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The Pros and Cons of High Risk Payment Processor

ByDarshan Shah

Oct 28, 2019 #Business

Open a shop laundry in the suburbs where real estate prices are low and how to start a laundromat business with no money? You have to do it differently. You can leverage your funds to get a business loan and then try to cut costs and increase revenue.

Technology is changing the world. Businesses are experiencing massive growth in most online buying and selling activities. The payment processes are also evolving, creating a need for reliable payment processors. Lately, accepting credit or debit card payment has become standard practice in business. However, obtaining merchant services for high-risk companies is still proving difficult.

When looking for a payment processor, you need to understand that there are businesses considered risky. The classification is based on the type of industry, chargebacks, and level of disputes in the organization. For example, a travel business is deemed to be risky because of the possibility of travel cancellation due to weather and airline issues, often leading to chargebacks. Other companies considered high risk include pharmaceutical, online gaming, adult entertainment, and firearms.

Finding yourself under the high risk category can be frustrating. The disappointment is mainly because of constant rejection from merchant account instant approval providers. But even with all the risks, some payment providers are willing to handle your business by offering the best high risk merchant account solutions. The payment processors serve high risk clients, by using a system that promotes the processors’ interests and yours too. Besides that, they have a significant consideration for the pros and cons of operating a high risk payment processor system.

What are the Pros of High Risk Payment Processor?

Luckily, there are payment processors that specialize in high risk merchant accounts. Dealing with high risk clients may seem like the wrong decision for most processors. But strangely, there are benefits associated with the process.

Advanced Security

More transactions are happening online every day. More customers are becoming aware of the need for a secure payment system for their operations. Because of security threats, high risk online payment processors have advanced in the use of multi-layered security systems that are highly effective in detecting fraud.

By using the advanced tools, more businesses are now trusting high risk payment processors. They rely on the convenience and security given by the processors for their online transactions. Businesses take advantage of advanced security to promote customer satisfaction through the successful completion of payment processes.

Increased Revenues

Businesses dealing with recurring payments require the services of high risk payment processors. It is mainly because they rely on recurring payments to upsell themselves. The business also rely on large transactions to boost profits. High risk payment processors make it easy for such businesses to retain clients. A reputable processors offers tailored services to most of these businesses.

The benefits of the recurring payments allows the business to operate both in the long-term and short-term. Great collaboration with processors implies an increase in revenue. It also ensures consistency in revenue collection. Customers are also assured of the longevity of the business due to secure payment solutions.

Massive Global Growth

The best high risk payment processors attract clients from around the world. Working with the best high risk payment gateway allows the business both local and international recognition hence enabling growth.

The ability to create offshore merchant accounts attracts a high volume of sales. It also allows businesses to receive payments from anywhere. A payment provider that offers domestic and offshore merchant account solution is termed ideal for discrete transactions like adult entertainment or pharmaceutical products.

With an online payment gateway, you can promote your products and services to the right clients. A high risk online payment processing system is a safe and convenient way to receive payment from a diverse audience. It is a beneficial payment solution for all types of business transactions.

Rapid Customer Verification

The best high risk payment processors have internal merchant solutions that allow for fast approval of online transactions. By collaborating with the best payment gateway for high risk business, there are fewer possibilities of false declines.

False declines, also known as false positives, are credit card transactions declined because they look suspicious. The suspicion can be because of too strict fraud rules. The inaccurate suspicions can result in the loss of customers, therefore, costing the business sales.

The best high risk payment processors understand the importance of fast verification processes. They minimize false declines by using analytical tools that are safe and ensure the rapid verification of purchases. The processors use code checks that are not too strict but are also safe for online merchant accounts.

The Cons of High Risk Payment Processors

Most of the cons of payment processors are associated with chargebacks. For the processor to understand how much of a risk you are, they check your payment history, number of years of business, and the type of customers. Chargebacks affect revenue utilization. They are associated with the most cons of high risk payment processors.

High Transaction Costs

For the merchant, every time a chargeback is received, a fee is charged for processing. Although you may be increasing your revenues elsewhere, what you do not see is the extra charges a high risk payment processor will charge. For a business with excessive chargebacks, the cost increases as the transactions add-up.

Because of the risks of these unavoidable chargebacks, the payment processors usually charge higher fees from the initial setup of the merchant account. The costs are higher than average processing fees and increase every month.

The charges, if not well managed, can affect the stability of most high risk businesses.Even when chargebacks are not present, it is common to see high risk business struggling with cash flow issues because of transaction fees.

Low Customer Conversion Rates

Strict policies by payment processors can limit business growth. No matter if you are running a large online store or a local business, customers need a smooth check-in to your website and fast approval of transactions. So, when you apply strict security measures, you might decline all suspicious transactions, some of which include genuine purchases.

This is how false declines happen. You deliver strict rules to protect the business from fraudsters. While being careful, the system flags legitimate transactions due to differences in, maybe, the shipping address, billing information, or high risk country. If the complaints are not genuine, you may lose a sale because of the false declines.

Constant false declines can affect the reputation of the processors. Often, false declines push customers away from your business, leading to low conversion rates. A merchant business that cannot retain customers will likely find it difficult to operate in the long-term.

Keep a Hold of your Reserves

Some payment processors require high risk merchants to have a reserve account. The account is used as insurance against chargebacks and fraud. If a business receives a chargeback and the merchant cannot recover the payment, the reserve account is used to cover the loss. There are three types of reserve accounts that payment processors request:

  • Rolling reserve – The payment processors hold a part of your sales and release it gradually after a certain period. Most processors use the rolling reserve as protection against fraud and chargebacks, where the merchant might lose money.
  • Up-front reserves – An amount is placed in a reserve account at the start of a contract. When the full amount of payment processing fees is met, then the initial amount is returned to the merchant. With the merchants permission, the processor can withhold 100 percent of the credit card payments until the reserve amount is reached.
  • Fixed reserve – At the start of the contract, a reserve amount is agreed upon. The payment processor takes a certain percentage of merchant transactions until the agreed amount is reached. Unlike the rolling reserve where a part of your sale is taken over time, the fixed reserve will only take a percentage of your transaction until the agreed amount is reached. Once the cap amount is fulfilled, the deductions are stopped, and no fees are taken after that.

The limit in access of revenue, because of reserve deductions, can lead to inconsistent cash flows. Reserves, though important, may leave a business struggling to meet regular cash requirements. Eventually, cash flow issues can put the merchant out of business.


If your business falls under the high risk category, you do not need to worry. The high risk merchant account rates may be higher but manageable. High risk payment processors may be expensive for a business to maintain, but they are worth trying.Your best bet is in finding a reliable payment solutions for domestic and offshore merchant accounts.

For example, if you are an online high risk merchant in Asia, it is essential to seek the services of the best high risk payment processors for an offshore account for USA. Reputable processors will manage your credit card processes, chargeback dispute, MOTO processing, online payment gateway, and merchant cash advances. They boost sales by advising on how best you can manage your chargeback transactions.


Whether you are opening a domestic high risk merchant account or an offshore merchant account, ipaytotal is here to help. We have years of experience with high risk merchant accounts, fraud protection, and chargebacks. We specialize in credit card processing and offer solutions for online payment of high risk merchant accounts. Our services are tailored to the needs of each client.

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