Tag: high-risk

Trying To Get A Second Merchant Account? Read This First
Is business booming so much it’s got you thinking about a second merchant account?

Many merchants settle for one merchant account for their company. But what happens when your e-commerce business starts growing and you can’t go beyond your $20,000 or $50,000 monthly limit? That’s where a second merchant account comes in.

Having multiple merchant accounts for your business is a great way to diversify your banking. If your current PayPal or existing merchant account gets shut down, what’s plan B?

If you’re like many of the high-risk merchants we’ve worked with, you need a second merchant account to have more processing options. Perhaps you applied for additional credit card payment channels on your own, but keep getting declined. Perhaps you have high chargeback rates. Or, you’re unfamiliar with getting an offshore account to support international credit card transactions.

Don’t let these scenarios hold you back.

In this blog we will recommend some important steps to ensure you get approved for a second merchant account in 30 days or less.

If you’d like assistance with multiple merchant accounts, simply send us a message online. We’ll set up a meeting to get you started.

Understand why your application may be rejected

There’s various reasons why a merchant account application may be denied. These are some of the common reasons we’ve witnessed.

1. Restricted merchant categories

If you have a single merchant account, you may know what merchant category codes (MCCs) are. Or, maybe you signed up to PayPal or Stripe and never knew MCCs existed. Well they do. You have an MCC, but just don’t know it.

Here’s the deal. MCCs are used by Visa and Mastercard to categorize merchants by business type. Categories can include financial services, travel, dating and many more. Some MCCs are restricted by certain payment processing providers. This means some acquiring banks will not work with your business model.

The solution:

Don’t be discouraged because some banks refuse to work with certain high-risk business products or services. Check to see if the MCC you fall in is a high-risk industry. This may mean that it is restricted by the acquiring bank you were trying to go through.

Next, identify payment gateways that support your business model. Once you find them, make sure to get your supporting documents ready. Don’t forget about your processing history. You will need to show your online business has low risk and a high monthly sales volume.

2. Bad processing history

All new payment providers rely on credit card processing history when deciding to do business with you. Even if you already have multiple merchant accounts.

In this regard, several things in your payment processing history may get your application turned down. These include excessive chargeback rates for at least three consecutive calendar months. And, not generating a high sales volume for a long enough period.

The solution:

Your processing history should show an absolute maximum of 1% chargeback ratio per calendar month. If it’s more, then you need a multifaceted approach to lower it.

Establish at least three consecutive months of strong sales history before you apply. If you suffer from high chargeback rates, actively take steps to reduce them. Some of the steps include:

Assess why you’re experiencing high chargebacks. Is it because of affiliates? Are they originating from a specific country? Then take the relevant actions once you identify the chargeback triggers.
Implement fraud detection tools like 3D-secure (preferably 3DS2) to reduce chargebacks. (This is a bonus when applying for new online payments).

Improve your customer service by making sure your contact information is prominently displayed, that your terms and conditions are clear, and you respond to refund requests in a timely manner.
Improve your service or product descriptions. Eliminate risk factors so customers are very clear on what they will receive and when.

Use easily recognizable billing descriptors. Customers must quickly identify their recent purchase. Many chargeback disputes occur because the buyer doesn’t recognize the charge on their credit card bill.

3. Websites failed to meet compliance standards

When was the last time you check your website? If you never have, it’s likely it doesn’t meets compliance requirements.

Do you have an SSL certificate on all pages? Is your business address in your footer? Does your support phone number appear on your contact page? Is your descriptor clearly displayed on your order page? Are your terms and conditions transparent? Did you spell out customer rights and responsibilities in your:
- Privacy Policy
- Shipping Policy (where applicable)
- Payment and pricing details
- Opt-out policy (if you offer a subscription service)
- Refund and cancellation policies
The solution:

This may seem like a long list, but website compliance is crucial. First of all, you’re not transacting in a card-present environment. Therefore, there’s different rules for online businesses. Please ensure you’ve prepared your website for high-risk merchant account approval.

Run an audit on your website to ensure you meet the requirements we noted above. Don’t forget to add credit card logos to your footer. Customers must see what payment methods are available. (You can take a look at this checklist as a guide as well.)

If you don’t meet the requirements, fix them before you submit your next application. Make sure to implement PCI compliance solutions, so your website shows all the necessary elements for approval to accept and process credit card payments.

4. Failure to meet KYC compliance requirements

Acquiring banks have very specific Know-Your-Customer (KYC) standards. Any director signing for a second merchant account application must still meet this criteria. If you cannot, that is also another strike against your application.

KYC starts with verifying the applicant’s identity and the business’s information. So, for example, a hard credit check will be performed on all directors of the business. Another example is providing proof of where the business is headquartered. Or, proving the identity of the director with the help of government ID or a utility bill.

Other aspects of the KYC process involve assessing the online footprint of the business. If your company has a bad reputation (e.g. negative reviews outweigh the good on sites like Better Business Bureau), this will count against your application.

