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High-Risk Merchant Accounts

What Is A High Risk Merchant Account?

A high-risk merchant account is a payment processing service for businesses that banks consider riskier than standard accounts due to a high volume of chargebacks, financial instability, history of frauds, bad credit rating or other reasons which we will discuss in this article.

High-risk businesses are usually required to pay higher fees and go through extra scrutiny in order to obtain merchant services because of the aforementioned risk factors.

A merchant bank may put a rolling reserve – the amount of money that will cover the possibility of chargeback – on a high-risk business’s account if their history shows numerous refunds and chargebacks.

Do You Need a High-Risk Merchant Account?

When applying for a merchant account, your business will be assessed in terms of risk to the bank or financial institution working with and providing you with an account.

A range of sectors, including charities, travel and tourism, tattoo studios, adult entertainment, insurance companies and affiliate marketing may be considered ‘high risk businesses’.

If you operate in a ‘high risk’ sector (which we list towards the end of this article) or have been denied by a bank in the past, then a high-risk merchant account will enable you to conduct business.

How Are Businesses Assessed As High-risk?

When it comes to assessing the risk of working with a high-risk merchant, a financial provider will look at both the enterprise in question and the sector it works in.

For the enterprise itself, high-risk factors include:

  • How many years the company has been trading (the younger the company, the higher the risk)
  • How financially stable the company is
  • The creditworthiness of the directors and owners (possibly offset when personal guarantees are involved)
  • The income channel — i.e. subscriptions versus pay-on-delivery — and length of time between payment and delivery of product/service.

The business’s sector or vertical is likely to be analysed via:

  • Credit Risk: Industries that have a delay between payment and delivery tend to be deemed as higher risk. That’s because if the company goes out of business before they can fulfil the order, the acquirer assumes liability. Airline carriers, tour operators and dropshippers are good examples of such ‘high risk’ sectors.
  • Regulatory Risk: Some sectors are heavily regulated and are susceptible to drastic changes. Such unpredictability reduces the stability of long-term business models, and in turn, increases the risk involved. Additionally, there are more laws to break (knowingly or otherwise), which comes with consequences too.
  • Reputational Risk: Banks rely heavily on their own reputation, and any activities that could jeopardise this are deemed high-risk (ie. facilitating legal but frowned-upon transactions.)

If your business is considered ‘high risk’ in any of the above ways, it’s likely a traditional bank may deny your account application. But that’s where a high-risk merchant account can come in very useful.

Examples of High-Risk Business Sectors

  • Alcohol
  • Adult Entertainment
  • Advertising Services
  • Affiliate Marketing
  • Airline, Travel, Tourism And Lodging
  • CBD Oil
  • Charities
  • Credit Repair And Debt Management
  • Cryptocurrency
  • Dating And Escort Services
  • Debt Management And Collection Agencies
  • Direct Sales And Pyramid Selling
  • Drugs And Drug Products (Including Prescriptions)
  • E-wallets
  • Events And Tickets
  • File Sharing
  • Foreign Exchange (Forex) Merchant Account/Services
  • Gambling
  • Health And Wellness Products
  • Insurance
  • Insurance
  • Investment Schemes
  • ISPAnd Hosting Services
  • Jewellery, Watches & Accessories
  • Lender Merchant Account & Services
  • Money Transfer
  • Nightclubs And Bars
  • Nutraceuticals
  • Online Auctions
  • Online Gaming And Gambling
  • Payday Loans
  • Ppi Merchant Accounts & Services
  • Prepaid Phone Cards
  • Pyramid Selling
  • Software Downloads
  • Tattoo Studios
  • Technical Support & Web Development
  • Timeshares And Holiday Clubs
  • Tobacco And E-cigarettes
  • Travel And Tourism
  • Vehicle Sales And Car Parts
  • VPNs

The Differences Between A High-Risk Merchant Account Provider and a Low-Risk Provider

The criteria for categorizing merchants as high-risk or low-risk varies from provider to provider. However, there are certain standards for classifying both types of businesses as such.

