High-Risk Merchant Application Approval: Step-by-Step Guide
Any business that wants to accept credit and debit card payments needs a merchant account. Without one, you can’t accept payments.
In this blog post, we’ll guide you through the essential steps to increase your chances of merchant application approval.
START YOUR MERCHANT ACCOUNT APPLICATION
Checklist Before Your Application
Answer these questions before submitting your application.
Is your product or service clear and understandable?
“What are you selling?” Can you answer this question confidently and can someone visiting your website tell without question?
When applying for a merchant account, clearly convey what you’re selling on your website. Merchant account providers need to understand your product or service offerings without hesitation. If they can’t quickly grasp what you’re selling, they’ll likely decline your application automatically.
Unclear product or service descriptions can lead to confusion and mistrust among potential customers and merchant account providers. This lack of clarity may suggest that you’re trying to hide something or engage in fraudulent activities. As a result, your application will be rejected, and you’ll miss out on the opportunity to process card payments.
To make your offerings easily understandable, follow these tips:
- Use clear, concise language to describe your products or services
- Include high-quality images or videos that showcase your offerings
- Provide detailed descriptions, including features, benefits, and specifications
- Display pricing information prominently and transparently
- Organize your products or services into easily navigable categories
By implementing these strategies, you’ll demonstrate transparency and professionalism to both potential customers and merchant account application reviewers. This clarity will increase your chances of getting approved for a merchant account and help you build trust with your target audience.
What is the risk level of your product?
Determine your business’s risk level before applying for a merchant account. High-risk businesses face more challenges when seeking approval, as they are more likely to experience chargebacks, fraudulent transactions, or legal issues.
Factors that can make a business high-risk include:
- Operating in a highly regulated or controversial industry
- Selling products or services above $1000
- Dramatic fluctuations in sales or scaling too quickly
- Offering subscriptions, digital goods, CBD, crypto products, or selling internationally
- Being a new business without an established processing history
Examples of high-risk industries include adult entertainment, cannabis-related businesses, online gambling, and subscription-based services.
Apply to the right type of merchant service provider based on your business’s risk level. High-risk businesses should seek out providers that specialize in working with their specific industry or risk level (like DirectPayNet).
By accurately assessing your business’s risk level and applying to the appropriate merchant service provider, you’ll increase your chances of getting approved for a merchant account and setting your business up for success.
Is your website ready?
Before submitting your merchant account application, ensure your website is ready for review. A complete website is essential for demonstrating the legitimacy and professionalism of your business.
Key elements of a complete website include:
- Clear navigation and user-friendly design
- Detailed product or service descriptions
- High-quality images or videos showcasing your offerings
- Contact information and customer support details
- Terms of service and privacy policy
- A functional checkout page, even if your website isn’t live yet
Include a checkout page that showcases your payment process, even if it’s not fully functional. This allows the reviewer to understand how you plan to handle transactions and customer information. If your website isn’t public yet, provide the reviewer with a password or access link so they can thoroughly evaluate your site.
Submitting an application with an incomplete website can have severe consequences. Reviewers will likely decline your application if they can’t fully understand your business or see that your website is unprofessional or unfinished.
Are you on MATCH or TMF?
When applying for a merchant account, disclose if your business is on the MATCH (Member Alert to Control High-Risk Merchants) or TMF (Terminated Merchant File) lists. These lists serve as a database of high-risk merchants that have had their accounts terminated by acquiring banks or payment processors due to excessive chargebacks, fraudulent activities, or other violations.
Being on the MATCH or TMF list can significantly impact your ability to secure a new merchant account, as most providers will automatically decline your application.
Therefore, it’s important to be upfront about your inclusion on these lists when applying for a new account. Failing to disclose this information can lead to immediate termination of your account if the provider discovers it later, further damaging your reputation and ability to process payments.
To check if you’re on the MATCH or TMF list, contact your previous merchant account provider or acquiring bank and inquire about the reasons for your account termination. They can confirm whether they reported your business to the MATCH list and provide insights into the specific violations that led to the decision.
If you find yourself on the MATCH or TMF list, seek out high-risk merchant account providers that specialize in working with businesses in your situation. These providers have experience navigating the challenges associated with high-risk industries and are more likely to approve your application.
Have you filed for bankruptcy?
Be upfront about any past bankruptcies when applying for a merchant account. Merchant account providers view bankruptcies as a red flag, indicating financial instability and increased risk.
Failing to disclose past bankruptcies can lead to immediate rejection of your application or termination of your account if the provider discovers the omission later. This lack of transparency can damage your reputation and make it even more challenging to secure a merchant account in the future.