The solution:

Check your credit score and credit history before applying. And where you can improve it, such as removing incorrect information, do so. If not, then you may need to consider a director with a better credit history. Review your online reputation and put in concerted effort to improve it.

Also, it’s not unusual for payment providers to ask for personal bank statements. Sometimes this is requested when processing history is poor or your business is only six months in operation. Showing a bank account statement that includes a sizeable balance can help reduce concerns about liability.

5. They didn’t know they were MATCH-listed

Some high-risk business owners are unknowingly put on Member Alert to Control High-Risk (MATCH). Being on the TMF/MATCH list is the fastest way for your merchant account application to be denied.

Not all merchants are notified that a processor placed their business on the Terminated Merchant File (TMF) or MATCH list. But any new payment provider to which you apply will see you on that list. Worse they will deny your application.

The solution:

Find out what payment provider put you on MATCH. Then contact their risk department. Ask them what the reason was and what can be done to remove you from the list. Now, this is not automatic.

The bank may choose not to offer you the chance to fix it. So, the next option after this is working with a high-risk merchant account provider that works with MATCH merchants. These can be costly.

So, you will need to keep the merchant account you currently have in stellar shape, as you may not be able to apply for any more merchant accounts. In that case, it may be worth exploring other payment options like ACH or e-check.

You can learn more about what to do if you are MATCH-listed.

What about an international merchant account?

If you want to support foreign Visa and Mastercard sales, an international acquiring bank could be the ideal option for your second merchant account.

Domestic accounts often get a higher decline rate for international orders, especially debit cards. Plus, you must contend with cross-border payment processing fees.

An offshore merchant account gives you more flexibility. It also offers more payment processing in multiple currencies, and improves payment decline rates. And in some instances, you could be approved for international payments before a domestic one. That’s because the card companies have segmented their global operations. Therefore, the requirements for underwriters for a merchant account are different according to the region.

If you intend to go this route, it pays to have a payment service expert review your application and work through the process with you. This will certainly improve your chances of success.

Preparing for a second merchant account application

Remember, no two payment providers are alike. Your first provider might have accepted your shortcomings. But, that doesn’t mean a second one will.

Not all acquiring banks accept the same category of merchants. For example, some are willing to accept more risk than others. One bank may have a higher risk appetite to accept CBD-infused energy drinks. Another acquiring bank may only be able to onboard sellers of oils, tinctures, and topical creams.

Plus, the credit card companies regularly update the requirements that acquiring banks must meet. And based on these updates, the requirements you need to meet will also change.

This is why some high-risk merchants work with a merchant services provider. Unfortunately, many don’t know or understand the the importance of KYC and compliance. Some don’t stay abreast of the ever-changing regulations and requirements for maintaining a high-risk payment gateway.

Being an expert in payments means advising clients accordingly to acquire additional merchant accounts or not lose existing ones.

If you want to go from managing one account to getting a second merchant account in the next 30 days, then contact the team at DirectPayNet.
September 10, 2020
Facebook Boycott: Big Opportunity For High-Risk Merchants? – Pt. 2

We’re looking at how the current Facebook boycott is affecting high-risk merchants. If you haven’t read part one, click this link to read it now.

In part two, we are going to look more closely at how you can get the most out of your Facebook ads. We’ll also explore whether now is the time to move away from the platform. Diversifying your marketing strategies to ensure your sales don’t suffer if there is a policy change at Facebook.

Facebook has strict compliance rules surrounding advertising. But many high-risk merchants are still attracted to advertising on the platform. It’s not hard to see the attraction. Facebook is the most popular social network in terms of users. It also has the best demographic targeting on the planet.

So let’s look at this in a little more detail.

How high-risk merchants can get the most out of advertising on Facebook

As mentioned, the best place to start is with revisiting your target audiences. Have you gone into enough detail when describing your target market? Remember, the platform knows how much we earn. How we like to spend our money. The last website we visited. Where we like to eat. What our hobbies are. You name it, they probably know it. This is the data gathering that has many individuals concerned about privacy. But it also provides marketers with the best advertising targeting there is.

Once your target audiences are revisited, look at split testing your ads. Perhaps set up multiple ads, and monitor their respective performances. Facebook allows merchants to split test across five parameters. This includes audiences, the ad text, ad placements, and the method in which they’re delivered to audiences. Examine your results. If you find a winning combination, focus your resources that particular advert to drive up your revenues.

The Facebook boycott will help to lower competition based on their auction format and also the compliance department may give you a break and allow more aggressive ads to make the cut. But moves made during the pandemic could help your business even more. As mentioned in part one, Facebook understands that their main customers are small businesses. Not household brand names. That’s why they’ve launched a small business grants program. As part of the scheme they’re offering eligible businesses ad credits. If you’re unsure about experimenting with Facebook ads during the boycott. Why not apply to the free ad credits scheme take a risk-free shot?

Why the Facebook boycott may spark a rethink of your marketing strategy

Many high-risk merchants we’ve spoken to feel a little in between a rock and a hard place. On one hand, the boycott presents an opportunity to advertise with reduced competition and perhaps scrutiny. On the other, changes may come as a result of pressure from the boycott. Those alterations to policies may act as the final nail in the coffin for restricted categories trying advertise on the platform.

