When it comes to payment processing, not all businesses are created equal. Certain industries are considered “high-risk” by banks and payment processors due to factors such as higher chargeback rates, legal restrictions, or operational volatility. For businesses in these sectors, securing a traditional merchant account can be challenging. That’s where high-risk merchant account come into play, designed specifically to meet the needs of these unique industries.
Here’s a breakdown of some industries that commonly require high-risk merchant accounts:
1. E-Commerce Businesses with High Chargebacks
Online businesses operating in e-commerce frequently face higher chargeback rates compared to physical retail businesses. Chargebacks can arise due to fraudulent transactions, unsatisfactory customer experiences, or misunderstanding of refund policies. Large-volume sales and recurring billing, common in subscription services, can further elevate this risk. Merchants in these sectors are often classified as high-risk, making specialized merchant account solutions vital for smooth payment processing.
Key Drivers:
- High transaction volumes
- Cross-border payments
- Subscription-based sales models
2. Travel and Hospitality
Businesses in the travel industry, such as travel agencies, ticket booking companies, and resorts, are flagged as high-risk due to their higher-than-average refund and cancellation rates. Economic fluctuations, geopolitical events, or natural disasters often add to the unpredictability within this sector, making it difficult for traditional payment processors to approve their accounts.
Why High Risk?
- Long timeframes between booking and service delivery
- Frequent cancellations or disputes
- Liability for external factors (such as weather or travel bans)
3. CBD and Cannabis
One of the fastest-growing industries in recent years, the CBD and cannabis sector faces significant regulatory oversight. Despite the rising popularity of these products across various markets, their legality can differ widely between countries and even states. This patchwork of regulations makes payment processors cautious, putting most cannabis-related businesses in the high-risk category.
Considerations:
- Regulatory discrepancies
- Age restrictions for purchasing (21+)
- Fraudulent CBD claims in the market that increase disputes
4. Adult Entertainment
The adult entertainment industry includes platforms for streaming content, webcam services, dating websites, and more. This sector is under strict regulations and often flagged due to concerns regarding fraud and disputed transactions. Additionally, adult content business models typically deal with high transaction volumes and require secure payment gateways for customer privacy.
Risk Factors:
- Reputation sensitivity
- Chargeback likelihood due to anonymity concerns
- Regulatory compliance
5. Gambling and Gaming
Online gambling platforms, sports betting websites, and online gaming companies often require high-risk merchant accounts. These industries involve considerable regulatory oversight, require age verification, and face a heightened risk of chargebacks due to disputes over wagers or in-game purchases.
Challenges:
- Jurisdiction-specific legality
- Fraudulent activity and disputes
- Large transaction volumes in short windows
6. Health and Wellness Products
Businesses selling health supplements, weight loss products, or similar wellness-focused goods are often classified as high-risk. The market is rife with refund claims due to unmet expectations or deceptive marketing practices from less reputable players. For genuine merchants focused on quality, a high-risk merchant account helps maintain seamless transactions while mitigating financial risks.
Why This Industry Needs High-Risk Accounts:
- Regulatory restrictions on claims
- Higher refund requests because of customer dissatisfaction
7. Subscription-Based Services
Subscription services for software, digital content, memberships, and more rely on recurring billing structures. While this model is increasingly popular, it carries risks like card declines, disputes, and cancellations. High-risk accounts provide the tools businesses need to manage recurring payments without frequent interruptions.
Common Risks:
- Ongoing billing disputes
- High refund requests during trial periods
- Customer account churn
Thriving in a High-Risk Market
While operating in industries labeled as high-risk might introduce additional hurdles, having access to a reliable high-risk merchant account allows businesses to manage their payment processing with efficiency and security. Understanding the risks and implementing measures to reduce chargebacks and disputes can help merchants build credibility and ensure long-term growth.