We’ve seen it so many times. On almost a weekly basis, we have clients emailing us desperate pleas such as “Help! My Stripe account was suspended! What Do I Do Now?!” Every day that passes sees another online business being flipped upside down by suddenly losing its payment processing abilities.
Startups worldwide benefit from the easy setup of Stripe, build their online businesses up to noteworthy five-figure-per-month revenues, and then BANG! They wake up one morning to find out that they can’t process payments. A successful business is brought to a grinding halt within just a few seconds without so much as an explanation.
Sound like a nightmare scenario to you? Well, sometimes it gets even worse! Sometimes you can have your company MATCH-listed too, making securing a new merchant account almost impossible.
But don’t worry, if you’re currently running what’s considered a high-risk business with Stripe processing your payments, you can act now to prevent yourself from sleepwalking into this potentially disastrous scenario.
We’ll walk you through what that back-up plan looks like. But first, let’s spell out the dangers associated with using Stripe as your sole payment processor for credit card payments.
Why Stripe Is a Dangerous Payment Service Provider For Merchants in High-Risk Verticals
So many online entrepreneurs get caught on the hop because they don’t see the suspension of their Stripe account coming. Let’s shed a little more light on what will land your business up the creek without a paddle.
Firstly, you must read the terms and conditions before you even sign up. Stripe do clearly state which business are restricted from receiving Stripe payment services. The issue is that your business might fall into one of these categories but initially slip through the net during their mostly-automated approval process. The last thing you want to do is build a business on borrowed time, so read the extensive exclusions list carefully to ensure that your vertical isn’t on it.
If you also dig into the terms and conditions a little closer, you’ll see that in “Section A,” Stripe reserves the right to suspend or freeze your account whenever they want. Regardless of whether or not you’re a high-risk merchant, this is a pretty frightening clause.
Worse, they don’t have to give any precise details about why they’ve done so. So often, they cite an unusual number of customer disputes, cancellations, chargebacks, or merely an “elevated risk” to their processing even if you’ve got a squeaky clean processing history!
Fortunately, having worked in the payments industry for over a decade, we’ve got a pretty good idea of what you need to watch out for to hang onto Stripe as a payment provider for as long as possible.
Keep a Watchful Eye on the Chargebacks Attributed to Your Stripe Account
Chargebacks are the biggest threat to payment aggregators, such as Stripe and PayPal. Their risk management policies are incredibly strict because they operate huge master merchant accounts. Each new business they onboard takes up a slot on that master merchant account, potentially posing a risk to its integrity.
This is where chargebacks come in. Not only are they incredibly damaging to the reputation of the top-level master merchant accounts, but they can cost Stripe a fortune. A single chargeback dispute process can cost as much as $25 to resolve. They pass most of that fee back onto you, the merchant. However, they still have to shoulder some of the costs.
For a global payment gateway company that processes 20-100 card transactions every second, this can soon add up to astronomical amounts if not strictly clamped down upon. At the highest number on that estimate, even if chargebacks only cost Stripe $5 each, they would incur $432,000 in chargeback fees each and every day at a chargeback ratio of 0.1%.
That’s why as soon as cardholders and card networks start issuing chargebacks to your account, you’re in big trouble. The entire Stripe business model depends on eliminating as many of them as possible.
So what’s acceptable? Ideally, none. But obviously, that’s not realistic. But if you’re over a 0.5% chargeback ratio, you should be very worried indeed. That meets the criteria they set in their terms and conditions to shut your account down within 24 hours, hold payouts destined for your bank account, and eliminate your cash flow.
If you’re well over, and more in the region of 0.9-1%, things can get really unpleasant for your e-commerce business.
Stripe Can MATCH-List Your Business
If you’re ever informed that your business has been added to a MATCH list, it’s time to panic. In case you’re unaware, Member Alert to Control High-Risk (MATCH) is a credit risk review system acquiring banks consult before considering issuing a merchant account. MATCH originated with MasterCard, but now all credit card companies are associated with this system. Sometimes it’s referred to as a Terminated Merchant File (TMF).
