Types of Businesses in a High-Risk Industry

Industries that Require a High-Risk Merchant Account & Why

Do you know if your business is on a high-risk merchants list? You’d probably want to check if you are within a qualifying industry as well as whether you should be banking with a payment processing company specializing in high-risk merchant accounts. Why is this relevant though? There is a great deal of regulations to adhere to for businesses that are considered high risk. Any business in a high-risk industry would need to register an account with a high-risk merchant account provider, otherwise, you would have limited access to resources that would be commonplace in most businesses and there are more obstacles to overcome before acquiring proper payment processing. 

Firearms Merchant Accounts

Merchants that deal in munitions and firearms should bank with a reliable and experienced high-risk merchant account provider, however, the provider would need to be registered as a high-risk firearms merchant account provider as well. The first step in acquiring a high-risk merchant account for your firearms merchant business is deciding on a qualified and reliable merchant payment processor. Research the payment processing companies other firearms merchants are using and make an educated decision based on what you have learnt from others in your field. 

Adult Industry Merchant Accounts

It can be challenging for adult industry merchants to find the right merchant account provider because it is considered a high-risk industry. Businesses in the adult industry are more likely to qualify for a high-risk merchant account, and it would be advised to look at which high-risk merchant account provider would be best suited to your business needs. While some high-risk merchant account providers would allow your business to process payments, other adult industry merchant account providers may offer reduced fees, quicker payment processing, and more flexible credit terms.

Nutraceutical Merchant Accounts

Nutraceutical merchants generally find it challenging to find a merchant account provider to process payments and provide credit within their specialized industry. The largest contributing factors for why a nutraceutical merchant account would find it difficult to operate with a normal payment processor include:

1. Recurring billing: Most nutraceutical businesses make use of a payment cycle that their customers do not fully understand. This would result in chargebacks to the merchant account as customers may be left feeling confused, angered, and sometimes cheated out of their funds, leading them to initiate a chargeback with their bank. 
2. Misleading marketing: Advertisements for nutraceutical products may often be misleading for some, and as a result, customers do not get what they wanted or what was advertised out of the product. This would again result in the customer wanting to initiate a chargeback with their bank, and because this particular kind of chargeback is listed as “Not as Described”, these listings on a chargeback report are often marked as international merchant fraud.
3. Poor communication: Often nutraceutical companies do not clearly communicate their free trial promotions to their new clientele. The customers, confused by why their accounts have been charged an amount they were not aware of, then seek to initiate a chargeback with their bank, making this the most common reason for the high chargeback rates nutraceutical merchants experience. 

Liquor Merchants

A liquor merchant would find operating a business online quite difficult, and with the legal age for the consumption of liquor differing in many countries, the risks of underage sales are greater. This is because many individuals would be able to lie about their age while completing a transaction. Therefore, the risk simply cannot be ignored. The risks involved for an online liquor merchant would not be feasible for regular payment processors. Those best suited to manage your payment processing profile as a business in a high-risk industry are high-risk merchant account providers that are experienced and educated around the details and tasks that each qualified vertical and service would need to meet the industry specifics. They should also understand the legal prerequisites related to your high-risk merchant account. 

Tobacco and Vape Merchants

Tobacco and vape store merchants are viewed as the highest risk industries for merchant accounts. On top of the exhausting regulations, soaring taxes, and age restrictions, payment fraud has had a foothold in this industry since the boom of e-commerce tobacco merchants. A large percentage of tobacco merchants have been victim to a higher-than-average chargeback rate, and the history of these occurrences certainly does not sit well with regular merchant account providers. Tobacco has been utilized by individuals for centuries, making this industry a time-tested and long-standing business model. Despite its popularity and history, merchant account providers and other financial institutions are still apprehensive about extending their services to businesses in this high-risk industry, despite the recent and healthier introduction of e-cigarettes and other vape products. 

Multi-Level Marketing

Unique business models such as network or referral businesses are part of a rapidly growing industry. In the USA alone, over 20.5 million individuals have signed up with multi-level marketing businesses, which in turn have generated revenues worth $35.54 billion in direct retail sales. Despite these statistics and earnings, banks still view multi-level marketing businesses as high-risk merchants. Multi-level marketing businesses are greatly known for their legal risks, inconsistent or unpredictable growth patterns, and high chargeback potential. 

Find Merchant Services for Businesses in a High-Risk Industry

With all the regulations, restrictions, and hoops that you would have to jump through to do business properly as a high-risk merchant, it is advised that you look for a high-risk merchant account provider that is experienced in your industry. There are many other businesses that would fall within these “qualified verticals” and have the label “high-risk merchants” – this does not mean that doing business on regular terms would be impossible. With the right high-risk merchant account provider, you could expect very normal and, in some cases, easier payment processing services that are on offer from different companies. Remember to seek opinions from others in a similar industry, compare what is available,  and make the right decision for you and your business in a high-risk industry. 

To learn more about how to get a high-risk merchant account, contact our team of payment processing experts at First Card Payments to get started.