General indicators of a low-risk merchant are based on the account provider’s favourable evaluation of the business and often include:

  • Operating with only one currency
  • Selling of low-risk products such as household goods, books, clothing etc.
  • Having a well-established business that’s been around for multiple years
  • A revenue of less than £15,000 per month
  • The average credit card transaction is less than £50
  • A very low chargeback frequency (or none at all)
  • The use of 3D Secure technology to prevent fraud

Likewise, the overall characteristics of a high-risk merchant may also vary, but generally include:

  • Multiple currencies accepted
  • A completely new or a relatively new business
  • Bad reputation due to the nature of services or products (adult industry, debt collectors etc.)
  • Poor credit rating and financial instability
  • A high chargeback frequency and fraud rate
  • The average monthly sales volume is over £15,000
  • An average credit card transaction is over £50

What Are The Pros To Having a High-Risk Account vs a Low-Risk One?

Flexible options of accepting payments

High-risk merchants are not as restricted as low-risk merchants are with the types of revenue they can collect by credit or debit card. For example, they can:

  • Sell a wider range of products and services
  • Collect recurring payments
  • Process high sales volumes for special sales and launch events

It should be noted that there are low risk merchant accounts that can allow all the options above but they can increase the chances that the merchant will require a high risk account.

Ability to accept international transactions

Similar to accepting a wider array of payments, high-risk merchants are not as limited as low-risk merchants when it comes to accepting international currencies and transactions from abroad. This provides a good foundation for eventual business expansion into global markets.

What Are the Cons to Having a High-Risk Merchant Account vs a Normal One?

Higher transaction fees

High-risk merchant accounts generally come with higher transaction fees. You might be looking at between 4%-10%, versus the 1-2% % fee for other low risk accounts.

Higher set up fees

Risk comes at a price, like in any area of finance. Setting up your high-risk merchant account will cause greater setting up fees.

Longer settlement period

A longer settlement period is inflicted to help reduce the chances of a chargeback. This might be up to around a week compared to the usual 3 days.

Rolling reserve

A rolling reserve is used to reduce the bank’s potential loss from chargebacks. This means a portion of your card transactions are collected by the acquiring bank which is used as a payment buffer.

How to Choose a High-Risk Merchant Account Provider

Before deciding between different high-risk merchant account providers as your future business partner(s), you should evaluate the following factors in order to make a well-informed decision.

Do they work with other merchants in your industry?

Choosing a provider that’s familiar with your industry has some advantages. For one, they will be more understanding of what typical transactions are like, and they may even be better equipped to detect fraudulent activity.

Do they offer customer services by phone?

If you operate in a high risk sector, it is likely you are going to encounter more issues around payments. Having a customer services telephone number to call or live chat will be so much better than relying on someone to respond to email or support tickets.

What is their total fee structure (monthly fee, transaction fee and discount rate used)?

Some providers will charge high monthly fees but low transactions, whilst others do the opposite. When choosing between high-risk merchant account providers, it’s important to get all the relevant fee information and then use your typical transaction volume to produce an estimated monthly cost to your business.

If you only take orders online, do they specialise in payment gateways? 

There is so many types of fraud possible with online payments that is well worth selecting a merchant account provider that has experience taking online credit card payments for high risk merchant services. They are likely to use a more secure payment gateway and have process in place to reduce fraud and chargebacks.

Are their security measures strict and reliable?

Your future payment partner should follow rigorous data security measures and best practices. For example, they should have a set of anti-fraud tools and a chargeback prevention system in place in order to keep your business safe from malicious users. Also, data encryption, firewalls and other standard measures of securing sensitive data are a must.

What service customisation options do they offer and how flexible are they?

You need to make sure that your merchant account provider can tailor their rates, products, services and features according to your business requirements, current state and objectives. This is especially vital if you run a particularly complex business model.

Are their fees & contracts transparent and understandable?

All the fees and potential supplementary costs should be laid out clearly on their website or when they provide you a bespoke quote. The small print in the contract should not be skimmed over and particular attention should be paid to any potential hidden fees, the length of the contract and the notice period and fees relating to contract termination.

