High-risk merchant accounts may face increased scrutiny when it comes to payment processing. Industries such as adult entertainment, cryptocurrency, online gaming, and foreign exchange are typically classified as high-risk. Due to the nature of these businesses, payment acceptance becomes costly, complex, and highly regulated. Therefore, if you operate in one of these sectors, understanding the obstacles, especially those related to credit card processing, helps you prepare for smoother onboarding and long-term business stability.
1. There Are Stricter Underwriting Processes
Credit card processors typically have stringent procedures in place before approving high-risk merchants. They review the licensing proof, corporate structure, ownership verification, chargeback ratio, processing history, AML checks, and compliance documentation. This makes compliance checks quite rigorous, and missing even a single piece of information or a document can delay approvals or lead to outright denials.
2. Fees & Reserve Requirements Are Also Rigid
High-risk merchant accounts often incur higher rolling reserves, additional cross-border transaction fees, increased account maintenance expenses, and higher chargeback costs. Rolling reserves are ideally around 5-15% of your monthly volume, allowing the processor to set aside funds to recoup potential losses. However, such unreasonable expenses or policies by credit card networks can put strain on your company’s cash flow, especially if you are a startup or a fast-scaling business.
3. Chargeback Management Is Important
Credit card transactions, especially those involving high-risk businesses, can pose an additional risk even if the merchant follows all procedures correctly. There can be a dispute-prone customer base, as well as vulnerable billing models and transaction values that are higher than average. While these are industry-specific challenges, they also increase the susceptibility to fraud, unauthorized transactions, and regulatory fines. Therefore, keeping your chargeback ratio well below the card network threshold helps avoid higher fees, hefty penalties, and account suspensions. If you want your business to stay afloat, you may need additional tools for fraud prevention, automated notifications, and dispute resolution.
4. There Is Increased Payment Processing Volatility
Credit card processors often impose transactional limitations, volume caps, and tiered processing restrictions on businesses with higher risk profiles. If there is a sudden spike in the card volume, the processor can freeze your funds or hold settlements for extended periods. Under these circumstances, even genuine growth can be misinterpreted by their monitoring systems, disrupting your cash flow. If your business is heavily reliant on everyday liquidity, this can be a major operational barrier.
5. You Have a Limited Choice for Processors
If you hold a merchant account for an online casino, for example, you might have fewer processor options for your business. Most domestic banks do not onboard such companies, leaving you with the option of using offshore banks, alternative payment methods, or specialist processors. This limited ecosystem leads to strict monitoring, fewer backup options, and longer approval processes, but quicker terminations. Inconsistent jurisdiction-related regulations worldwide add to the complexity.
Partner With Experts for Assistance
Your high-risk business may struggle with its credit card processing capabilities. However, once you understand the constraints and work proactively to build a compliant and stable infrastructure for your business, you can operate confidently across all hurdles.
If you are still seeking a trusted service provider for credit card processing for high-risk merchants, it is essential to partner with specialists to enhance your approval rate, minimize friction, and safeguard your business growth.
Liberty Enterprises Inc. can be a reliable partner offering industry-focused solutions to help you move forward. We support high-risk credit card transactions, enabling you to maintain thriving operations across various geographies and industries. Get in touch with us today to explore the opportunities.