When operating your own business, you will encounter all kinds of obstacles and challenges along the way. Some will be expected, so you’ll weather them with relative ease, whereas others may come as a bit more of a surprise to you. Being deemed a “high-risk” merchant account is certainly one of those obstacles that can pop up, and can often come as a surprise to you as the business owner.

Your business can end up with this designation due to the amount of online transactions you are processing (the higher the volume, the more likely you will be flagged as high risk), where your target market is located, even the fact that your business is young (a start-up operation), the business's credit score, the history of returns in your business, and even the history of chargebacks (refunds to the customer's card).

Once you get the title of a high-risk merchant account, then you can expect to see a bit of an elevation in the pay-out and pricing structure on your merchant account. The merchant account provider sees you as a risk, so they want to be sure they are covered. Some providers will even refuse to work with high risk merchants, so it can be a challenge to find one.

This brings us to the high-risk payment gateway and why it may be necessary and make sense for your business. Let’s take a closer look.

Take a Look at the Reasoning Behind the Designation

Before you go ahead and accept that you are a high-risk merchant account, it's important to understand what the criteria was and how it applied to you specifically.

The determining factors will vary from one provider to the next, but there are some general things they will look for. Things such as misleading your clients in particular when it comes to recurring transactions; a large amount of fraud or chargebacks to customer's cards; services and products that are considered risky (fad items are a great example); a large volume of online transactions; a long lead time meaning you don't have the product to fill orders when the sale is made; and your credit rating of course.

Any one or combination of these criteria can certainly land you in the category of a high risk payment gateway. MerchantScout, a well-known merchant account service provider suggests that when going through the process of determining whether you are high risk or not, it's a good idea to prepare your processing history. This means gathering all your financial statements for the company and then addressing why it is that your previous account was in fact cancelled. The service provider will want to take an in-depth look at how you conduct your online sales, your policies, procedures, and practices.

MerchantScout has more than a decade’s worth of knowledge and experience when it comes to online debit and credit card processing. It specialises in customised solutions, which is ideal for those merchants who are classified as high risk.

Be Prepared and Have Multiple Accounts

Another way you may want to go about things is to have a few different merchant accounts. What this does is ensure you always have one account operating, regardless of whether one gets shut down or hits the monthly limit. Many providers will allow for multiple accounts with them so you don't even have to look around for multiple ones. This makes it fast and easy for you.

Look for Ways You Can Reduce Chargebacks and Refunds

A big red flag for merchant service providers is the number of chargebacks and refunds, as mentioned above. If you have a particularly high amount, not only will this be a red flag for the providers, but it should signal a red flag for you - the business. This is an area that would benefit from your attention as you work to find a solution to the high rate of chargebacks. What is causing so many refunds and/or chargebacks? What can you do to decrease them? Is fraud to blame?

It would also be a good idea to use a chargeback alert system. What this does is warn you about a chargeback so that you've got a bit of time in between to give the full refund before it turns into the chargeback and shows up in your history.

Another suggestion is to start following up sales with phone calls or emails asking customers if they are happy and satisfied with the products/services. Ideally you want to limit the returns, so customer satisfaction is key. If you can bring down the number of chargebacks you have, then that may even be enough to remove that high-risk merchant designation you have.

Take the Time to Examine Things Fully

Deciding whether or not you need a high-risk payment gateway is something that requires a much closer look, and possibly some advice from the professionals.