In this article, we will look at the main differences between high and low risk merchant accounts, as well as determine what role chargebacks play in determining risk.
KEY FEATURES OF LOW RISK MERCHANT:
- Your average monthly sales are less than $ 20,000.
- Your average credit card transaction is less than $ 500.
- You only accept one currency.
- Your payment page is hosted by a payment service provider.
- The products you sell are: low risk books, stationery, household items, or clothing.
- Your country is considered a low risk country – USA, Canada, Western or Northern Europe, Japan or Australia.
- You are using 3D Secure to prevent fraud.
- Your returns and payments are kept to a minimum.
HIGH RISK MERCHANT CHARACTERISTICS:
- You are listed on MATCH due to excessive chargebacks.
- You are a new merchant with a small history of credit card transactions.
- You sell goods or services to customers in countries with high levels of fraud (anywhere outside the United States, Canada, Western or Northern Europe, Japan, or Australia).
- You accept multiple currencies.
- You have a bad credit history.
- Your average monthly sales exceed $ 20,000.
- Your average credit card transaction is over $ 500.
- Your sales are seasonal or recurring.
- You are in an industry that is usually associated with high returns or chargebacks.
HOW EQUIPERS ASSESS THE RISK OF MERCHANTS
Risk identification is a subjective process. When assessing the risk of a merchant account, many factors are taken into account. Many acquirers view the following products and services as high risk:
- Casino, gambling or games
- IP telephony / telemarketing
- Pharmaceuticals / pharmacies
- All products or services related to adult content or activities
- Hotel accommodation
- Dating service
- Magazine subscriptions
- Software, hardware, or other downloads with potential copyright issues
- Authorized collectibles
- Financial / investment services
- Counterfeit goods
Acquirers will consider each business on a case-by-case basis. Not all of the aforementioned industries will be considered high risks for everyone; likewise, many other businesses not listed above may be considered risky.
In general, acquirers use the following criteria to evaluate a merchant’s services or offerings:
- Will this business attract unwanted advertising to the bank because of the services or products it provides?
- Will there be potential legal and financial obligations due to the services or products offered?
- Will excessive chargebacks be a problem?
As such, there are many factors that can cause a business to be considered a high risk, but refunds should not be the only one.
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