What Industries Are Considered High Risk - An Explanation

What Industries Are Considered High Risk - An Explanation

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Online Merchants may never think their business is risky. The merchant is offering a regular item or service, following every rule and regulation then why it might be viewed as risky?

Usually, a merchant discovers that his area of business is considered a medium or high risk business when he tries to set up a payment gateway and is rejected in the first go as he is required of a high risk merchant account. It can come as a significant surprise to many of them.

Shockingly, a few industries are more inclined to refunds and chargebacks than others. This implies a great deal of money which further ruins the records of the account. And therefore, it is not good for either merchant or the payment service provider. Clearly, both the parties would favor the money going one way– into the account!

The merchant is most likely not astounded to hear that specific industry are viewed as high risk and improbable to discover a bank or payment service provider. The merchant in certain cases is certain to possess risk if he’s offering an item or service which isn’t legal in all states.

RECURRING PAYMENTS This would seem entirely basic service nowadays, particularly with a considerable programming going from a single payment model to the Software as a Service (SAAS), which requires a membership/subscription. Obviously having money removed from a client’s record every month can lead to unpleasant surprises.

There are contracts which are renewable by tacit consent. Something which a consumer might not realize while signing. All these contribute to a very high number of chargebacks for recurring payments.

Another factor is the implementation delay. While a customer is paying for the subscription every month for a service, he/she will have time until the last day of the month to request a chargeback.

Consistently this will extend the period, which implies that chargebacks could come at any time far into the future.

TICKETS AND TRAVEL SERVICES Mostly the tickets for an event, concert or travel are purchased ahead of time. It could be a week, a month or even a year before leading to an extended period for conceivable chargebacks and refunds. This delay is one reason behind the incorporation in the high risk category.

Another reason why tickets are viewed as high risk is that of the hackers and fraudsters of cards such as VISA and MasterCard. Fraudsters purchase tickets with stolen cards and sell them at a discounted price. A recent case of Australian tourist website is the best example of such frauds.

And when the actual cardholders find out about the fraud and that they haven’t made such purchase, they request the chargeback.

DATING WEBSITES Generation X is not only full of love but is obsessed with an online world, and thus indulge themselves in online love. A few years ago people were reticent to mention that they used such sites but now it has become commonplace to talk about one’s experiences on websites and apps such as Tinder, OkCupid or CoffeMeetsBagel. Dating websites give a profitable service bringing people closer. So, why is this business looked upon as a High Risk Business?

One of the common reasons for a chargeback is when people don’t discover what they were searching for or are baffled by the results. Another issue may arise when an individual is already in a relationship but is seeking an extramarital affair. When caught or looked at the statements with such charges, the partner unknowingly considers them as a deceitful charge and request a chargeback from the bank.

If you are an online merchant and selling a product or service with a high probability of refunds and chargebacks or with a long accomplishment duration you may need to look around a little to find the perfect payment solution for you. If you’re unsure whether your business is low risk, medium risk or high risk you can contact us at Merchant Stronghold and we will find the best payment solution for you.

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