For many businesses, the question, “is Stripe safe?” is a pressing one. While lauded as a secure and simple payment processor, there’s more to the story that online merchants need to know.

Stripe offers a suite of products that facilitate online and in-person payments. But that doesn’t mean it’s a merchant account provider NOR a payment processor. It’s what we call a 3rd-party processor, just like Shopify or WooCommerce or PayPal.

Open a real merchant account for your online business today.

What Is Stripe?

A 3rd-party payment processor like Stripe acts as an intermediary between the merchant, the customer, and the financial institutions involved in a transaction. Unlike traditional merchant account providers that require individualized bank accounts for each business, 3rd-party processors aggregate all transactions through a single master account.

This aggregation simplifies the onboarding process for merchants, enabling them to start accepting payments almost immediately without the cumbersome paperwork associated with traditional merchant accounts.

Here’s How It Works

1. 3rd-party processor securely captures and encrypts their payment information.
2. ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”3″>Upon approval, the 3rd-party processor (Stripe) routes the funds to its master account before ultimately disbursing them to the merchant’s account.

This seamless operation reduces the complexity for businesses, supporting various payment methods including credit and debit cards, digital wallets, and ACH transfers. With advanced fraud detection and stringent compliance measures, 3rd-party processors like Stripe ensure secure transactions, giving merchants reassurance that their business and customers are protected.

But there are major caveats to using a 3rd-party processor like Stripe.

Why Stripe Is NOT Safe

In reality, Stripe isn’t always the safe financial haven it’s often painted as, particularly for high-risk businesses. Close to 90% of online businesses may find Stripe to be a shaky foundation for their financial transactions. Despite offering seamless setup and an all-in-one platform, the potential pitfalls of using Stripe far outweigh the platform’s conveniences.

Numerous online merchants have experienced the abrupt closure of their Stripe accounts, leaving them without a means to process payments – all with zero warning or right to appeal. For many, this begs the question, does the simplicity of Stripe outweigh the operational risk it introduces?

The Wrong Type of Funnel

Stripe functions as a payment aggregator, lumping all its clients under a master merchant account. As such, your funds are funneled through Stripe’s main account before reaching your business’s account. This inherently makes Stripe volatile. Merchant accounts, on the other hand, provide your business with an exclusive account for your funds, ensuring greater stability and lowered risk exposure.

Stripe could pounce on your account at the first whiff of risk, categorizing your business as high-risk and shutting down your access IMMEDIATELY.

Here are some factors that can result in Stripe deeming you high-risk:

• Your industry or business model
• High chargeback or fraud rates
• Selling high-ticket items or recurring subscriptions
• Inconsistent or sporadic processing volumes
• Location of your business and customers
• Lack of processing history

Therefore, if you operate in a sector that Stripe deems high-risk, expect to be on thin ice with this “payment processor”. These sectors often include:

• ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”2″>digital goods
• ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”4″>subscription-based businesses
• ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”6″>affiliate marketing
• ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”8″>gaming
• ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”10″>nutraceuticals

Being classified as high-risk by Stripe does not necessarily mean your business is inherently risky. Unfortunately, Stripe’s risk management strategies often lead to the shutdown of legitimate businesses, causing severe financial distress and operational disruption.

If your business falls under Stripe’s high-risk category, it’s advisable to secure a high-risk merchant account with a provider that understands your industry’s risks and needs. High-risk merchant providers typically demonstrate more tolerance for risk and are dedicated to setting you up with a secure, long-lasting payment solution.

Open a dedicated high-risk merchant account.

When It’s Safe to Use Stripe

Despite its pitfalls, there are scenarios where Stripe can be a safe and effective payment processing solution. Businesses can strategically leverage Stripe in conjunction with other payment processors to mitigate risk and maximize their operational efficiency.

As a Backup Processor

One of the most prudent ways to utilize Stripe is as a backup processor. Should your primary payment processing service encounter issues, Stripe can ensure your business remains operational and continues to accept payments seamlessly. This provides a valuable safety net, allowing uninterrupted cash flow even during service disruptions.

