Payment Aggregators: Why Services Like Stripe Are A Ticking Time Bomb!
Stripe, PayPal and Square are all payment aggregators. But, they can be a ticking time bomb for your business!

Payment Aggregators: Why Services Like Stripe Are A Ticking Time Bomb!


Stripe, PayPal and Square are all payment aggregators. Some merchants in high-risk verticals they think are signing up to a simple solution. They couldn’t be more wrong. Payment aggregators can be a ticking time bomb!

Many merchants sign up to these services, but then risk account termination. Worse, they use aggregators like PayPal, Stripe and other services for too long. They process orders for months instead of getting their own dedicated merchant account.

This seems like a clever idea at first. But, in an instant, big risk from using payment aggregators and similar services begins to surface.

So, what attracts merchants to choose this option in the first place?


What is a payment aggregator?

A payment aggregator or third-party processor allows merchants to accept credit card payments without setting up their own merchant account.

The aggregator can be PayPal, Square, Stripe or some lesser-known providers. They operate a master merchant account and add each merchant applying for processing as a sub-seller within the same account. The simple and fast setup is a big advantage. But, with every advantage comes a downside.

Here are a few things you’re missing out by using an aggregator:

  • All your shopping cart data is given away. Therefore, you don’t know when and where a customer is abandoning your checkout.
  • You cannot host your own order page. This means you have less control of what customers see at checkout. You may have to redirect them to another site to collect payment, which can lead to cart abandonment and a lost sale!
  • If your chargebacks or refunds are a little high, you risk losing your account. A payment aggregator must manage their chargebacks and risk among all merchants. You may get shut down as you’re adding more risk that you should on their merchant account, even though you are within chargeback limits.
  • Your account may get frozen or suspended with funds held with little or no notice. It can take days or months before you get your money and your business may be at a standstill while you wait.


Payment aggregators have some advantages for high-risk merchants

There are several problems that come with using and aggregated account. And, many merchants choose this option regardless. This is for a few different reasons.

First off, the application process is fast and simple. This is attractive compared to merchant account applications that can take a week.

Next, approval is also much faster. In some cases, merchants can be up and running with credit card payment processing in as little as 24 hours.

Finally, the fee structure is simple and easy to understand. Merchants who sign up are aware from the start what the processing fees relating to payments will be. But unfortunately, that’s where the advantages end.

Did you know that last year credit card purchases made up 34% of all e-commerce payments? This is a sign that accepting Visa and MasterCard is a no-brainer when it comes to buying online. It’s more widespread than buying using cryptocurrencies or other alternative payment methods such as ACH and e-check. You can understand the desperation behind pursuing payment aggregators.


More disadvantages to payment aggregators than first meets the eye

While fee structures are simple to understand, it doesn’t mean they are good. In fact, they are very high compared to a traditional merchant account. Payment aggregators such as Stripe have more reasonable fees. Other aggregators charge more. This is due to accepting more high-risk companies in categories like adult, dating and nutraceutical. Sometimes they charge upwards of 10-12%, plus extra fees and reserves.

High-risk merchants gain access to an aggregator’s merchant account. They are then grouped together, with several other businesses sharing one merchant account. Thus, some lesser known payment aggregators that work with high risk merchants allow huge risks.

As a result, they charge overpriced fees to compensate and because they know you’re desperate. Fixed fees can start to eat into profit margins when processing volumes increase. Merchants in the adult space unknowingly sign up as they’re not aware that there are plenty of options for obtaining their own merchant account.

But this practice has many other downsides.


Payment aggregators have low tolerance for high risk

The tolerance for suspicious consumer behavior or irregular transactions is much lower. High-risk merchants are subjected to holds, freezes, and sudden terminations.

Worse, sub-merchants will be linked to high chargebacks generated from completely different merchants sharing the account!

Using this type of service is one of the fastest ways to land your business on the dreaded MATCH list. Some acquiring banks and other payment providers even consider merchant account sharing a violation. If you’re not working with a reputable aggregator, you may find yourself in trouble with Visa and other card associations.

You as the sub-merchant are also dependent on the payment aggregator to pay you. In some cases, they have famously failed to do so. In some cases huge lawsuits have been launched in an effort to recoup the monies owed.

Additionally, an increasing amount of payment facilitators are springing up. Much like payment aggregators, a payment facilitator allows any business with a master MID account to add companies as a sub-merchant.

However, an automated underwriting tool vets and approves applications for these types of accounts. Therefore, the chances of rogue merchants getting approved are much higher. And those approved merchants would share your account. Potentially wreaking havoc on your processing history and your business.

As you can see, using payment aggregators can quickly become a recipe for disaster!


Are payments aggregators holding back your business? Are you curious to learn more about the benefits of having your own merchant account? Click here to find out how to transition away from high processing fees.


An independent merchant account is your best solution

Your own dedicated merchant account is the best solution, hands down!

First, you have sole ownership and responsibility for your own account. You are responsible for your own chargebacks, fraud, and any other potential causes for reputational damage. The actions of other merchants do not affect the fate of your company.

Second, the payment processing fees are cheaper overall. In most instances they are tailored to your company. You can scale as your company grows. Rather than being stuck with low annual transaction volumes.

Third, you control your checkout page and the data from your checkout page is yours! You can add google analytics to learn where your customers are getting stuck or abandoning your cart. This is invaluable information you’re losing by using a payment aggregator whether it is a high-risk one or a low risk option such as Stripe or PayPal.


Independent merchant accounts give you more control over your data

Platforms directly from merchant account providers gather all kinds of data to build patterns of behavior. You gain real-time access to this kind of reporting.

The right service provider can alert you to any suspicious or unusual activity on your account. A welcome relief to those tired of having their account frozen without warning. Furthermore, merchant accounts operate with little to no interruption. Funds usually arrive within a couple of days.

Merchant accounts open up new payment opportunities like direct deposit networks. Also, if an account is located in the EU, merchants have the ability to trade in multiple currencies.

However, these benefits come with a deliberately high barrier to entry. Depending on the market, whole industries have been blacklisted (e.g. escort services). If you’re operating within industries with poor reputations, you’ll need to stand out as an exemplary merchant.

For instance, poorly packaged nootropics with a website filled with typos are unlikely to gain acceptance. Support and/or technical services with Asia-based call centers are also frequently declined.


Payment aggregators only get you so far

High-risk merchants struggle to gain access to credit card processing. Thus, a payment aggregator seems like a great option. But, these types of services have dangerous practices.

Aggregators can keep funds and reserves without reason for excessive periods. They often shut down accounts without warning, leaving you open to violations that land you in hot water with acquiring banks.

A merchant account approval may not happen in 24 hours. But, the benefits far outweigh any negative consequences.

Your own individual merchant account provides:

  • Competitive rates;
  • Lower fees;
  • Customized checkout page;
  • Access to your checkout page data;
  • Tailored merchant support;
  • Faster transaction processing;
  • Regular payments to help with operations;
  • Access to transactional data that can help in identifying errors and cause of declined transactions;
  • Access to real-time reports; and
  • High-tech anti-fraud tools.


Securing a merchant account is a must for any high-risk merchant

Is using a payment aggregator squeezing the life out of your business? Not sure how to take advantage of the vast positive aspects to having your own merchant account?

Our team has 10 years of experience securing merchant accounts for business is high-risk verticals. We work with all industries and categories be it an adult or dating website, nootropics capsules, supplement creams or high-ticket offers for business events or retail.

We commit to finding you a payment solution and keep it.


Talk to our team today to find out how we can make your dream of securing a merchant account a reality.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.