Factors That a Credit Card Processor Looks for in Your Business
If you’re running a business, payment management must be a priority. No matter how small your startup is, accepting credit cards is essential. It helps with the expansion and popularization of your business.
So you might be searching for a company providing high risk credit card processing. Since high-risk processing is a sensitive and risky task, the company would check and evaluate some factors to verify your business. Before you apply for processing to a company, discover what all the company will confirm with your business.
What Is High-Risk Credit Card processing?
As the name suggests, high-risk credit card processing is processing that has a high-risk factor. Credit card processing is when a processing company verifies credit card transactions.
For example, let’s say a customer buys your product from your online site and makes a payment. Then, the processor receives the request to authorize the payment. They contact the issuing bank for ultimate verification of the payment. Then the processor approves the transaction and notifies the merchant too.
It might seem like a long process, but it usually takes nearly a few seconds to a minute. So it won’t hinder your customer’s smooth shopping experience. Besides, it is essential for managing payments and steering clear of any risks.
The low-risk and high-risk processing differ with the business’s features, the same features that a credit card processor looks for in your business to determine the type.
Let us take the example of two businesses to understand these types better. Business A is a travel agency covering many locations worldwide and has international clients. Business B is a small handicraft startup selling handmade customized jewelry only in the US.
Which one do you think is a high-risk business, and which one is a low-risk one?
As you might have guessed, Business A is an example of a high-risk business. Many factors like the clients, transaction values, and risk factors help to determine this. On the other hand, Business B handles minor transactions and is relatively low risk.
If you contact a credit card processor to help manage the transactions, they would need to check a few factors. These routine checks can help determine the nature of your transactions and management.
Once the processor has evaluated these factors, they will plan out the best management strategy. Such information is crucial for the appropriate management of your credit transactions.
Here are some factors that the processor inspects before providing their services:
The average transaction amounts from your online store indicate the type of business. Generally, processors deem businesses with less than $500 transactions low-risk. Remember that this figure is an average and may differ for your processor.
Your store’s monthly sales contribute to the nature of your business, so they get evaluated. Suppose that you have monthly sales exceeding $20,000, then your business may be a high-risk one. The more the sales, the higher the risk of chargeback, hence the categorization.
With more customers of hefty buyers, the chances of issues increase gradually.
The clients you cater to and the currencies you accept also affect the nature of your business. Businesses catering to many international clients are considered to be high risk. With more currencies and international transactions, the risk gradually grows.
Further, you would have to handle the transactions from various institutions, making processing more complex.
Types of Service/Goods
Between clothes and complex software, which would you consider a high-risk product? The latter is high risk due to its nature, costs, and many other factors. The type of goods you sell also determines your businesses’ nature. Items like clothes, stationery, food, and more are examples of low-risk items.
On the other hand, products like software, tickets (travel and entertainment), adult content, and more are considered high-risk.
If you have faced many cases of chargebacks in the history of your business, then you may be a high-risk merchant. Chargebacks are when customers demand a return of the paid amount due to the product or service.
Since there is already a history of chargebacks, it only makes it more probable for further chargebacks in the future.
You might wonder why you need a company to manage your credit card transactions. With online businesses, credit fraud and failed transactions are everyday issues. So seeking experts to manage your credit card transactions is the best measure.
So here are some benefits of opting for high-risk credit card processors for your business:
- You can secure transactions by customers even through credit cards. The instant verification process helps your business stay safe and not get caught up in fraud.
- The high speed of transactions ensures that users don’t have to wait. Though the verification process is complex, credit card processors help cut down the time for efficiency.
- You will have more customers due to the expanded payment methods. The variety in payment methods can attract potential customers and expand your customer base.
It is best to prepare the required documents for verification before you apply. Applying for a high-risk merchant account is a long process, so sorting these documents will save you much time and effort.
Here are some documents and information to prepare before you apply for high-risk credit card processing:
- History of transactions and chargebacks.
- Average figures regarding monthly sales, individual purchase values, and more.
- Certificates (Shareholder and incorporation)
- Access to your online platform for testing procedures
- License documents in case of licensed businesses
While you might have a rough idea of high-risk and low-risk processing, you might not know which one applies to your business. But worry not since the credit card processors check for some factors, making it clear.
If you’re looking for high-quality high-risk processing, you can reach out to the processor. They will need to look at some aspects of your business to put your business in a category and approve it. It will then make you ready to receive credit card payments with ease.