Operating as a high-volume merchant has pros and cons. Naturally, more sales lead to increased profits, but getting bigger also means that the risk of fraudulent transactions and chargebacks will go up.
This means that there are plenty of banks and other traditional financial institutions that may choose to not process your company’s payments. In these cases, the alternative is finding a high-risk, high-volume credit card processor that can handle the inevitable additional financial strain that your business will face with higher sales.
Failing to work with an adequate high-risk merchant leaves you open to account freezes, data security vulnerabilities and irregularities in your payment schedules. High-volume merchants should aim to find a high-risk payments processor that has experience dealing with fraud and chargebacks, minimizing the blowback that your company will face when these types of activities take place.
What It Takes to Get a High-Volume Merchant Account
Specialized high-volume merchant accounts are ideal for businesses that accept credit card payments and process at least $100,000 per month. Working with a high-risk payment processor is especially useful when you deal with hundreds of single transactions every day as you’ll need a secure way of processing these payments the right way.
To apply for such an account, you’ll need a valid, government-issued ID, a bank letter or voided check, a secure, working website, three months of the most recent bank statements and processing statements, your owner’s Social Security Number (SSN) of Employer Identification Number (EIN), and you need to have a chargeback ratio below 2%.
The underwriting process requires that your business comply with all industry rules and regulations, while risk is measures based on a merchant’s credit score, card processing history, bank statements and website security. All these factors are taken into consideration to ensure that your business has no negative account balances, outstanding bills, or high chargeback ratio.
It is usually recommended that the stakeholder in your business with the best credit history should apply for the merchant account. Plus, providing the most accurate transaction volume estimates helps the application process as it helps to create trust between your business and merchant.
What You Should Know About Risk
High-risk businesses often have credit card processing volume caps every month. Once that cap is exceeded, additional charges may be held for manual review, or the account could be suspended or even terminated.
Higher transaction volumes also result in increased chargeback ratios, which have a negative impact on a business’ credit score and risk level. The same is true about fraudulent purchases, which pave the way for cybercriminals to take advantage of a business. The same concept applies to friendly fraud, which is when a customer buys an item, receives tham and claims they were damaged, didn’t arrive or were different from how they were marketed.
A high-volume merchant can calculate its chargeback ratio based on its number of monthly transactions divided by the number of its chargebacks for the period, and this number is a good indicator of where a business’ risk score will land. You usually want your business’ chargeback ratio to be 1% at the most.
In some cases, credit card companies will accept a chargeback ratio up to 2%, although any number higher than this can result in your processor being fined, which is another reason why you need a high-risk processor that can handle this risk. Your account may shut down if you consistently keep this number higher than 2%.
How to Keep Chargeback Ratios as Low as Possible
Merchants should always try to maintain a low chargeback ratio. Having clear return and refund policies and good customer service is a great start; however, merchants should also implement standard security tools like 3D Secure 2.0, AVS, and CVV2 to verify each customer’s identity. Great customer service paired with end-to-end fraud and security controls can cut down true and friendly fraud chargebacks.
A high-volume merchant is best served by a high-risk payment processor that understands the unique challenges faced by this business model. High-volume merchants can benefit greatly from working with a trusted partner that can advise on chargeback management, appropriate fraud tools, and growth strategies.
The team at MerchACT has more than 10 years of experience offering businesses flexible, affordable and simple merchant payment solutions. We deal with businesses of all sizes and complexities in virtually every industry and market. Read more about our High Volume Domestic U.S. Merchant Account or our High Volume Offshore Account.