So what can you do if you rely on Facebook advertising to drive your sales? Even if you manage to stay on the right side of ad compliance policies, Facebook can shut down a profitable campaign without warning. The platform realizes that they need to move away from their reliance on advertising income. That means investment into their advertising capabilities may decrease. Lower investment could lead to worse-performing ads. You may need to rethink your marketing strategy sooner than desired.

As is the case for your merchant account or payment gateway, relying on one method is a recipe for disaster. If you’re entirely dependent on your Facebook ads for revenue, your income is at risk. The best method to mitigate this is always diversification. The boycott may give you the nudge you need to explore other online advertising avenues. By decreasing your reliance on Facebook ads, as profitable as they may be, you can lower the risk to your business.

Are you a supplements or nootropics merchant reliant on just one payment gateway? Learn more about why advertising isn’t the only aspect of your business that requires diversification.

Best-performing online advertising channels for high-risk merchants

It’s vital to remember there’s a world outside of Facebook when it comes to online marketing. In fact, several competitors have emulated Facebook’s targeting advantage. Giving merchants a similar experience. First on the list of competitors is Google. If you thought Facebook’s $69.65 billion in ad revenue last year was impressive, Google’s came in at more than double that figure. During 2019, advertisers spent a collective $134.81 billion on the Google Ads platform.

Putting YouTube aside for a moment, Google is revolutionizing the way in which consumers search and buy products online. Herein lies Google’s biggest advantage for advertisers over Facebook. By investing advertising budgets into Google placements, merchants can target users with commercial intent. That is to say, they can present the products that the user is already searching for.

Get creative and never leave display ads dormant

Ad fatigue is a big problem with Facebook ads. You have to show your ad multiple times to cold prospects and convince them to buy your products or services. That could be as many as seven times, “fatiguing” the customer and putting them off. Whereas with Google, you can advertise to customers already looking to buy products and services you sell. With the advent of Google Display ads, merchants can now display beautiful visual imagery of their products. Within a few clicks, the customer can graduate from a search for a product to your checkout page.

For instance, if you’re selling libido or weight loss supplements, you don’t have to resort to sensationalist language. Nor do you need the cliché before and after photos. There’s no need to try and persuade prospective clients in this way. They’re already convinced because they are searching for your specific type of product or service.

All you have to do is list the specific benefits alongside a picture (or video) of your product in action. If you target the right keywords, the customer already knows what they’re looking for when they arrive at the Google search page. So all you have to do is tell them why they should buy your product or service over a competitor. Targeting ‘warm’ or ‘hot’ leads in this way will drive up your conversions and revenues.

What about other social media platforms?

As touched upon above, YouTube represents another great social platform for advertisers. After all it benefits from all the same advantages Google search ads have. But to secure excellent conversion rates, you need to produce a video ad. While the similar in nature to Facebook, YouTube’s advertising guidelines are less stringent. For instance, let’s go back to an example used in part one. Prepper and survival kit merchants could shoot a video showing camping and hunting knives in action. Something that would not be permitted on Facebook.

It might also be time to target fast-growing video-based social media platforms such as TikTok. Which allow you to show off your personality and capture consumer interest. Their advertising guidelines are very similar to Facebook’s regarding making exaggerated or unfounded claims about your products and services.

Thus, if you sell info products for example, consider not speaking about your product on your ads. By making an engaging or funny video with a musical background, you could go viral. Attracting both attention and sales for your brand that way instead. The number of daily active TikTok users exploded in 2020. So now could be the best time for high-risk merchants to capitalize on lower competition for ad spaces. Particularly for those aiming at younger demographics.

But moving away from text and advertising copy isn’t something trending on social media. It’s right across the internet.

The rise of visual and mobile search

Two huge trends are underway in the advertising space. One is visual search, the other is the increasing prevalence of smartphone usage. Combined, they are set to reshape the e-commerce landscape.

Mobile search

Let’s tackle mobile marketing first. Almost three quarters of the world will use only use their smartphones to access the internet by 2025. That’s 3.7 billion people. Which means if you’re not targeting mobile search marketing, you’ll get left behind by those that are.

But it’s not only search. Apps (including social media) will account for many of those individuals accessing the internet via their smartphone. Customer spending within apps has already reached $101 billion globally. So it’s something you can no longer ignore as a high-risk merchant. To grow and scale in the 2020s, you’re going to need to heavily focus your advertising on handheld devices. Also, you have to ensure that you make your mobile checkout page easy and quick to navigate for users. Here are some tips to help you.

Visual search

Pioneered by Google, Pinterest, Amazon, and Bing, visual search is another key advertising trend to get acquainted with. As highlighted above, the way people search is moving away from keywords, and towards visuals, including videos. In fact, 70% of millennials and Gen Z consumers have admitted that if all visual content was shopable, their rate of online purchasing would increase. The stats appear to back that up. As much as 10% of all visual searches convert to sales for products less than $200. High-risk merchants that appreciate the power of visual search first, will benefit the most. So get out that camera and start filming and photographing your products!

