Why Do High Risk Merchant Accounts Cost More?
Today, having a merchant account is more of a necessity than a luxury geared toward your customers making impulsive versus need based purchasing decisions. Businesses, small to large, traditional or virtual are all eager customers of banks and processors the world over; the banking industry has changed regarding merchants and their credit card processing capabilities over the last few years. Due to the dominance of online storefronts merchants, banks and processors have been inundated with requests for merchant accounts for mainstream as well as specialty industries.
Banks generally classify merchant accounts into two risk categories, high and low; as there is really no in between, the only variance are terms, volume and the merchant’s discount rate. As a capitalist society, the US and even western European countries perceive ideas as opportunities and tend to mount an all out attack on industries and markets. The internet has enabled hungry businesses to achieve high volume, both in terms of sales volume and net and gross profit. As this isn’t a, “which came first, the chicken or the egg,” discussion, the reality lies in the timeline which shows that the internet has made possible a new consumer and a new merchant. With high volume sales in a virtual setting or even over the phone sales, it comes as no surprise that banks and processors place these merchants in the high risk category. There are a lot of reasons for this; lets cover the most obvious reasons that a merchant might be considered high risk. Risk factor depends on the likelihood that a chargeback might occur. As chargebacks are less likely in traditional storefronts due to customer signatures and the ability to verify the cardholder’s identity, those businesses tend to receive lower rates and be less restrictive. Ecommerce ventures and situations where card not present transactions occur pose more of a risk to banks and processors not only because of obvious consumer fraud and identity risks, but because of product and service quality, authenticity and fulfillment hazards as well. The fate most of these businesses endure is high rates, security deposits held for impending chargebacks and lower processing volume than they would like.
Merchant service providers or brokers have a foothold in these sub-markets as the rates aren’t going down and the banks and processors aren’t seem to be tightening their hold on merchants. A merchant service provider’s role is simple; find the best deal for their customer. What this means is different for each merchant and even certain industries. What it typically entails is sourcing banks and even specific processors for those industries and businesses; geographic location even plays a role. The refreshing part about dealing with a merchant service provider is the ability to custom tailor their processing. What that means for a merchant is the ability to monitor their accounts online or have a virtual terminal that can organize and batch daily or weekly submissions easily. For online merchants, whose entire business may be ran on a laptop computer, this type of flexibility is priceless. Going off shore and having an international merchant account is more popular today than it was in years past. Many merchant’s markets span the globe and the influx of currency transcends a simple geographic location. Basically, it doesn’t matter where the bank is, as the money is converted, taxes are paid and the money is available anytime. The costs for doing business internationally are not as high as you might think, but there are costs. For more information, contact a merchant service provider.
About Stradafee:
Stradafee is a leading international payments advisor based in New York. Stradafee is a retail and ecommerce credit card processing provider specializing in global retail and internet merchant account solutions. Stradafee also offers check processing, multi-currency processing, high risk merchant account and offshore merchant account options. Stradafee can help businesses of almost all industries and sizes. For more information on check and credit card processing please visit www.stradafee.com
Written By: Sager G. Loganathan
Banks generally classify merchant accounts into two risk categories, high and low; as there is really no in between, the only variance are terms, volume and the merchant’s discount rate. As a capitalist society, the US and even western European countries perceive ideas as opportunities and tend to mount an all out attack on industries and markets. The internet has enabled hungry businesses to achieve high volume, both in terms of sales volume and net and gross profit. As this isn’t a, “which came first, the chicken or the egg,” discussion, the reality lies in the timeline which shows that the internet has made possible a new consumer and a new merchant. With high volume sales in a virtual setting or even over the phone sales, it comes as no surprise that banks and processors place these merchants in the high risk category. There are a lot of reasons for this; lets cover the most obvious reasons that a merchant might be considered high risk. Risk factor depends on the likelihood that a chargeback might occur. As chargebacks are less likely in traditional storefronts due to customer signatures and the ability to verify the cardholder’s identity, those businesses tend to receive lower rates and be less restrictive. Ecommerce ventures and situations where card not present transactions occur pose more of a risk to banks and processors not only because of obvious consumer fraud and identity risks, but because of product and service quality, authenticity and fulfillment hazards as well. The fate most of these businesses endure is high rates, security deposits held for impending chargebacks and lower processing volume than they would like.
Merchant service providers or brokers have a foothold in these sub-markets as the rates aren’t going down and the banks and processors aren’t seem to be tightening their hold on merchants. A merchant service provider’s role is simple; find the best deal for their customer. What this means is different for each merchant and even certain industries. What it typically entails is sourcing banks and even specific processors for those industries and businesses; geographic location even plays a role. The refreshing part about dealing with a merchant service provider is the ability to custom tailor their processing. What that means for a merchant is the ability to monitor their accounts online or have a virtual terminal that can organize and batch daily or weekly submissions easily. For online merchants, whose entire business may be ran on a laptop computer, this type of flexibility is priceless. Going off shore and having an international merchant account is more popular today than it was in years past. Many merchant’s markets span the globe and the influx of currency transcends a simple geographic location. Basically, it doesn’t matter where the bank is, as the money is converted, taxes are paid and the money is available anytime. The costs for doing business internationally are not as high as you might think, but there are costs. For more information, contact a merchant service provider.
About Stradafee:
Stradafee is a leading international payments advisor based in New York. Stradafee is a retail and ecommerce credit card processing provider specializing in global retail and internet merchant account solutions. Stradafee also offers check processing, multi-currency processing, high risk merchant account and offshore merchant account options. Stradafee can help businesses of almost all industries and sizes. For more information on check and credit card processing please visit www.stradafee.com
Written By: Sager G. Loganathan
Labels: credit card processing, E-Commerce Merchant Account, high risk merchant account, high volume merchant account, internet merchant account, merchant account, offshore merchant account, online
posted by Stradafee at
11:19 AM
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