Implementation of payment gateways for high-risk business projects
Many businessmen find it difficult to get a highly reliable and convenient payment gateway for processing payment transactions. The task is even more challenging when it comes to a high-risk business project. Today we’re going to talk about how to solve this problem, but first let’s understand what a payment gateway is and how it works.
A payment gateway can be defined as an intermediary between a seller of a product / service and a payment processor. Its purpose is to transmit transaction data and credit card details in encrypted form from merchant’s payment page to payment processor. Thanks to this technology, both payment and transaction security is preserved.
What then is a payment gateway for high-risk business projects? It is the same technological solution, only used by those whose business involves a high level of risk. Of course, in this case a special service is required.
What types of business projects can be considered high-risk?
All businessmen take risks. Vendors who sell their goods / services over the Internet are no exception to this rule. There are even known cases where two identical companies from the same area are exposed to business risks with different degrees of intensity. So what organizations can qualify a business as high-risk?
First and foremost, banks and card payment processors. Both banks and processors play the role of payment service providers. Among other things, they carefully evaluate the following business factors:
- The products the company sells
- Sales volume
- Credit card payment processing history
- Chargebacks
- Fraudulent transaction cases
What’s the point of all this? The answer is simple. Payment processing is a kind of business, and people who run such a business, of course, do not want to burden themselves with unnecessary trouble like unplanned expenses or other problems. If a company may turn out to be in trouble in the future, processing services for it will be more expensive. In addition, no one removes the responsibility of payment service providers for the processes they do. If the frequency of fraudulent transactions or chargebacks suddenly spikes, they could be in trouble with the issuing banks.
Each provider has its own set of criteria by which it determines the riskiness of a particular business sector. Therefore, it is not surprising that it is impossible to find a single list of high-risk businesses. However, there are specific types of business activities recognized as high-risk by most payment services:
- Dating and 18+ entertainment
- Offshore business transaction services
- Sales of airline tickets and tickets to various events
- Collection business
- Auctions
- Pawnshop business
- Cryptocurrency business
- Gambling and anything related to gambling
- Attorney / broker services
- Sales of products related to smoking
- Wellness and nutritional supplements
- Goods / services provided on a paid membership basis
- Real estate and furniture, etc.
Let’s say it again, this list should not be taken as the only one. Each service provider is guided by its own set of attributes that define a high-risk business. In practice, it can easily happen that one provider will not approve your merchant account opening application and another one will readily agree to help you with it. Read on to learn more.
Finding a payment gateway for a high-risk business: what do you need to keep in mind?
The most serious problem that people running a high-risk business have to face is opening a merchant account. We have already described the reasons that make banks and processors cautious when dealing with potentially troubled companies.
High demand inevitably generates supply. There are a lot of suspicious companies that are happy to offer you a merchant account and approve your application at lightning speed. You should not trust such companies, because even those who run a low-risk business do not get instant approval. On average, it must take several days before your account application is approved. To be on the safe side, we still recommend learning more about the payment processor you are planning to work with.
When you get a merchant account, it’s time for you to find a payment gateway. Gateways are not burdened with risks. Their job is to encrypt the card details and transmit them securely to the processor.
How do I find a reliable payment gateway provider for a high-risk business?
For your customers to be confident that their payments are secure, you must take care of two high-risk tools: a payment gateway and a merchant account. Many online merchant service providers will be willing to offer both. And all of them will promise to protect your high-risk business. Is it going to be a difficult task for you to determine the most suitable one? In order not to regret your choice, use the following criteria.
Compliance with a set of security measures
Frauds in the payment industry employ cunning schemes. To withstand it and protect your customers’ payments, you must provide yourself with high-tech security measures. Strict adherence to the PCI DSS Level 1 security standard, encryption, tokenization, monitoring of suspicious transactions are the basic elements of advanced solutions that payment providers must provide you with.
A complete set of monitoring, management and audit tools
As a high-risk business, you need to manage payment flows, record conversions, and regulate payouts. Make sure your provider has advanced statistics, analytics and management services such as Analytics, Dashboard, etc.
Loyal price
Providers often overprice their services for high-risk businesses. They understand that finding a payment gateway and opening a merchant account may be challenging, so they offer rates that are just too high.
Don’t fall for these tricks. Keep in mind that the cost of processing for high-risk businesses is not much higher than the industry average. Look for a provider who is willing to provide services on reasonable terms.
Level of coverage
When choosing a payment gateway provider, think not only about the present, but also about the future of your high-risk business. Look for an offering that includes a wide range of payment options and payment methods. It will allow you to expand your business over time and attract customers from all over the world. The vendor you choose should not only meet your current requirements, but also your future growth plans.
Among the large number of payment gateway providers for high-risk businesses, the ideal one for you will be the one that can help you set up your payment processes in the best way and avoid payment troubles.
The 5 most common payment problems of high-risk businesses
Frequent refusals of providers and banks to provide merchant accounts
It is difficult for a high-risk business owner to gain the trust of providers and banks. He / she has to overcome enormous hardships to get a positive response to a request for a merchant account. Often this struggle can only be won when the business owner agrees to excessive fees and severe restrictive conditions. One of the penalties for violating such conditions can be the blocking of the merchant account, which is fraught with serious costs to the owner due to falling sales.
Excessive transaction processing fees
Compensation of risks requires additional expenses. That’s the way providers think when they assign high fees to high-risk consumers for processing payment transactions. With a great variety of types of fees, it is usually 3-4%. However, you can try to negotiate a more acceptable transaction fee.
Rolling reserve
Rolling reserve is one of the mechanisms to protect banks from high risks of the client. The essence of this mechanism is to temporarily retain a part of payment operations, up to 20%, with subsequent release and repayment.
The problem of chargebacks
Statistically, high-risk commercial businesses have a higher average rate of chargebacks. The situation is exacerbated by monthly thresholds set by payment gateway providers. Finding strategies and tools to prevent chargebacks is one of the most pressing challenges for high-risk businesses. This involves avoiding high chargeback fees, saving customers, and keeping up reputation.
Fraud
High-risk businesses are often targeted by scammers. Criminals try to get hold of other people’s money and develop elaborate schemes in an attempt to bypass high-tech payment security solutions. That is why a multi-level security system is the most important indicator of efficiency of a high-risk enterprise.
TODA can solve your problems
The TODA payment hub is known as a reliable partner for high-risk business owners. The platform ensures a convenient multi-provider environment that allows them to manage multiple merchant accounts from one location. This multifunctional support enables them to use varied payment acceptance methods and continually expand their business by attracting customers from all over the world. In addition, TODA provides continuity of operations.
In case a provider blocks a high-risk merchant account, the traffic will be quickly redirected to another PSP. That can be really helpful sometimes.
Contact our team for details. We are ready to solve all your problems!