gateway on its website because there are so many different payment gateways available.

Many payment gateways, however, refuse to operate with high-risk merchants. High-risk merchants typically only work with high-risk payment gateways.

What are high-risk payment gateways?

High-risk payment gateways are those that accept merchants that are regarded as being high-risk.

These high-risk payment gateways evaluate the risks associated with working with such businesses, including processing credit card payments, prior to onboarding them.

These companies are also referred to as high-risk merchants. These companies lines of business, credit card processing history, chargeback history, and other factors are examined as part of the risk assessment process.

What are high-risk merchants?

Payment gateways classify businesses as high-risk if their business model unavoidably attracts shady users. Companies that deal in cryptocurrencies or adult entertainment, for instance, are more vulnerable to external dangers than other types of businesses.

According to the concept of “high-risk,” there could be financial loss, the potential for money laundering, theft of user data, etc. Unexpected events are more likely to cause financial problems for these businesses.

Listed of instances for high-risk enterprises:

  • Online gaming
  • Debt collection
  • Adult entertainment
  • Online auction
  • Cryptocurrency
  • Online dating
  • Sexual wellness
  • Offshore businesses

Businesses that banks and payment gateways deem high-risk must pay a higher processing cost.

Difference between high-risk and low-risk merchants

To ascertain if a merchant is high-risk or low-risk, each payment gateway will have its own assessment standards. Despite the fact that each has its own set of criteria for identifying a high-risk merchant, there are some similarities between the two.

Some of them are as follows:

High-risk BusinessmanLow-risk Businessman
High rate of chargebacksLow rate of chargebacks
An abundance of cancellationsminimal order cancellations
The company has a low credit rating.The firm’s financial standing is very strong.
Operates in a risky sectorWorks in a low-risk sector
Dealing with dishonest clientsLow to zero fraudulent clients
High Risk Payment Processors

Challenges of high-risk merchants

When working with a payment gateway, businesses in high-risk industries must overcome numerous payment hurdles, including the following:

  • Higher processing fees
  • Rolling reserve
  • Difficult onboarding

1. Higher processing fees: 

Payment gateways have historically charged higher processing fees to high-risk merchants than to low-risk merchants. Payment gateways impose hefty fees on high-risk businesses as a means of making up for the risk involved in doing business with them.

2. Rolling reserve: 

Payment gateways require high-risk merchants to hold back a predetermined portion of their transaction volume as a rolling reserve. This is to make sure that banks have a mechanism to cover their losses if something goes wrong with the company.

3. Difficult onboarding:

Payment gateways and banks frequently find it challenging to cooperate with merchants who are deemed high-risk by these institutions. Before allowing such enterprises to use their services, payment gateways, and banks thoroughly investigate them. High-risk companies are subject to restrictions even after being accepted, which may have an impact on their earnings and liquidity.

How payment processors evaluate high-risk businesses

It’s challenging to identify particular factors that payment gateways consider when making a choice because each one has its own set of guidelines for evaluating the risk associated with a merchant.

Every payment gateway will do a few standard due diligence checks to evaluate these merchants.

Some of them are as follows:

  • Checking line of business
  • Scrutiny of business promoters
  • Limiting credit payment

1. Checking line of business: 

A business’s industry of operation is frequently a reliable indicator of whether it can be categorized as high-risk or not. Businesses that deal with gambling and casinos, conduct business overseas, or provide goods for sexual wellness are frequently viewed as high-risk merchants.

2. Scrutiny of business promoters:

The founders’ or promoters’ backgrounds might also shed information on a company’s risk considerations. Businesses whose founders have been charged with or found guilty of financial fraud typically aren’t accepted by banks or payment gateways.

3. Limiting credit payment: 

Many payment gateways initially disable credit card payments on a high-risk merchant’s website until they are confident in the validity of the company.


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