For Specific Products or Charge Amounts

Stripe can also be beneficial for processing specific types of products or transaction amounts. For instance, businesses that primarily sell low-risk products or services can use Stripe to handle low-value transactions. By doing so, companies can minimize the risk of account closure or disruptions, as smaller transactions are often viewed as less risky by Stripe’s risk management system.

Targeting Specific Regions

Another safe strategy is to use Stripe for transactions in particular geographic regions where Stripe’s services are known to be stable and efficient. Understanding the regions where Stripe operates most effectively can help businesses tailor their payment processing setup to ensure minimal risk and maximum reliability.

For New Businesses

For startups or new businesses, Stripe offers an opportunity to quickly build up a payment processing history. However, caution is advised: maintaining low-risk, legitimate transactions is crucial during this phase to avoid triggering any adverse actions from Stripe. By responsibly managing transactions, new businesses can develop a credible payment history, which can be advantageous when applying for more robust payment processing solutions in the future.

What Should You Do?

So, what’s the most foolproof solution? Open a dedicated merchant account—one that truly supports your business and your merchant category. With a dedicated account, not only will your funds be safe and directly deposited to your unique account, but your business will also avoid sudden shutdowns or funds freeze.

At DirectPayNet, our team specializes in providing merchant accounts to high-risk businesses, ensuring reliable, long-term payment processing.

If you’re tired of asking, “Is Stripe safe?” and want to secure your business with a tried-and-tested payment processor, take the leap and open a high-risk merchant account with DirectPayNet today.

OPEN A HIGH-RISK MERCHANT ACCOUNT TODAY

Frequently Asked Questions about Stripe

1. Is Stripe suitable for online businesses?

Stripe is not typically suitable for high-risk businesses, which constitutes 90% of all online businesses (roughly). They have stringent risk management protocols that can result in sudden account closures or fund freezes for companies operating in sectors deemed high-risk such as dropshipping, digital goods, coaching, and others.

2. What happens if Stripe closes my account without warning?

Stripe has the authority to close accounts without prior warning, which can disrupt your operations significantly. In such cases, you will need to look for alternative payment processors that are more tolerant of risk and suited to your business model, such as high-risk merchant accounts.

3. Can I use Stripe as a backup processor?

Yes, using Stripe as a backup processor is a prudent strategy. If your primary payment processor encounters issues, Stripe can help ensure your business remains operational and continues to accept payments seamlessly, providing a critical safety net for uninterrupted cash flow.

4. Is Stripe safe for new businesses?

For startups or new businesses, Stripe can be a viable option to quickly build up a payment processing history. However, it’s important to maintain low-risk, legitimate transactions to avoid triggering adverse actions from Stripe.

5. Are there regions where Stripe operates more effectively?

Stripe’s performance and reliability can vary by geographic region. It’s advisable to research and understand where Stripe’s services are most stable and efficient, then tailor your payment processing strategy to leverage Stripe in those regions while using other processors where Stripe may be less reliable.

6. Can Stripe handle all types of transactions?

Stripe is best suited for handling low-risk, low-value transactions. For businesses dealing with high-value transactions or operating in high-risk sectors, it’s safer to use a dedicated high-risk merchant account to minimize the risk of disruptions and ensure stable payment processing.

7. How can I minimize the risk of Stripe closing my account?

To minimize the risk of account closure by Stripe, ensure that your transactions are low-risk and legitimate. Conduct thorough compliance checks and maintain transparent business practices. Additionally, consider using Stripe in combination with other payment processors to distribute risk more effectively.

8. What alternatives exist if my Stripe account is closed?

If Stripe closes your account, it’s crucial to have alternative payment processing options. High-risk merchant accounts provided by specialized providers like DirectPayNet can offer greater stability and tolerance for risk, ensuring your business remains operational without sudden disruptions.

For more detailed information or to find a payment processing solution tailored to your business needs, contact our team at DirectPayNet. Our experts are here to help you secure a reliable and long-term payment processing solution tailored to your industry.