An interesting platform to look into for advertising is native. Native ad platforms such as Taboola and RevContent allow you to target users at the bottom of a website they are visiting, thus resulting in more targeted traffic. Say your customer is browsing an article about male pattern baldness, this might be a good opportunity to offer supplements geared toward male enhancement or other male targeted products. Native ads allow you to select your customers interests and then place your ads strategically on articles and websites that your target audience visit.

The Facebook boycott presents an opportunity for experimentation and diversification

The Facebook boycott means different things to different high-risk merchants. Some of you should use this as an opportunity to try and push boundaries in a less competitive space. Others may look at the bigger picture and start to look at where advertising strategies will be focused ten years from now.

Obviously, no one knows the final outcome of the Facebook boycott. The best line of defence right now is to protect your business. It’s always wise to diversify your marketing, regardless of whether you increase or decrease Facebook ad budgets. Having all eggs in one basket is never a successful long-term business strategy. Even if it’s payment processing or advertising.

Worried about your over-dependency on one type of advertising or payment solution? Then don’t hesitate to contact the DirectPayNet team.

We’ve remained open throughout the challenges of 2020. We continue to help businesses in high-risk categories to grow and scale through diversification. Email our team now to find out how.

August 1, 2020
Facebook Boycott: Big Opportunity For High-Risk Merchants? – Pt. 1

Unless you’ve been living under a rock, you know that there is a Facebook boycott. No, not from individual users. From big brands and corporations that advertise on the platform.

The global pandemic has forced the number of Facebook users into record territory. Today the platform has over 2.6 billion monthly active users. Thus, you would think that advertisers would be licking their lips at the chance to target such a vast audience. However, many prominent companies have staged a Facebook ad boycott; holding back their advertising dollars. This is due to recent events and reemerging concerns over Facebook’s performance in policing its own platform.

Some of the biggest brand names in the world such as Starbucks, Coca-Cola, and Unilever have joined the initiative. But with so many of the world’s biggest Facebook advertisers pressing pause on their ad budgets, what does it mean for high-risk merchants?

This two-part series will walk you through what the Facebook boycott is about. As well as how the role Facebook plays in your high-risk vertical may change. It’ll also cover what the current status of Facebook advertising is for high-risk online merchants. Before moving on to the importance of diversifying your advertising strategy.

What is the Facebook boycott?

Facebook has struggled in the past with events such as the Cambridge Analytica privacy scandal. But this boycott centers on new issues. More specifically, the issue of Facebook failing to tackle the spread of hate and misinformation on its platform.

Other platforms such as Twitter, have recently started tackling the spread of false information. Including from sources such as Donald Trump. They’ve also committed to a complete political advertising ban. However, Facebook has taken a different approach. They have steered clear of interfering with posts and some adverts made on their platforms. For instance, many adverts from extremist right-wing groups are still circulating to this day. This is despite the fact they are banned according to their own guidelines.

This approach to so-called “hate speech” and misinformation spawned the The “Stop Profit for Hate campaign”. It was first launched on June 17. It’s backed by civil rights groups, and so far over 1,000 prominent brands have taken part. They have all agreed to pause their ad spend until real changes happen. Their action is a response to the “repeated failure to meaningfully address the vast proliferation of hate on its platforms.”

Why does it matter to Facebook?

The idea of the campaign is to put pressure on Facebook to make significant changes to the way it operates its platform. They know holding back advertising dollars is the way to achieve that change. In 2007, advertising accounted for $764 million in revenue for Facebook. Last year that figure was $69.65 billion. Worse, despite recent efforts to diversify, 98.5% of Facebook’s revenue is derived from advertising. If the movement gains serious momentum, Facebook could see the bottom line impacts as soon as Q3 2020.

Facebook knows it has a problem. They’re aware they shouldn’t have 98.5% of their eggs in one basket. This is why they’ve been recently expanding their business operations to diversify their income. They’ve acquired WhatsApp, Instagram, and now they have entered the payments space with WhatsApp Pay in India and Brazil. That’s not to mention their attempts to launch a new cryptocurrency named Libra. But it has stalled after many major backers pulled out shortly after its announcement.

As Facebook operations continue to proliferate, what does it mean for high-risk merchants? For instance, what if you’re in the dating niche? How much longer before Facebook bans your adverts for clashing with their new Facebook Dating service?

But this is pressure from high-spending partners to get even stricter with their advertising polices. Also, couple that with their desire to lessen their dependency on ad revenue. It could be a ticking time bomb for high-risk merchants reliant on Facebook ads to drive revenues. On the other hand, it could present an opportunity.

How is the Facebook boycott affecting high-risk merchants?

