High-risk account

Payment processor classify certain industries branches as being high-risk. Online gambling, online dating and software/hardware sales are, for example, generally qualified as high-risk. The criteria used to classify merchants are usually the industry type and the history of disputes and chargebacks.

High-risk merchants are generally more susceptible to fraud, insolvency or other liabilities, or connected to an elevated risk of financial loss when underwriting those businesses.

High risk merchant account

Applying for a merchant account always implies a lot paperwork and verifications. However, processors and Acquirers will proceed to a more careful evaluation of high-risk merchants.

Some or all of the following corporate documents and business information might be requested: certificate of incorporation, memorandum of association, beneficial owner ID (preferably a passport) and proof of residence. When applicable, a business license might be required. To facilitate the application process, the provided information should be accurate.

A trustworthy business model can help minimize fraud and chargebacks. Full disclosure of the services and charges is an important criterion to get a merchant account. The order process should include the terms and conditions of a promotion, as well as a clear cancellation policy, including the steps to cancel payment after a trial period or recurring transactions. Trial period should clearly disclose their length and that the customer will start being charged, if not cancel prior to the end of the trial. The date to which payments will begin should also be clearly stated.

Previous credit card processing history can help convince acquirer or processors to onboard a high-risk merchant. It can prove that the applicant is an established and dependable merchant, with good monthly sales volumes, few chargebacks and few refunds.

High risk merchant category codes

Visa define, in the Global Brand Protection Program (GBPP) Guide, clear categories of high risk businesses. Here is a list with some of the merchant category codes (MCC) for high-risk merchants:

  • 4722: Travel agencies and tour operators
  • 4812: Telecommunication Equipment
  • 4814: Telecom services
  • 4816: Computer networking
  • 4829: Bank transfers and money orders
  • 5122: Drugs, drug proprietaries, and druggist sundries
  • 5912: Drug Stores and Pharmacies
  • 5962: Direct marketing (Travel related arrangement services)
  • 5964: Direct marketing (Catalog merchant)
  • 5966: Direct marketing (Outbound telemarketing)
  • 5967: Direct marketing (Inbound telemarketing)
  • 5968: Direct marketing (Subscription)
  • 5969: Direct marketing (Others)
  • 5993: Tobacco and cigar shops
  • 7021: Timeshare (rental, leases and sales)
  • 7273: Dating and escort
  • 7841: Video tape rental
  • 7994: Video game arcades and skill gaming
  • 7995: Gamling, betting and casino (incl. lottery, wagers, casino and off-track betting)
  • 9399: Government services
  • 9754: Non face-to-face gambling, betting and casino

While industry branches are a main factor in determining whether a business is considered high-risk or not, other factors can come into play. For example, the low credit score of the business owner. An inexistent credit card processing history, or one marked with many chargebacks and refunds, can also qualify a merchant as high-risk.