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.