High-risk merchant accounts imply the level of risk an acquiring bank must take on if your application is accepted. As you can gather from the name, most banks are not exactly handing out stamps of approval to every application that comes their way. They want minimal risk because to financial institutions, risk means the likelihood of money lost.
Your application is submitted through the high-risk merchant account provider you choose, like DirectPayNet. Even though the provider makes the application approval process as simple and straight-forward as possible for you, there is still some heavy lifting to do from your side. Both you and your provider want your application to be as attractive as possible to minimize the apparent risk your company might bring to a bank and increase the odds of approval. Here are our top industry tips to ensure your merchant account application gets approved.
Our Top 5 Tips for Merchant Account Approval
We’ve narrowed down our top tips for high-risk merchant account approval to five to better serve every industry that falls under the high-risk category. When working with your chosen merchant services provider, you should receive a more industry-specific and personalized guide to filing the application as each business should be presented to show distinct strengths.
1. Know Your Industry
Do some homework about your own industry and its relation to payment processing. In the application, you’ll want to recognize what makes yours a high-risk business. Then, it’s more likely that you’ll convince the acquiring bank of your ability to minimize the risk you’re bringing to the table.
For example: businesses in the adult industry. What’s the current relationship between card networks, payment processors, and banks with adult content businesses? Take the OnlyFans debacle—has this changed the relationship between business and processor? You’ll likely want to prove how secure your customers’ personal information is as well as the consent of all models and actors on your site.
This is just one example of how in-depth minimizing risk can get. Do the research about your high-risk industry and use that knowledge in your merchant account application to ensure approval.
2. Be Upfront About Your Business
Beating around the bush won’t raise your chances of approval. You need to be upfront about what your business is, what you sell, and what your history is. If you have to lie about your business type to get debit card and credit card processing, then you’re either doing something less than legal or you’re hiding something. In either scenario, the teams reviewing your application will see right through it and immediately decline it.
Credit history plays a major role in your approval odds. To ensure the approval of your high-risk merchant account application, be upfront about your credit history and credit score. Credit card processors and banks will perform a credit check on you, so it’s not something you can hide. Either apply for a low/bad credit merchant account or speak with your provider about having no or bad credit history and what you can do about it. New merchants and startups suffer from low or no credit, so knowing your options and positioning your business to be as low-risk and reliable as possible is key. Credit applies to both business and personal credit. If you have no business credit, you can use your personal credit standing to supplement the application.
Previous payment processing is highly valued. If you have it, use it to your advantage. Transaction history shows banks how reliable your business is by presenting financial interactions between you and your customers. If you have a clean transcript with few returns, then that’s a golden ticket to ensuring your application approval.
High-risk businesses tend to handle a fair share of chargebacks, which is one of the criteria that defines “high-risk” in the financial world. If you have history with high chargeback percentages, you can supplement that with efforts to minimize and prevent future chargebacks from happening. Things like online payment gateway plugins that confirm customer identity to fraud scoring. The effort speaks to your professionalism and makes you, as a business owner, and your business more reputable.
3. Study Future Financial Trends
Another of the criteria that labels your business as high-risk is processing volume. Higher volumes don’t look good to banks. The reasoning goes both ways: because of high monthly sales volumes, businesses are labeled high risk.
On the surface, it seems a bit backwards—why would banks not want higher sales volumes if it means they also receive more money? The typical trend is that fraud comes with higher volumes, so banks run the risk of losing money if they approval a business with above-the-threshold volumes.
With that said, you should research financial trends for your own industry, both present and future. Banks would prefer if you processed sales within the general norm of your industry. If you can realistically provide estimates within that range for your own business, then that’s perfect. Otherwise, you need to be open to negotiations about pricing and terms (Step 4).
4. Be Willing to Accept the Terms
Even if terms aren’t completely in your favor, be willing to negotiate. Some businesses are subjected to reserves and higher fees or higher rates because of their risk level. Listen to the bank’s or payment processor’s reasoning and react accordingly.
Be open to paying slightly higher fees if it means approval (especially if you’ve been struggling). We know that doesn’t sound appealing and a lot of businesses want the lowest rate immediately upon activation. The fact is that these slightly higher rates might be the lowest possible that acquiring banks and card processors are willing to give you. In the future, you may be able to negotiate those rates down once you’ve gotten a few months of processing history under your belt.
Reserves or rolling reserves are a method of chargeback prevention. If you’ve received a response that requires your account to have a reserve, then it’s in your best interest to accept if everything else in the terms is tolerable. High-risk businesses are associated with higher chargeback ratios. To ensure your merchant account application gets approved, you should be willing to accept the restrictions due to the effects chargebacks have on your industry.
5. Find a Credit Card Payment Processor That Matches Your Needs
Payment providers and processors differ in their terms. If you’ve been struggling to get approved, then don’t be too picky. On the other hand, if you’re in good standing then certainly shop around.
Compare transaction fees, startup fees, processing fees, termination fees, discount rates, equipment offered, monthly minimums, reserve fees, chargeback fees, refund fees, and more. Look at where you do business—if your customers are mostly in Europe, then a processor that allows you to accept euros and international transactions is beneficial. Do you need point-of-sale (POS) devices and sales terminals? If you need e-commerce “materials” like an online shopping cart, virtual terminal, ACH processing, and customer tracking, then find a processor that will provide it all.
A payment processor that works with high-risk merchants and provides all or most of the materials you need with a fee structure you like will more than likely be willing to work with you. It’s a mutual arrangement, so if they run along the same lines as your own demands, then it’s a good match. And a good match ensures your high-risk merchant account application approval.
Be Prepared Before Contacting Merchant Service Providers
The pre-application process is just as important in the assurance that your merchant application is approved. Before approaching merchant service providers, you should at least have your documents organized.
Business information like address, contact information, processing history, credit card and bank statements, and the personal information for the one who’s name appears on the application should be put in a folder that’s ready to be submitted.
Be prepared to answer the who, what, when, where, and how of your business. Answers should be concise, no tiptoeing around.
You’ll most likely be asked about being on the TMF List or MATCH List, or if one of your previous merchant accounts has ever been terminated. Answer truthfully. Being on the list or having an account terminated isn’t a death sentence, but it does raise a few flags. Your chosen merchant account provider will help you in this situation.
A Reliable Merchant Account Provider Will Ensure Your Application Approval
Merchant service providers are your connection to the banks and processors that will ultimately lead to your business’ success. Develop a good relationship with yours to get the most help out of the application process and for the lifetime of your account. The payment processor you choose should grow alongside your business. Aim for one that can adjust as you expand and one that’s open to future negotiations.
DirectPayNet can connect you will the right processor for your business. We’ll assist you through the application process to ensure yours gets approved and provide assistance and protection for the lifetime of our relationship.