Why High Risk Industries are Avoided by Payment Processors

May 15, 2023

high risk industries and merchant accounts

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 when it comes to having 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 or 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.

Whether it’s the changing legal landscape or banking compliances, high business risk means your company has to face certain obstacles. It’s critical to create an online store within the boundaries of your payment processor’s Terms and Conditions. Although it may seem strict, these stipulations help you maintain the ability to process credit card payments through your store.

List of High Risk Industries

Here is a list of high risk industries. Each have a one or a combination of risk levels that qualify their industry. For a complete list of merchants in this category see our PayKings industries page.

  • Adult Products
  • Adult Videos
  • Antique Collecting
  • Auto Warranties
  • Bad Credit
  • Business Consulting
  • Coins and Collectables
  • Continuity Billing
  • Credit Monitoring
  • Credit Repair
  • Dating Websites
  • Debt Collection
  • Delta-8
  • E-Cigarrette
  • Fantasy Sports
  • Firearms
  • Gambling
  • Kratom
  • Nutraceuticals
  • Online Gaming
  • Pawn Shops
  • Skin Care
  • Subscription
  • Tobaccos – Cigars & Smoking
  • Travel
  • Vape

What makes a business high risk?

The risk can come from the company’s history or industry they’re in. High priced ticket sellers, travel agencies, adult entertainment, online dating websites, medical marijuana practices, subscription boxes, and vape retailers are all high risk industries.

Ultimately, banks and low-risk independent sales organizations (ISOs) avoid associating themselves with these and other high risk business types. This makes payment processing a challenge for so many businesses in a variety of industries.

Especially businesses that have “reputational” risk. Reputational risk could mean the business has had issues in the past. But another way banks view it is by looking at their own reputation for associating with an industry. For example some people may not want to use a bank that supports firearms or CBD products.

How does my processing history affect my merchant account?

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. It also tells them your likelihood of processing future transactions.

Although these high risk industries might be just as valid and have the financial records to prove their viability and profitability, they are still very likely to experience rejection in seeking a payment processor. The same is true for many different businesses you might not think would be considered in high risk industries.

eCommerce with Future Deliverables

Obviously, many e-commerce websites operate on the grounds of future deliverables. While payments can be provided with such relative ease online, and with the desired convenience of making purchases from home or your phone, products or services from you can be delivered at a later date post receiving payment.

Online dating services and subscription box companies are prime examples of businesses that require a high risk merchant account. While there are lots of secure e-commerce businesses with stellar reputations, these high risk businesses are still prone to excessive chargebacks.

Additionally, if an e-commerce website has a yearly membership service or a billing model that take payments on a recurring schedule, the danger of chargebacks only increases. In turn, high chargebacks  can translate to dropped accounts.

Reputational RiskHigh Risk Industries with Reputational Risk:

Reputational risk is another example component of high risk indutries. For example, adult entertainment, CBD oil retailers, and people prone to experience information theft, are categorized as high risk due to being a reputational risk.

And let’s not neglect the medical marijuana business. Although marijuana is legal in some states, traditional payment processors have regulations against it. Many won’t align themselves with this relatively new sector. In turn, companies specializing in medicinal marijuana have to find payment processors, like PayKings that specialize in high risk merchant accounts and who have experience and expertise in your industry.

When a company presents reputational risks, conventional suppliers are reluctant to forge a business relationship together. It’s not surprising to learn that banks and low-risk independent sales organizations (ISOs) place an emphasis on their public image. As a result, they don’t want to risk tarnishing it, nor negatively influence how potential or prospective customers see them.

High risk businesses are pose too much risk for traditional banks who aren’t willing or equipped to offer high risk merchant accounts.

Businesses Dealing with High Priced Products or Services:

Automobile warranties and companies in the airline and travel booking industries fall under the high risk category as well. Due to the fact, their products are expensive purchases. High ticket sales mixed with a higher likelihood of returns (let’s say from a cancelled vacation) makes reverse transactions more likely.

The higher the expenses paid out to any specific industry, the larger the opportunity of chargebacks there are. Basically, if you’re a dealership or airline who falls on some tough times, the absence of sales will signal poor financial performance to conventional payment processors. As such, they tend to levy hidden and extra fees on you and this helps them deal with the fluctuations in sales.

Though a variety of companies in the high risk category may struggle to find a conventional payment processor, alternative solutions do exist. Moreover, you will find payment processors with experience working alongside businesses in this category, and PayKings is one of them – we can help set you up with a high risk merchant account and get your business accepting online payments in no time at all.

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Kyle Hall CEO

May 15, 2023 | High Risk Merchant Account | Kyle Hall