High-risk merchants thoroughly rely on credit card processing, but they should explore offering ACH and eCheck payments too for their US customers. These payment models are a commonly overlooked option. They are low-risk and can make credit card acquiring easier down the road. This method is a great alternative for startups with no financial history. Also, if you’re MATCH-listed (Member Alert to Control High-Risk) or have a terminated merchant account, this helps keep your business open while you discover a new way to accept credit cards.
High-risk businesses like precious metals, credit repair, nutraceutical or property management merchants are naturally excellent candidates for ACH processing. This is likely to be an afterthought if your prime focus is on getting a standard merchant account to accept credit card payments. But, based on our expertise you are missing out on a solid payment solution for willing buyers. ACH can raise your bottom line up to 10% with orders from customers that have limited access to credit.
Why an ACH and eCheck payments solution is best
In a previous blog post, we defined and distinguished the difference between ACH and eCheck processing. Here’s a quick recap:
Automated Clearing House (ACH) processing and eChecks are practically the same thing, with ACH being the network and eChecks being the actual payment you receive. ACH is the network of financial transactions that allow different banks to communicate with one another. With this network, funds can move freely to and from connected bank accounts. In simple terms, ACH processing is basically like paying with a check for online purchases. All the customer does is input their bank account info safely and securely into an order form at your checkout. For eChecks, you need a visual of the actual check being used to make the purchase.
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The beauty about ACH and eCheck payments is that you don’t need a merchant account. This is a completely independent service. The most massive benefit of using ACH processing is that it gives you more flexibility to reach a new type of customer.
Additionally, being in the precious metal, property management, credit repair or subscription merchant category typically makes your lucrative business attractive to fraudsters. You become prone to more expensive and excessive chargeback rates or customer disputes compared to conventional online sellers. Risks of this nature costs companies time and money – neither of which you want to waste.
Precious metals merchants
Precious metals merchants should definitely consider ACH and eCheck payments. Considering the recent aftermath of the stock market market plunge last Christmas Eve, this is timely. The fall of US stocks had an impact on consumer interest and the sale of gold bars, silver coins and bullions. People panicked due to the uncertainty of their investment’s future.
Credit card acquirers are worried about reputational risk and financial liability linked with precious metals dealers. Fraud is at the root of this. Notable incidents of exaggerated markups, the sale of fake coins and other products, plus trafficking and money laundering result in increased chargebacks. Criminal investigations and lawsuits can also be pursued.
Many payment solution providers are hesitant to issue a merchant account due to the considerable risk involved with this specific industry. However, with the right paperwork and business credentials, legitimate companies in this market succeed when using ACH. Merchants do not need to worry about the use of stolen credit cards. Once money is withdrawn securely and successfully from a customer’s account, concerns over theft and chargeback fraud are reduced. What’s more, ACH may allow ticket sizes larger than credit cards to be processed.
Credit repair experts and coaches
Credit repair is another common merchant category considered risky for payment providers. In today’s market, these financial services have exploded given that the average American is USD $38,000 in debt – up $1,000 from just a year ago. Because of this unfortunate number, many people are averse to wracking up more credit card debt.
The economic environment, rising disposable income and low unemployment rate have also proved unfavorable for the credit repair industry. Revenue for this sector declined at an annualized rate of 5.2% over the five years up to 2018. Statistics like these deliver a negative impact on credit repair. Again, reputation and financial liability lead credit card processors to flag your business as high risk.
Fortunately, for merchants in this category, ACH is an alternative option to process orders from potential clients once your product or service has been delivered. Whether it’s personal consulting services, an online course or live event, you can carefully establish processing history through this channel. Chargebacks and refunds are allowed up to seven days and do not incur similar consequences as with credit cards. If your ACH processing is ever shut down, finding another provider won’t be as challenging.