Facebook advertising is already a tough environment. Even tougher if you’re in a high-risk vertical such as dating, online education, supplements, or digital info products. Any kind of adult content (symbolic or otherwise) in ads is a big no-no. The advertising of dietary supplements is very tricky, with before and after pictures banned, for example. Merchants selling info products (particularly online business coaches or biz-ops) have a hard time getting Facebook ads approved. Since, many operators in the same making money online niche have caused problems for Facebook.

Prescription drugs, supplements, alcohol, tobacco, cryptocurrency, weapons, gambling, and credit and loans. These are a few examples of tightly-restricted verticals on the Facebook advertising platform.

But the boycott may help to relax those policies. You see, it’s not actually the big household name brands that provide the bulk of the advertising revenue for Facebook. It’s small and medium-sized businesses. Given that the movement has spread far beyond the headline names. The boycott may make Facebook a little more lenient with their policies so as not to feel the pinch on revenues. Ads that were not compliant a few months ago may make it through the gate now that Facebook’s ad dollars are drying up from big companies.

Therefore, if you’ve had a tough time trying to advertise on Facebook, now might be the moment to try again. By being strategic with your advertising, you can beat competitors who gave up on Facebook ads years ago.

Are you aware of the compliance rules governing Facebook ads? If you get you ads wrong, you could be banned from advertising on Facebook altogether. Make sure to read our two-part guide to staying on the right side of their guidelines!

Now could be the time to restart those old Facebook ad campaigns

For instance, let you say you operate a survivalist or prepper website. Advertising your camping knifes are out of the question. However, can you get creative with your products or advertising? What about selling an e-book that informs the reader about the best camping gear, boots, or tents? Or what about if you’re a credit-repair merchant? Could you write an ad that omits inflammatory and sensational keywords?

Collecting email addresses from customers of these types of products might help sell other products to them at a later date. An email list of customers for a particular product niche is a very valuable asset!

There’s no time like the present to revisit Facebook ads, if you’re a high-risk merchant. Facebook hasn’t yet publicly stated any changes to its strict advertising guidelines. But with less ad spend across the board, there may be less competition for your placements.

Don’t forget Facebook’s ads system is based on an auction system. The less bidders there are, the cheaper you can acquire new customers. Also, with Facebook compliance typically being very restrictive, they may let out given there are less advertisers.

Some in high-risk verticals will see the boycott movement as the beginning of the end for their industry on Facebook. In some instances, they may even be right. But while they are focusing their efforts elsewhere, you can gain a competitive edge by taking their spot at the table.

For that reason, it may be worth increasing ad budgets during this boycott period. To see what effect it has on your bottom line. You may begin to notice you receive higher returns on your investment.

Don’t forget the importance of the landing page

Where many Facebook marketers for high-risk merchants have gone wrong is at the landing page. Facebook no longer scans the content of the ad, but where you’re sending their users too. In fact, 50% of the ad review process is dedicated to your landing page, rather than the advert itself. Your landing page is also subject to the same rules and stipulations.

Therefore, just because you’re not on the platform itself, it doesn’t mean you can revert to more sensational marketing language. Avoid any language that could be construed as misleading. By the same token, avoid providing false information or overselling your products and services.

Not only is this a bad practice from a Facebook standpoint, but it will also result in high refund rates. And a slew of damaging chargebacks. You don’t want your little experiment in beefing up your Facebook ad spend to result in damaging to your ability to process payments. But by staying on brand throughout your ads and landing pages you may be able to increase revenues. All without running into ad compliance issues associated with Facebook advertising. At a time when even local and small online outfits are pausing their Facebook ad spend, you could reap some hefty rewards by experimenting.

The Facebook boycott may signal the time to start experimenting with your ads

The dust is yet to settle on what the Facebook boycott means for high-risk merchants. But it certainly presents a potential opportunity. Many household brands and local businesses are shunning Facebook. You could use the reduced competition to your advantage. Facebook haven’t changed their strict compliance policies. But you could get smarter and experiment with the way you craft your adverts. Benefitting from lower customer acquisition costs in the process.

In the second part of this two-part series, we will delve into how to get the most out of your Facebook ads. We’ll also look at how to future-proof your marketing, given how turbulent Facebook is as an advertising channel at the moment. So stick around!

In the interim, get a head start on your payment processing as well as your online advertising strategy. Speak to us at DirectPayNet. We work will all types of high-risk industries. Including adult entrainment, supplements, and online coaches to name a few.

Email the DirectPayNet team today to establish a better payment processing strategy during these increasingly uncertain times.

July 29, 2020
Boom Time For Dating Merchants – Manage Chargebacks & Refunds As You Scale

Dating merchants in the US and Europe experienced a wealth of interest from online consumers this past spring. This was influenced by the fallout from Coronavirus. Some people are using dating apps and websites as a form of entertainment while others are truly looking for love.

Dating merchants are seeing record numbers of sign-ups. However, surges in volume is usually followed by record levels of chargebacks, refunds and scams. This has the potential to get out of control and threaten high-risk merchant accounts.

This article is for anyone looking to mitigate these risks to their payment processing. With the following advice, you can grow and scale well into 2021.