At Merchant Savvy, we offer free, impartial advice and can recommend the best high risk merchant provider for your specific business. We’ll review contract terms and negotiate the best rates for you. 

Do they update their website regularly?

While on the subject of the provider’s website, the whole package should be kept up to date: general information about their recent events and the current year in the footer of the website. This is a sign of a company that still operates smoothly and is keeping up with the times and business requirements.

Typical high-risk merchant fees & pricing

  • Around 4% for transaction fees and up to 10% on overseas transaction fees.
  • Around £50 to £100 per month in monthly fees.
  • Around 15% of your transaction money in the rolling reserve.

How to Apply and Get Approved For a High-Risk Merchant Account

Applying for a high-risk merchant account online is a fast and simple process: reach out to us so we can help you find the merchant account provider that is fit for your business.

When the acquiring bank initially approves your business for the account, you will need to send them this documentation in order to officially apply for a high-risk merchant account:

  • Incorporation certificate
  • Copy of a recent Bank Statement showing company name and bank account information – Account number, IBAN etc
  • Scanned copy of valid ID of company’s owners/director.
  • Organizational structure chart
  • Shareholders’ certificate
  • For businesses that require a license: the license number and the organization that handed you the license
  • 6 months worth of processing history (total processing volume, number of transactions, chargebacks etc.)

Also, you should ensure that your business’s website meets the following requirements:

  • Clearly display the company’s legal name
  • Publish a Refund and Return policy
  • Display contact details for customer services and / or support
  • List out all the methods and timings of product delivery
  • Is secured with an SSL certificate and uses HTTPS

Every merchant account application procedure differs depending on the chosen provider, but the above are the mandatory steps every business applying for an account should go through.

How to Increase Your Chances of Getting Accepted For a High-Risk Account

Aside from simply applying for a high-risk merchant account, there are certain steps you can take to optimize your application and better position yourself for a successful outcome.

Keep your accounts up to date

Having your accounts up-to-date will go a long way to proving your current financial situation.

Improve your positive credit rating

Whilst high risk merchant accounts cater to those with a poor credit rating it is still worthwhile taking steps to improve your credit rating prior to application. This may include avoiding any late payments and clearing any overdue debuts.

Make sure your T&Cs are fully compliant

Ensuring that your terms and conditions are fully compliant, so you’re within the legal framework of regulatory practices and restrictions, will help convince providers that you won’t cause issues down the line.

If you are using 3rd party fulfilment, make sure your contract protects you

Using 3rd party fulfilment can increase the risk of your company around orders and refunds. Make sure your contract with them leaves you protected, should any problems arise.

Get a number of quotes and do your research

Getting a range of quotes will put you in a better negotiating position in any business situation. Approaching a number of providers, and taking the time to read customer reviews, will make sure you’re fully informed and able to get the right high-risk merchant account for you.

Minimise chargebacks

Showing you can minimise chargebacks will leave you with more chance of getting accepted. You can do this by implementing fraud filters, properly formatting statement descriptions and by having a quick and easy refund system.

Consider off-shore merchant accounts

Broadening your net of potential providers will only increase the chances of getting accepted, and may also land you with more preferable terms.

8 High-risk Merchant Account Provider

High-Risk Merchant Accounts verotel logo

Verotel specialises in providing merchant account for high-risk and international businesses. As with all high-risk merchant accounts, you’ll be paying a higher transactional rate and Verotel charges up to 15.5% for each credit card payment. The good news is there’s very little in the way of additional charges if you qualify for a premium account and transaction fees can also work out cheaper – especially if you’re taking repeat payments from your customers.

High-Risk Merchant Accounts bitpay logo

Bitpay is a specialist merchant account provider for Bitcoin and Bitcoin cash payments while also allowing you to exchange Bitcoins for US Dollars. While cryptocurrency payments aren’t mainstream yet, they’ve already got something of a history with high-risk merchants and Bitpay is trying to grow market share in this expanding sector. 

The company charges a flat 1% settlement charge on every transaction, which is significantly cheaper than the going rate for card payments using fiat currencies. Dealing with Bitcoin also means you don’t need to worry about chargeback fees and you can sell to anyone, anywhere that’s using Bitcoin.

