Why High Risk Industries are Avoided by Payment Processors

What Is A High Risk Industry?

A high-risk industry is a sector of business that banks categorize as riskier due to potential issues with their payment processing. These industries face concerns like high chargeback rates, MATCH listings, or fraud. Banks have special stipulations for boarding high-risk accounts.

High-risk industries require merchant accounts that allow for the increased liability banks undertake. The payment processing fees associated with these accounts come at a slight premium but are essential for sustainable payment solutions.

Which Industries Have High Business Risk?

Industries with high business risk include CBD, Vape, Kratom, Adult, Firearms, and more. They face regulatory concerns, age restrictions, and a changing legal environment that makes it risky for banks to underwrite. These businesses may have to adjust or remove certain products to comply with regulations.

List of High Risk Industries

Here's a partial list of high-risk industries:

• Adult Products
• Auto Warranties
• Business Consulting
• Continuity Billing
• Credit Repair
• Dating Websites
• Delta-8
• E-Cigarette
• Fantasy Sports
• Firearms
• Kratom
• Online Gaming
• Subscription Services
• Travel
• Vape

What Makes a Business High Risk?

Several factors can make a business high-risk:

Industry type (e.g., adult entertainment, online dating, medical marijuana)

Business model (e.g., future deliverables, subscription services)

High-priced products or services

Reputational risk

Processing history and volume

eCommerce with Future Deliverables

Many e-commerce businesses, especially those with subscription models or future deliverables, are considered high-risk due to the increased potential for chargebacks.

Reputational Risk

Businesses in industries like adult entertainment, CBD oil, or medical marijuana face reputational risk. Traditional payment processors often avoid these industries to protect their public image.

High-Priced Products or Services

Industries dealing with expensive purchases (e.g., automobile warranties, travel bookings) are often categorized as high-risk due to the increased potential for large chargebacks.

How Processing History Affects Merchant Accounts

Your processing history indicates how reliable and consistent your revenue is over time. These factors, along with your overall processing volume, show banks the level of risk associated with your business and your likelihood of processing future transactions successfully.

Conclusion

While high-risk businesses may struggle to find conventional payment processors, alternative solutions exist. Specialized payment processors like PayKings have experience working with high-risk industries and can help set up merchant accounts that allow these businesses to accept online payments effectively.