Challenges dating merchants have faced

When government-imposed lockdowns took place across the globe this spring, the reaction was positive for dating merchants. They provided a way for singles to still feel intimacy in a world where many were confined to the four walls of their own homes. Dating apps, websites, and dating coach services all experienced a flurry of activity in March.

However, even though many of these services are online-only, they’ve not been without their own challenges.

For dating sites and apps, the issue has introduced new technology to meet demand. Previously, many offerings merely acted as matchmakers for face-to-face meetings. With that ability stripped away by the Coronavirus, dating services have been trying to play catch up.

For most, the biggest enhancement has been the introduction of video calling technology. The ability to interact face-to-face in a virtual environment has proved a big hit for those who have managed to implement the technology.

However, that’s not the only challenge that merchants have faced. US dating merchants have been some of the first to bear the brunt of the rising tide of refunds and chargebacks. Customers without the money to be able to pay for services are issuing chargebacks and refund requests.

Many of those chargeback requests are not justified. Meanwhile, others are actively participating in fraud to receive premium dating services for free.

Do you run an adult dating site or a hook-up app? As a high-risk operator, there are certain steps you need to take to gain success. Read our ultimate guide to find out what they are!

How dating merchants can combat the fraud and chargeback risks they face

Competition is fierce within this vertical. Therefore, merchants need to come up with more engaging consumption methods that can justify the associated fees.

For instance, it makes sense to offer browsing and messages for free. However, users will pay a premium for a virtual video call date that another rival service cannot offer.

However, that comes with its own challenges. If you look at the explosion in the popularity of certain streaming sites, it’s clear that people becoming increasingly open to being risqué online.

Thus, you need to put in place stringent data privacy practices and policies to protect your users. A data breach of sensitive material invites fines and reputational damage.

Another aspect to think about is geo-targeting. Long-distance travel is continuing to be beset with lockdown and virus-related problems. Thus, users will only want to interact with people close to them for when restrictions are eased. By introducing these features, you can differentiate your service for competitors. Making it worth paying for.

If you’re a dating coach, it makes sense to make the move to Zoom or Microsoft Teams to carry out calls with clients. But it makes sense to acquire signed authorizations or prepaid invoices in advance. This ensures that no one can receive your services and then immediately disappear.

But perhaps the most critical threat is the one posed to your payment processing.

How can dating merchants protect their payment processing?

Of course, chargebacks and refunds are rife at this particular moment in time. As is fraud. Individuals with limited funds will look to use your services without having any intention of paying for them. This makes an already high-risk payments environment, even more dangerous. With major issuers Visa and Mastercard recently tightening up their tolerances, you’ve got to be on top of your game.

Fortunately, there are plenty of strategies to protect your payment processing abilities. Here are some of the steps you could take to ensure you can continue to grow during this period.

Age and ID verification

Firstly, many dating services are strictly 18-plus. This means you need strict verification processes in place. This practice also works well as a deterrent against fraud.

To win a chargeback appeal you will need to produce evidence that shows you verified the cardholder’s identity at the point-of-sale. By asking for a scanned copy of your customers’ photo ID, you can rely on it during the dispute procedure.

Use technology to protect subscription payments

The dating world is dominated by subscription products or digital goods and services. For these products, you need enhanced protections in place.

For instance, you could install push notifications to customers. Alerting them to when their subscription is up for renewal. They can then login and update their card details, for example. Explore IP address tracking to prove a digital product or service was used, as well as AVS and CV2 matching.

Diversify payment processing

It never makes sense to put all of your eggs in one basket when it comes to your merchant account. If you’re experiencing rapid growth, why not open a subsidiary office in another country with a physical location and local director? That way you can apply for another merchant account for credit card processing of foreign transactions. It will also help increase your conversions if you have a local payment gateway.

In many instances, offshore or EU based merchant accounts have more relaxed qualification requirements. You may even be able to acquire higher monthly processing limits. Helping you to scale in new international markets such as Canada, Europe or Latin America.

Document everything

The key to winning chargeback disputes is documentation. Revisit your terms and conditions and make them as clear and transparent as possible. Next, make the cancellation policy as simple as possible.

You can avoid chargebacks by making it easy to cancel a dating site membership, for example. Make sure your customers can reach you by phone, email and chat if possible. The more contact methods you can support, the better

Also, keep copies of any emailed invoices and customer service communications. Don’t forget the terms and conditions the customer agreed to at the time of purchase too.

It’s very difficult to argue for a chargeback when the terms are there in black and white.

Make use of latest anti-fraud routing technology

If you haven’t already, you need to install 3D-secure (3DS) technology to route your payments.

This process requires strong authentication (such as an additional PIN number or fingerprint), minimizing the chances of chargebacks. It also makes use of machine learning technology to spot emerging fraud patterns. You can use 3DS in unfamiliar geographical markets or with new customers that may present a higher risk for your dating business.

Speak to your payment services provider or acquirer about its implementation.

Enjoy the boom in users without the associated downsides

It’s clear that dating merchants are experiencing a boom in user numbers. But merchants must remain alert with the virus having such a devastating effect on the economy.