High-Risk Merchant Accounts epoch logo

Epoch Payment Solutions is a global merchant account provider that caters for high-risk and international businesses. It promises to help you expand your customer base by guaranteeing secure payments, flexible services and clear pricing. Similar to Verotel, you’ll be paying up to 15% per transaction fee, depending on your average weekly volume while there’s a $1 processing fee and chargebacks are going to cost you $12.50.

For the most part, Epoch offers a competitive package as a high-risk merchant account provider but there are a worrying number of complaints about the company charging customers for additional services they either didn’t sign up for or didn’t realise they signed up for.

High-Risk Merchant Accounts logo header

Instabill is a high-risk merchant account specialists and even the riskiest ventures can usually get an account set up with this UK company. As usual, you’ll be paying over the odds as a high-risk business but there are no free lunches in this game and you have to be particularly careful about high-risk merchant providers that offer unusually low rates. Instabill isn’t the biggest provider with roughly 12,000 active accounts but it has a good reputation of accepting new merchants and looking after them.

High-Risk Merchant Accounts gspay2

GSPAY is a little-known high-risk merchant account provider that offers a variety of fixed rates for different types of businesses. For example, ecommerce brands can expect to pay 4% per transaction while dating sites are looking at 6% and IT support 10%. The company’s pricing policy appears to be very transparent and clearly broken down on its website – a rare thing in this business.

That said, it’s hard to feel confident about the design and content on GSPAY’s website. Likewise, it’s difficult to dig up much of anything about this company in terms of feedback from previous or existing customers. This makes us hesitant to recommend GSPAY, even though it’s possible they could be doing a great job under the radar and focusing their efforts on merchant accounts instead of superficial web designs.

High-Risk Merchant Accounts header home

Web Merchant provides merchant accounts for a range of high-risk businesses and there aren’t many ventures this company will turn away. Its website lists cannabis, legal highs, male enhancements, PPI claims and research chemicals among some of the riskiest merchants it provides accounts for and options for some of these businesses are limited. For mid-high risk retailers, Web Merchants says transaction fees should be in the region of 3-6% + 15p, which is cheaper than many of its competitors although higher-risk merchants will have to pay more.

Actually, Web Merchants offers an impressive all-round package which makes us wonder why there isn’t more third-party information about the company readily available. This is probably because of the number of partners it works with where feedback is mixed to say the least.

Payworld is our first example of a high-risk merchant account provider that raises some unwanted eyebrows. One look at the website should be enough to scare you away and the fact it provides a contact number starting with +447 (the international code for a UK mobile) doesn’t help to ease those initial concerns. When we tried to dig up some information about this company, it was difficult to come up with anything substantial.

There’s nothing concrete to suggest Payworld isn’t a legit merchant account provider but there are too many warning signs for our liking.

High-Risk Merchant Accounts ccnetpay

ccNetPay is another one of these high-risk merchant account providers with a website that screams high-risk itself. It’s about a decade more impressive than GSPAY’s site but stock images, awful rigid layouts and 1990s fonts do little to instil confidence. Once again, it’s difficult to find any info about ccNetPay and this doesn’t necessarily mean there’s any danger in doing business with them but you have to be especially careful with high-risk merchant account providers.

FAQs

As explained above, the enterprise itself will often be analysed for risk factors, including creditworthiness. This means that even if you operate in a non-risky industry, you could still be deemed ‘high risk’ by finance providers.

What does ‘high-risk transaction’ mean?

A transaction is generally considered high risk if a large loss is possible. This could be due to increased exposure to fraudulent transactions, for example.

Can I get a merchant account with no credit check?

Yes, some merchant account providers state that no credit checks will occur (i.e. CCBill).

A transaction is generally considered high risk if a large loss is possible. This could be due to increased exposure to fraudulent transactions, for example.

Yes, some merchant account providers state that no credit checks will occur (i.e. CCBill).

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Merchant Savvy is a division of VUBO Ltd (Company Number 09017066).
Address: Spaces, 9 Greyfriars Rd, Reading, RG1 1NU.

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