Many merchants, and even agents, have a difficult time distinguishing what is high riskA merchant that is considered a high risk based upon the credit, product, method, ticket size or volume. Examples of high risk merchants are telemarketing, adult and travel related industries., and what constitutes low risk. So in order to tell fairly easily which category a business falls under, here are the basic parameters of high riskA merchant that is considered a high risk based upon the credit, product, method, ticket size or volume. Examples of high risk merchants are telemarketing, adult and travel related industries..
1. Business type
The first parameter of high risk is the business type. The Card Brands, government municipalities, and banks have developed criteria for outlining which business types are prohibited, restricted, and low risk. These high risk/restricted merchants can include, but are not limited to, auctions, bail bondsmen, travel-related businesses, affiliate marketing, nutraceuticals, psychics, and electronic cigarettes. These businesses are considered high risk based upon their business model, the product they sell, or typical processing patterns from the business type.
2. Business model.
High riskA merchant that is considered a high risk based upon the credit, product, method, ticket size or volume. Examples of high risk merchants are telemarketing, adult and travel related industries. businesses are often labeled so because of their business model, which can include extended warrantees, future delivery, mail/telephone purchase orders, and eCommerce transactions. Any business that conducts a significant amount of card-not-presentA merchant environment where the cardholder (and the card) is not physically present at the time of purchase. Typical card-not-present transactions take place in businesses focused on mail order/telephone order, business-to-business, and Internet-based transactions.... transactions is considered high riskA merchant that is considered a high risk based upon the credit, product, method, ticket size or volume. Examples of high risk merchants are telemarketing, adult and travel related industries..
3. Product type.
Oftentimes, the business is high riskA merchant that is considered a high risk based upon the credit, product, method, ticket size or volume. Examples of high risk merchants are telemarketing, adult and travel related industries. based on the product sold. Products could simply be high ticket, which runs the risk for chargebacks, returns, and fraud. Products like tobacco, firearms, medical marijuana, and anything sexually oriented have been deemed high riskA merchant that is considered a high risk based upon the credit, product, method, ticket size or volume. Examples of high risk merchants are telemarketing, adult and travel related industries. by the government due to the age and geographic restrictions placed upon these products.
4. Processing history.
Oftentimes, despite the product, business model, and type, a business is considered high riskA merchant that is considered a high risk based upon the credit, product, method, ticket size or volume. Examples of high risk merchants are telemarketing, adult and travel related industries. due to the processing history. High chargebackThe act of reversing a sale made by the merchant. This can happen for many reasons including procedural and fraud. The process usually begins with a dispute from the cardholder. and return ratio, a high average ticketThe average amount of each sale made by a merchant. and annual volume, and a low credit score can push a business from what is normally considered low risk to a higher risk threshold.
Check out Part 2 of our high and low risk payment processing article.