Businesses usually aspire to become international. They wish to spread their consumer base across the world. You are required to ensure a few things before you expand your business. Businesses and merchants are often looking for a reliable payment partner. Some merchants prefer getting a low-risk merchant account, seeing that it is easier to get funding and support from banks and other entities. On the other hand, some merchants intend on getting high-risk merchant accounts. This article talks about high-risk merchant accounts and tells how one can get them in Canada, moreover you can google High-Risk Merchant Account Canada to research further.
High-Risk Merchant Account
Sometimes, banks consider certain accounts to be of high-risks. These accounts are high-risk merchant accounts that are used for payment processing. Having a high-risk merchant account means that your account has been labeled as being at a higher risk of fraud or charge-backs by your payment processor. For every transaction, the payment processor takes a risk. So the people who have high-risk merchant accounts end up paying high processing fees to compensate the payment processor for the risk he takes—accounts of new merchants who have not processed any payments before being labeled as high-risk merchant accounts.
Obligations on the person or corporation holding a high-risk merchant account are multifold. They may be obligated to enter into long-term contract terms, termination at an early stage, or an additional monthly or annual fee. Another obligation is rolling reserves, where a certain percent of the merchant’s income is with-held by the payment processor until he can verify that the merchant’s transactions are not fraudulent or at risk of charge-back.
Reasons For A Merchant Being High-Risk
There is no commonly applicable set of rules or guidelines that the payment processors follow. There are a few general criteria:
- Transactions in high volume: Merchants who transact in high volumes or have a higher average transaction rate are usually considered high-risk.
- Acceptance of International payments: If the sale of products of the merchant takes place with clients in foreign countries that are high-risk, then the merchant shall also be treated as a high risk
- New merchant: A merchant who is a novice and has never processed payments in the past is usually considered high-risk.
- High-risk industry: If the industry in which the merchant undertakes his occupation is termed as high-risk, then his account will also be considered high-risk.
- Low credit score: A merchant with a low credit score could also be high-risk.
For example, the travel industry is an example of a high-risk business because there is a risk of impromptu cancellations. Under such circumstances, it is risky to support or finance such trades as they are considered high-risk. Customers are often filing for returns and charge-backs. Some other examples are the adult industry, forex trading, etc.
Benefits Of A High-Risk Merchant Account
Merchants considered high-risk often find a particular disadvantage associated with the label. There are certain advantages and certain benefits linked with high-risk accounts as well. These benefits usually include:
- There are no restrictions on high-risk merchant accounts in terms of area or jurisdiction that they can cover. Traditional merchant accounts will have to restrict themselves to transactions in their own parent country only, but high-risk merchant accounts can transact anywhere in any currency without any limitations.
- While traditional merchant accounts have to worry about achieving a target every month, high-risk merchant accounts need not worry about achieving any monthly targets, so they work up at their own pace and transact as per their whims.
- Issue of termination of account is a patent concern for traditional merchants because even if the amount of charge-backs increases significantly, the account could become liable to be terminated. However, high-risk merchants are fully aware that there cannot be termination of their accounts due to the issue of an increase in charge-backs.
How To Get A High-Risk Merchant Account In Canada
A procedure is needed to be adopted to get such an account. First, you will have to apply for a merchant account. You will then have to submit the business and tax-related documents. Then your application will go into processing. Once it is processed, there will be an assessment done by your payment processor, who will also be a reliable high-risk entity. He will assess and determine if you are high-risk or low-risk. After the determination, a suitable plan for your business needs is created. Even in Canada, a similar procedure is adopted. You only need to ensure that your business is either based in Canada or is selling to Canadian customers.
There are several security checks involved. The companies and banks that support such business do not hand out support willy-nilly. Some general quality checks involve verification for terminated merchant files (TMF), a thorough review of credit card processing history, etc.
One should be vigilant because there are several high-risk processors or credit cards in the market, and your behavior should be thorough in choosing a reliable payment partner. You must ensure that the credit card payment provider you are opting for guarantees taking care of any situation. Concerning your business plans, look for a high-risk processor that allows flexibility concerning various payment scenarios. Ensure transparency in the pricing system adopted by the payment processor. Further, ensure that the payment technology used by the payment processor is reliable and allows you access to various payment gateways. Lastly, look out for the expertise of the payment-processors, their website, the business models adopted by them, etc.
Conclusion
So a high-risk merchant account means that your commerce has been labeled as high-risk by your payment processor. Once so labeled, your business is averse to higher fraud risks or charge-backs. Most businesses end up becoming high-risk. Some businesses choose to become high-risk because of the benefits associated with it. Benefits like easy globalization, no monthly targets, no risk of termination of an account, etc., are often associated with high-risk merchant accounts. There is a simple procedure adopted to open a high-risk business account. In Canada, one can open a high-risk merchant account by simply applying for it. There are a few things to be taken care of before applying. It is a simple process, and many merchants are keen on getting it done.