Chargebacks, refunds and fraud can eat away at your profits even with the increase in sales. You’re going to have to assess how you can differentiate yourself in a competitive market.

Payments are also a worry. With so many internet users struggling for money at the moment, chargebacks and refunds are on the rise. This threatens your ability to process payments through your merchant account. Make sure you add alternative payment modes such as ACH, e-check, and local European debit cards to maximize your sales and conversions.

With the advice laid out above you can achieve both objectives.

DirectPayNet continues to help high-risk merchants thrive in what is a challenging environment. We continue to offer our support throughout the pandemic and beyond.

Contact us today to find out how we can help your high-risk business.

July 16, 2020
When A Low-Risk Business Becomes A High-Risk Merchant. Follow This Advice.
Are you a low-risk or high-risk merchant? It’s not always obvious to some entrepreneurs.

Although being classified as a high-risk merchant can change available options for accepting payments on your website. There are merchant categories that are blatantly obvious (e.g. CBD oil, e-cigarette, spy camera, survivalist gear, supplements and nootropic products). While some online sellers assume that their products are harmless, but they are not.

If you’re an online merchant, it’s time to assess your business model and products. You may be unaware that you are a high-risk merchant. You may not even know it until your payment provider tells you so and you’re unable to secure payment processing capabilities for your website. In this post we will provide guidance if you’re unsure where your business model stands. By the end of this blog post, you will be able to determine your risk level and find a suitable payment solution for your business as you scale.

When merchants are unaware of their risk level

Several months ago, a MATCH-listed online business owner came to us for help. His former payment provider terminated his account. He had a high-risk business model — an online business coaching product with ticket prices up to $2500. But he had no idea he was a high-risk merchant. He was unaware of this given he had been processing online orders for eight months.

The problem arose when his member’s area portal wasn’t allowing users to login. No one in his tech department noticed the issue for a few days. As a result, customers were unable to login and get access to the content. Too many chargebacks emerged as customers thought they were being scammed. Specifically, USD $13,000 worth over a total sales volume of $100,000 in one month. All this despite attempts to reach out to customers and offer refunds. Worse, the merchant got processing through his local bank. The institution wasn’t prepared for high-risk activity. Or, the influx of chargebacks, as they did not understand the issue to begin with.

The characteristics of a low-risk merchant

Low-risk merchants pose a small threat of liability to acquiring banks and payment providers. They sell their products or services for small or mid-level prices (e.g. $10, $25, $50), are usually not luxury items and do not offer subscription services. Generally, merchants’ business models are within industries that are not politically charged or heavily regulated (the way that legal marijuana and adult content is for instance).

Examples of low-risk merchants in e-commerce include:
- Clothing stores
- Household items
- Baby products
- Shoes and accessories
- Books
- Office supplies
Don’t get us wrong. Low risk merchants are not immune to fraud or chargebacks. However, an acquiring bank won’t be as alarmed if a couple $20 physical goods are refunded versus a $500 item.

Given the low risk level, your payment options are pretty open. You can partner up with a local financial institution or online payment provider like PayPal and Stripe. The benefit of being low risk is you will pay lower discount rates and fees. Also, you may not be subject to a reserve from your payment service provider. Reserves are assessed on merchants who may have higher liability than the payment provider is willing to cover. Usually this can be between 5-10% of monthly sales volume that is collected for 3-6 months.

The characteristics of a high-risk merchant

Do your individual ticket prices go upwards of $500 or higher? Is your monthly revenue going beyond USD $25,000 or more? If so, and your business often has monthly chargebacks, then consider the possibility that you may be a high-risk merchant.

Merchants that fit into the high-risk e-commerce category include:
- e-Cigarettes and other vape-related products
- Software providers
- Adult entertainment websites (e.g. tube, cam and video membership sites)
- Digital products
- Virtual courses such as business opportunities
- Subscription services or boxes
- Luxury products that are authentic brands
- CBD oil
- Gambling (e.g. sportsbetting, online casinos)
- Supplements whether they are targeted toward weight loss or other health related topics
- Financial services (e.g. credit repair)
Other characteristics include business categories considered politically charged or heavily regulated (such as cannabis).

Chances of approval are higher with low liability

A poor credit rating and little to no processing history won’t help startup merchants of any risk level. If you’re a high-risk merchant, chances of payment processing approval are slim.

Don’t bother going to a local low risk bank unless you know for a fact, they will accept a high-risk merchant and can understand your business model. Local institutions are more likely to scrutinize your background. Worse you could have approval to process orders, but then get shut down within a month. This translates to lost sales and customers. Acquiring banks want to work with legitimate businesses and on a long-term basis. Interest will decline if your company poses a risk of excessive fraud, bankruptcy or government monitoring.

And, sale settlements from an acquiring bank will go unpaid if the liability is too much. This is why fees are often higher. So, consider outsourcing your next merchant account application to an expert payment service provider. They understand the complexities of a high-risk business better than you will. They can set you up for success to avoid the headaches of merchant account closures, MATCH or TMF.

