Thanks to modern technology, the old barriers to building a business have crumbled by the wayside.
Today folks have an opportunity to build businesses – global businesses – with little more than a laptop, internet connection, and a marketable idea. The internet has changed everything about the way we build businesses, particularly when it comes to making it easier and more accessible than ever before to process payments over the web.
A quality merchant account is going to give you an opportunity to take credit card payments (and other forms of payment) over the web in ways that weren’t possible before. The ability to do so quickly, safely, and securely gives you an endless amount of opportunities to build the business of your dreams.
At the same time, however, not all merchant accounts are created equal.
In fact, there’s a world of difference between low-risk online merchant accounts and high-risk online merchant accounts, and it’s important that you understand exactly where your business – and the kinds of payments you anticipate processing – fall on the spectrum before you move forward.
Let’s dig a little deeper.
Understanding Low-Risk Versus High-Risk Definitions
Merchant accounts (including Forex merchant accounts) are going to assess their clients on an individual basis before they determine whether or not you fit the low risk profile or the high risk profile.
This definition is going to have a huge impact on the fees you’ll pay to process payments, your ability to process payments, and whether or not you have to adhere to extra regulatory rules and pressure put on this industry.
Low risk merchant accounts are going to pay lower fees to process payments, are going to have a lot more freedom in the way that they take advantage of merchant account services, and usually aren’t going to have their transactions looked at or scrutinized as closely at as those that fit the high risk criteria.
High risk merchants are going to have to pay higher fees, may have to jump through more hoops to get payment processors set up and running, and may have to deal with transaction thresholds, different payment schedules, and perhaps even a host of other regulatory pressures low risk merchants never have to consider or contend with.
Even worse news for high risk merchants is that they may not be able to move forward with traditional merchant account service providers just by the very nature of the business that they are running. Some companies are willing to extend themselves into these high risk areas by charging higher fees (that eat into your profit margins) – but that may or may not be tenable for the type of business you’re looking to run.
Working with High Risk Merchant Services
To a certain extent, every single individual business is a risky proposition – particularly when you look at the overall statistics for business success and failure in aggregate.
If businesses weren’t risky as a general rule we never need words like bankruptcy or liquidation to exist at all!
At the same time, certain types of businesses and certain industries have higher risk thresholds in certain areas. This is especially true in the fraud and chargeback potential areas, areas that not only threaten your business and its finances but also threaten the good standing of the merchant account that allows you to process payments with major financial services (like Visa and MasterCard, for example).
Merchant account services are acting as an intermediary between your business and these financial organizations. Fraudulent charges and higher chargeback rates impact their overall relationship with major credit cards and banking institutions, affect the liability that they have to carry, and may even negatively impact their overall license to conduct these kinds of financial services altogether.
This is why traditional merchant account services get so nervous around industries that include, but are not limited to:
- Adult Industries
- Credit Repair
- Debt Collection Industries
- ISP and Web Hosting Services
- MLM/Info Marketing Businesses
- Nutraceuticals and Supplements
- Online Gaming
- Software Downloads
Thankfully, your risk factors as a business operating in these industries is offset somewhat if you are running your business out of low risk regions around the world (like the United States, the European Union, Australia, Canada, Japan, South Korea, etc.) and are doing business almost entirely in a single currency.
Before you set up your business always a good idea to have a look at your merchant account opportunities before you dive right in.
You’ll want to know whether or not you are going to be classified as a low risk operator or a high risk business, and you’ll want to know how to minimize your liability, your fees, and the hopes you’ll have to jump through as a business owner processing payments through these platforms.