A high-risk merchant account caters to businesses deemed “high-risk” by payment processors like Visa and Mastercard. This classification often stems from factors like elevated chargeback rates, high transaction volumes, or the nature of the industry itself, which presents an increased risk of fraud.
Securing a merchant account can be challenging for high-risk businesses, particularly those operating internationally or outside the US. High-risk merchant account providers specialize in enabling these businesses to process credit card transactions securely, often routing payments to offshore bank accounts. It’s important to note that these services typically involve higher fees compared to standard credit card processing.
Many traditional credit card processors are hesitant to work with businesses considered high-risk. Therefore, the key is identifying a processor willing to approve your application and facilitate efficient credit card acceptance, whether through a high-risk or international merchant account.
Industries commonly classified as high-risk include pharmaceuticals, telemarketing, online dating, travel, gaming, and replica goods. The level of risk can vary within these categories.
Obtaining a direct high-risk merchant account through an international bank usually involves specific requirements:
1. **Incorporation:** The business must be incorporated within the bank’s jurisdiction, a stipulation based on credit card regulations.
2. **Processing History:** A minimum of six months of existing processing history is generally required, ideally with a clean record.
3. **Chargeback Threshold:** Chargebacks must remain below 1% over the preceding six months.
4. **Setup Fees:** Payment of applicable setup fees is mandatory.
5. **Documentation:** Submission of the principal’s passport, business incorporation documents, and, in some jurisdictions, a local nominee director’s passport and utility bill may be necessary to address cross-border concerns.
6. **Website Compliance:** The merchant website must adhere to Visa and Mastercard’s guidelines.
These accounts are also frequently referred to as offshore high-risk merchant accounts, international merchant accounts, or high-volume merchant accounts.
An alternative solution for businesses lacking processing history or preferring to avoid incorporation costs is a third-party merchant account. These accounts often have less stringent underwriting processes and offer quicker setup times compared to direct accounts.