If you’re interested in learning more about the various techniques you can use to prevent chargebacks, read our blog article that goes into further depth here.

Both low and high-risk merchants come with their own risks

Risk is the one thing that low and high-risk merchants have in common. Most merchants will do anything to get away from a high-risk label. But even being low risk comes with its own issues.

For example, a chargeback that occurs for a high-risk merchant is a little more expected. High-risk merchants tend to deal with this more efficiently. Compare that to a sudden chargeback or two on otherwise clean processing history for a low-risk business. The provider may overreact by closing or suspending your account.

Due to expertise, acquiring banks, card networks and merchant service providers recognize even the smallest of red flags in your account.

Key strategies to ensure merchant accounts don’t get shut down

These are helpful steps whether you’re low or high risk, and prevent getting on the bad side of acquiring banks.

1. Focus on developing a stable stream of revenue day to day.

It’s important for any high-risk merchant to demonstrate they have a stable company. Having inconsistent sales that are high one week then non-existent the next is often a quick red flag for banks.

2. Control fraud and chargebacks before they get out of control.

Any high-risk merchant should implement anti-fraud measures. Use fraud prevention techniques like implementing 3D-secure if high-risk orders are really out of control. You can also set rules in your CRM and via third-party fraud analytics software. Doing the latter can regulate the number of times an individual credit card number is charged. Or, even blocking certain suspicious card numbers or IP addresses can be helpful.

3. Make sure you and your staff are trained to recognize risk.

Build a strong customer service channel to reinforce operational and business management processes. Your best agents should be ready to receive inquiries through a local toll-free number. And, the number of days for a refund should be reiterated so the customer doesn’t get impatient and ask for a chargeback.

4. Come up with sound supporting documents (like invoices and agreements).

These will prove to acquiring banks that, although you may seem higher risk on paper, in reality, you keep risk low. For example, imagine you own a travel touring company that gets most of its business during specific seasons. It may seem high risk on paper due to the inconsistent sales. In reality you can show sales over six to 12 consecutive months. You can also offer partnership agreements with suppliers. Or, signed invoices from customers that paid and used your services. Plus, you can show that you use 3DS to authenticate orders received. Demonstrate that your risk is minimal.

5. Keep a good payment processing history.

If any hiccups occur with sales, deal with them right away instead of hoping they’ll go unnoticed. These are the times they usually do get noticed and most often when it becomes too late to fix. Also have a contact number and clear instructions and total days for how refunds can be received. If you can afford to, dispute customer complaints, particularly when you suspect or can prove cases of chargeback fraud.

6. Perfect your website with acquiring banks and payment providers in mind.

According to Visa’s Risk Management Guide, a method of controlling the risk of your business is by developing essential website content. “When designing your website, keep operational needs and risk factors foremost in your mind. Key areas to consider are privacy, reliability, refund policies, and customer service access.” We cannot emphasize enough the importance of having a compliant website. No page should leave questions in your prospective buyers’ minds about the terms and conditions of a product or service. Neither should cancelations or refunds be confusing to buyers.

What happens when low-risk merchants go high risk?

An article on EverCompliant makes a sound case that there is no longer such a thing as “low-risk” merchants. An issue that is more prominent today is the existence of low-risk laundering. Criminals are using low-risk fraudulent businesses to pose as the face of their illegal schemes.

Payments get processed under another business name instead of the illegal one. There are no chargebacks, because the customers are aware of this. A scheme like this allows the low-risk business to go under the radar of acquiring banks. But, more banks are increasingly aware of these schemes. Plus, they are attempting to control it by digging deeper into other risk factors.

An account may face termination if an acquiring bank (and merchant service providers) discovers a low-risk business is actually high risk. It’s possible that fees can appear to make up for the prorated time in which the merchant came into service. MATCH or TMF placement may also occur due to the business’s fraudulent representation.

Position your DBA the right way for bank approval

Banks are on the alert for this type of activity so always be honest and up front. Adding more expensive or at-risk products to your catalog that are more controversial can suddenly take a low-risk business and skyrocket it up into the no-fly zone. Perhaps you sell physical products or educational content online and want to offer items meant for a more adult audience. It’s a good idea to register an entirely separate website for these racier products/services. Whether or not this new business venture should also be registered as a separate legal corporation is up to you, depending on your own unique situation.

There are many factors that acquiring banks, card networks, and other merchant service providers look for when it comes to assessing your risk. Most important is the likelihood your venture will result in chargebacks. Usually, the two criteria are product pricing and regulation of the item or service. There are tactics and choices you can make as an e-merchant to limit the chances that your low-risk business will be flagged and understanding the many determinants of risk is the first step.

It is essential that businesses don’t make the same mistakes as outlined in this blog. Understand the definitions involved with being a low or high-risk merchant. Gain this knowledge before you apply for credit card processing.

Email or call the DirectPayNet team today. Particularly, if you are unsure if your business is low risk or high risk.
February 25, 2020