In DirectPayNet’s extensive experience, non-compliance with the federal Credit Repair Organization (CROA) and high incidents of fraud are ordinary reasons for payment processing rejection. Part of our specialty is aiding merchants with compliance. It is imperative not to present customers with false claims, unclear terms and conditions, and questionable services. If you want to accept credit cards but cannot get approved, exploring ACH as a first step might bring you closer to your goal.
Vitamins, supplements, skincare and other nutraceutical merchants
Companies that sell muscle gels, dietary supplements and weight loss teas are missing out on ACH payments. Some health merchants already face pushback when applying for processing due to high chargebacks. As nutraceuticals are untested and regulated to the extent of pharmaceutical drugs, getting approved to accept credit cards for products of this nature can be challenging. Therefore, an acquiring bank may not accept your business. But if you are seeking a solution or are even MATCH-listed, you are in luck! ACH payment processing remains a wonderful alternative to a merchant account.
If no processing history is available, then ACH is the way. It allows the ability to build credible processing history, which is a forward-thinking strategy for your business. Our team has helped merchants build up at least three months of good financials to show two things; that 1) they can scale, and 2) fraud rates can be kept low.
Through our experience in the payments industry we understand how to navigate merchant account applications. Nutraceutical merchants sometimes are unaware that processing history isn’t enough to be boarded. Compliance is a key factor. Additionally, pricing model is important. Free trial merchants are learning it is harder to secure a reliable payment solution. A straight-sale model or a subscription without a free trial is ideal to minimize fraud and help in getting a merchant account approved.
Gift, wine clubs and other subscription merchants
Beauty, gift and wine clubs are excellent candidates for ACH. Declined or cancelled recurring orders are one of the biggest hurdles for subscription-based companies. It’s easy to see how these types of merchant accounts can be terminated; fraud can run rampant if preventative measures aren’t applied early.
The ACH processing fees are affordable, and the frequency of chargebacks is lower for subscription merchants. Customers are asked more verification questions which lowers fraud. Having reduced fraud delivers a better financial outlook for your company when you are ready to find a credit card acquirer.
Credit card rebills often have a higher rate of declined transactions. ACH offers more flexibility with recurring check orders and lowers those decline rates. If a customer changes banking details, his new account is updated, which reduces the frequency of declined orders. Completed transactions of this nature transfer the money directly from the consumer’s account within 24-48 hours. Consequently, the risk of credit card chargebacks or customer disputes is reduced. Overall, you can expect to see higher conversions on subscriptions.
Property manager merchants
Despite the explosion of services like Airbnb, vacation rental companies are unpopular among some acquiring banks. Property management merchants can face the same fate. However, an ACH and eCheck payments option is a good payment solution for business owners unable to get approval for a credit card merchant account.
Property managers are considered high-risk due to the future fulfillment of their services. Rental payments of $1,000 and higher make merchant service providers nervous. This is due to substantial amounts of money being transacted, and the ease with which they can be reversed should a payee cancel or change their mind. Business models like this benefit highly from using ACH and eCheck payments compared to, or as a complement to Visa, MasterCard or American Express.
Property managers can rest easy knowing that transaction fees are lower than would typically be issued by credit card companies. Besides, if a good tenant is paying a recurring $2,000 per month for a property, there are fewer chances of that transaction being decline. With ACH the frequency of rejected orders due to insufficient funds is lower than credit cards, as customers are more conscious of potential NSF charges.
ACH and eCheck payments are one of the best alternatives to a merchant account
ACH and eCheck payments are used by many high-risk merchants to help reduce risk. This practical solution also helps merchants properly establish a good financial history when applying for other US-based processing options. The ACH payment method means heightened conversions and sales increases up to 10%, as you’re attracting potential customers unwilling to use a credit or debit card. If the money is in your customer’s bank account, you get paid! It’s as simple as that.
As we mentioned before, there are significantly lower fees, and it isn’t complicated for your prospective buyers. The transaction is digital. Therefore, there’s fewer bank trips, paper invoices and checks. It means everyone is more content.
Contact DirectPayNet to get started, and give your customers more options like ACH and eCheck payments.