The issue with being on the list? You’re effectively blackballed as a company. You cannot process credit cards. Even additional payment methods are challenging to come by. New merchant accounts can only be secured on the harshest of pricing terms. Reddit is full of sob stories of business owners placed on the MATCH list, and it’s not somewhere you ever want to be as a company.
Here at DirectPayNet, we can help companies get off the MATCH list, but it’s tricky. There is never any guarantee of success. Sometimes that’s the end of the road. A successful and profitable e-commerce business comes crashing down in the space of a few hours.
The worst part is that it’s not always the fault of the business. With Stripe, it’s not uncommon for businesses to share MIDs with other merchants. You see, payment facilitators like Stripe allow 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 when those approved merchants wreak havoc on your shared account, you get tarred with the same brush.
Yes, that’s exactly how risky Stripe is. You could be MATCH-listed with a clean processing history. And yet, startups continue to rush over to Stripe in their thousands.
Has your business just been MATCH-listed? While it might feel like a time to panic, staying calm and acting quickly can help you recover. Read our step-by-step process to MATCH-list recovery here!
Stripe Accounts Can Be Suspended or Shut Down Without Warning
Perhaps the worst aspect of having your Stripe account shut down is that it comes without warning. There’s often just one simple email informing you of their decision and wishing you the best of luck.
When panicking business owners email customer support looking for answers, they rarely go back on their decision. They also don’t often give you any detailed information as to why you have been suspended or shut down.
Again, just a reminder, this could happen at any moment. It doesn’t matter if you have a clean processing record. As we’ve already mentioned, you can have your Stripe account suspended for the activities of others.
This is why you simply have to set up a back-up merchant account. That way, you can ensure you’re covered for every eventuality.
Always Source Your Own Merchant Account – Even if You Continue to Use Stripe
We get it. Stripe is one of the easiest and most convenient payment service providers out there. They handle the financial institutions processing on the back-end for you, take on PCI DSS compliance, supply you with advanced fraud prevention tools, and the ability to process payments in multiple currencies, including USD, EUR, and GBP.
We’re not saying don’t set up a Stripe account, period. We’re saying have a back-up plan ready for when it inevitably falls apart for you as a high-risk merchant. Putting all of your eggs in one basket is always risky, no matter what aspect of your business we’re talking about. But it’s even more vital for payments.
Losing access to payment processing can permanently damage your online business, sometimes beyond repair. With Stripe’s ultra-low risk tolerance, you are always going to be just one email away from trouble. If you’re in the dating, nutraceutical, weight loss, hair loss, dropshipping, or consumer electronics space, you’ll already know that chargebacks are part and parcel of doing business in these verticals.
The good news? There are payment processors that can provide specialist high-risk merchant accounts with higher built-in risk tolerances. They understand that chargebacks, refunds, and the occasional instance of fraud will happen and help you implement steps to mitigate the damage they do to your processing.
That’s why it’s a good business practice to divert a portion of your sales to a specialized high-risk merchant account (known as load balancing) to build up a solid processing history alongside your Stripe card transactions. This way, when the inevitable happens over at Stripe, you have a back-up plan in place ready to go. Failure to do so could see you lose your business overnight.
Speak to the High-Risk Payments Experts to Protect Your Online Business Today
The unfortunate truth is that many entrepreneurs approach us too late. There’s nothing we can do to help resurrect their payment processing. However, for the vast majority of clients who have their Stripe account suspended or shut down, there is a route back to processing credit cards and other alternative payment methods.
The sooner you approach us during your business journey, the better. Even if you haven’t yet launched your online high-risk business, we can still advise you of the best options for specialist payment processing.
If you’ve already had your account suspended by Stripe, PayPal, or anyone else, contact the experts here at DirectPayNet immediately to assess your situation. More often than not, we can rectify your payments situation and ensure your business lives to fight another day!