Some merchant account providers specialize in working with businesses that have a history of financial challenges, including bankruptcies. These providers understand the unique circumstances surrounding bankruptcies and are more willing to take on the associated risks.
To find providers that work with merchants who have declared bankruptcy, research high-risk merchant account providers and read their terms and conditions carefully. Look for providers that explicitly state their willingness to work with businesses that have a history of bankruptcy.
You may also consider reaching out to these providers directly to discuss your situation and gather more information about their requirements and processes.
Do you have a low credit score?
Consider your personal and business credit scores when applying for a merchant account. Merchant account providers use credit scores to assess the financial stability and risk level of your business. A low credit score may indicate poor financial management, increased risk of default, or a higher likelihood of chargebacks.
If you have a low personal or business credit score, merchant account providers may view your application as high-risk and be more hesitant to approve it.
However, having a low credit score doesn’t mean you can’t secure a merchant account. Some options are available for merchants with less-than-perfect credit:
- High-risk merchant account providers: These providers specialize in working with businesses that have low credit scores or other risk factors. They may offer more flexible underwriting criteria and be more willing to approve your application.
- Payment service providers (PSPs): PSPs like PayPal, Stripe, or Square often have more lenient requirements for credit scores. While they may not offer the same level of customization or support as traditional merchant account providers, they can be a good starting point for businesses with low credit scores.
- Secured merchant accounts: Some providers may offer secured merchant accounts, which require you to put down a security deposit to mitigate the risk associated with your low credit score. This deposit can be used to cover potential chargebacks or losses.
- Improving your credit score: If possible, take steps to improve your personal and business credit scores before applying for a merchant account. This may include paying down debts, disputing errors on your credit report, and maintaining a positive payment history.
By understanding the impact of your credit score on merchant account approval and exploring the options available for merchants with low scores, you can increase your chances of securing a merchant account and growing your business.
Are you low on funds in your bank account?
Ensure you have sufficient funds in your bank account when applying for a merchant account. Merchant service providers check your bank account balance to assess your financial stability and ability to cover potential chargebacks, refunds, and fees.
A healthy account balance demonstrates that you have the resources to manage your business’s financial obligations and mitigate risks associated with payment processing.
If your bank account balance is low, consider using temporary solutions like Stripe or PayPal to build your processing history. These payment service providers have more lenient requirements and can help you establish a track record of successful transactions.
By demonstrating a consistent volume of sales and a low chargeback rate, you can prove your business’s viability and improve your chances of approval for a traditional merchant account in the future.
Once you’ve built a strong processing history using temporary solutions, leverage this information when applying for a merchant account. Provide detailed records of your transaction volume, chargeback ratio, and overall financial health to showcase your business’s stability and low-risk profile.
This processing history can be a powerful tool in convincing merchant account providers to approve your application, even if your bank account balance is not as high as they typically require.
Security Implementations
What are your fraud detection capabilities?
Payment processors scrutinize your fraud prevention capabilities more than ever before. Traditional rule-based systems no longer cut it. You need AI-powered fraud detection to demonstrate you’re serious about protecting both your business and your customers.
Fraudsters now leverage AI themselves to conduct sophisticated attacks, creating fake identities and manipulating verification systems. Your fraud prevention tools need to match or exceed their own.
- Include documentation of your AI fraud detection systems in your application.
- Show processors the specific capabilities, detection rates, and how the system integrates with your payment flow.
Merchants with demonstrable AI fraud prevention experience higher approval rates and negotiate better processing terms.
How do you prevent chargebacks?
Chargeback ratios make or break high-risk merchant account applications. Processors set strict thresholds, typically 1% of total transactions. Applications from merchants who exceed these limits face automatic rejection.
Now, Visa launched a new chargeback program called VAMP. This program combines the previous fraud and dispute monitoring programs with stricter thresholds. Your application should demonstrate awareness of these programs and show how your prevention strategies keep you well below trigger levels.
- Include historical chargeback data if you have it.
- Show consistent ratios below 0.5% to give processors confidence in your operational controls.
- Implement transaction descriptor optimization and detail your descriptor strategy and show how you test it with sample transactions.
Are you PCI DSS 4.0 compliant?
PCI DSS 4.0 introduced critical client-side security requirements that didn’t exist in previous versions.
- Requirement 6.4.3 mandates that you maintain an inventory of all scripts running on your payment pages, tracking authorized versus unauthorized code.
- Requirement 11.6.1 requires continuous monitoring for unauthorized modifications to HTTP headers and payment page content.
These are mandatory security controls that processors verify during underwriting. Your application should document how you’ve implemented these controls. Include evidence of your script inventory system, monitoring tools for detecting unauthorized changes, and your response protocols when threats are detected.