In today’s society, most businesses require the capacity to process credit cards. Finding the high risk payment gateway providers is difficult for any company, but it’s considerably more difficult if you’re a high-risk organization. High-risk merchant accounts are helpful in this position. In this article, we will explain what a high-risk payment gateway is? And list down the list of high-risk industries.
What is a high-risk payment gateway?
A payment gateway is a service instrument that approves or rejects any transaction that comes into a business via an internet transaction. A high-risk payment gateway, for example, allows customers to enter their credit card information and then securely transmit sensitive financial data between the customer, the business, and the bank. There are two sorts of merchant account services available for credit card organizations: low-risk and high-risk payment gateways. The type you need is determined by the level of risk your firm faces. A low-risk merchant account is generally less expensive than a high-risk account since it has fewer liability protections if an error occurs during the payment process.
The Cardholder account details are encrypted using an SSL connection when checking out. The file is sent to the merchant’s gateway program via a secure link, which prevents outside threats. When a purchaser makes a payment using a payment gateway, their card information is encrypted and transferred to the bank for authorization via another secure SSL connection. A Visa or MasterCard authorization request gets sent to the card issuer. A transaction involving American Express and Discover (including JCB) is completed by that corporation, serving as the processor and issuer of the customer card.
The issuing bank is the one who decides whether the transaction is accepted or not. This response gets transmitted to the customer’s shopping cart for approval or refusal with a unique transaction ID. Merchants have access to all of their pending authorizations once the payment has been finalized.
High-Risk Industries List
Advocates/law firms/attorneys and any other business or individual involved in providing legal services: Financial institutions avoid dealing with this industry because they are aware that chargebacks and refunds will always be an issue for merchants. It would be challenging to communicate with the merchant in chargebacks, refunds, or penalties because merchants in this field are more familiar with local legislation and business laws. Before signing the Merchant Application form, people in this field ask many questions, and most financial institutions don’t want to amend the service terms specified in the contract.
Convenience Store: They also have a high-risk profile. It’s a little confusing because we hear about convenience businesses adopting point-of-sale machines nearly everywhere. The danger of robbery and the possibility of the company collapsing is why financial institutions avoid convenience stores. People worldwide have begun to buy online and in shopping malls that are significantly larger and offer a variety of products under one roof. This new tendency has made it extremely difficult for convenience stores to stay afloat in the market. A convenience shop owner can quickly lease the POS machine to another high-risk company.
Aircraft Dealers: This is a question that any newcomer to the payment processing sector will have. Why are airplane sales deemed to be high-risk? There is just one explanation for this: the possibility of a chargeback—the greater the ticket size, the greater the financial institution’s risk. Consider what would happen if a plane trader sold two jets for $1 million apiece. It will be disastrous for the financial institution if one of the sales results in a chargeback request. The payment processor is liable for ensuring that the vendor issues a refund to the buyer. The only entity in danger is the financial institution if the vendor does not return the money to the consumer.
Casinos: This industry is full of soft music and enjoyment, but it still struggles to find a payment processor. The foremost reason for this is that most governments are not in favor of this business model. Several cases have been reported of criminals spending stolen funds at casinos. The banking institution wants to focus on its core business by onboarding only those merchants who will bring them the most profit while posing the least risk.
Travel Agencies For Travel Websites: Since there is a chance that the customer would cancel the ticket and want a refund, this industry is deemed high risk. The acquiring banks or PSPs go to great lengths to find the proper merchant for this industry type. The days of creating travel websites and obtaining merchant accounts are long gone. In today’s market, the majority of PSPs and purchasing banks will turn down this industry. If they say yes, they will impose limitations such as the service must be delivered within two months, with a maximum of three months. They’ll also set aside 10% to 20% as a rolling reserve, and they’ll safeguard themselves by deferring the payoff for 7 to 14 days.
Call Centres: Customers are persuaded to make purchases by call center agents. To promote sales, they also offer misleading pledges and commitments to customers. This type of action attracts a lot of money. In the payment processing industry, returns are frowned upon.
Websites And Auction Services: The risk of onboarding a Merchant in this category is to claim the product after the auction. Anti-social groups may also employ this business model because the product’s cost price never gets revealed. People can sell the merchandise for any price they want. You can use this business strategy to launder money.
Agricultural Companies/Farming Companies: Climate change has a significant impact on this industry. Due to excessive rains, drought, and low yield, this industry has suffered significant losses. The Financial Institutions attempt to keep away from this market because a farmer can make a lot of money and lose it.
Financial Firms/Accountants/Chartered Accountants: Due to the greater ticket size, many merchant account providers for payment service providers dislike supplying payment processing solutions to this market. The majority of accounting businesses in this industry deal with extremely high-value transactions. Financial institutions like merchants provide fewer services for fewer tickets and have a low return/chargeback ratio.
If merchants understand their company goals, selecting and integrating the correct payment gateway provider isn’t complicated or expensive. They may have an immediate and beneficial impact on their brand’s customer experience and profits if they execute it correctly. All they have to do is speculate about the considerations when selecting and deploying a payment gateway service. Another effective case practice is hiring a specialist and delegating all payment gateway integration technical parts to them.