How to open a merchant account if your company belongs to the high-risk category?

Obtaining a high-risk business can seem problematic at first. But with a closer look, it is not that necessarily complicated. In this Genome article, let’s talk about what a high-risk account is, why it is considered to be so, and how to open it.

A high-risk merchant account: what is this?

There are two types of businesses: low-risk and high-risk. They differ by the potential risk they can bring to an acquiring bank. An acquiring bank is the only institution that is authorized to launch accounts. 

It is the only way to accept money via e-payments, such as credit and debit cards, eWallets, etc. When payment is done in EUR, USD, or other currency, funds go to the merchant account, from where an owner can send money to their business account. 

When launching an account for a low-risk business, a bank is relatively protected from possible risks such as a massive volume of chargebacks. But issuing a high-risk merchant account means more possible challenges for the bank because of several factors.

Is it bad to have a high-risk merchant account?

Definitely not. Having and processing a high-risk merchant account, in the end, does not distinguish much from dealing with the low-risk. But there are three crucial differences: issuing, pricing, and life-cycle.

Problems

Issuing a high-risk merchant account is more complex usually. Not all of the acquiring banks gladly work with such companies, and when they do, they require extra documentation to ensure their financial security in exchange for their merchant services. 

Pricing is different as well. Opening, processing, and providing merchant services will cost more, this is again one of the bank’s ways to secure themselves from potential extra expenses and chargebacks. 

The life-cycle issue refers mostly to those companies generating a lot of chargebacks. Overflow of money returns provokes the termination of an account by the bank. Even though it seems like a terrifying fact, actually this is quite normal for some types of businesses.

Solutions

An acquiring bank is indeed the only one that can open accounts, but other payments companies can issue accounts on behalf of it and offer other merchant services as well. Payment service providers normally are easier to partner with: they require less documentation and provide a fast onboarding process. 

Regarding the fees, PSPs win again. Yes, high-risk merchant accounts and online merchant services would cost relatively more at any provider, but PSPs can offer better pricing models, and more flexible support as well.

For the life-cycle, there is a simple trick to open several high-risk merchant accounts instead of one. Like this, there will be a constant payment flow with a backup, no matter if one account is terminated.

Which enterprises are considered high-risk and why?

In fact, the risk category does not always contain adult services and gambling. There are a lot of factors that can make a business this way. Some industries even labeled so automatically, such as any travel booking agency or social networks. Here is a full list of reasons that make a business high-risk.

1. A bad credit history.
2. Background of account termination.
3. A business belongs to a high-risk industry.
4. Selling subscription-based products or services.
5. Operating with many currencies within one business.
6. Offering goods or services that result in high dollar transactions.
7. Locating business within a country with a potential high chargeback accumulation.
8. The company is international.
9. No credit card processing records or very little amount due to the freshly opened account.

Some of the high-risk industries

Travel and booking agencies	Vitamins	Gambling and betting
Subscription-based businesses	Supplements	iGaming
Real estate	Pharmaceuticals	Online casinos
Social networks	CBD products	Telemarketing
Dating sites	Alcohol	Multi-Level Marketing
Adult entertainment	Tobacco	Investment firms

How to open a merchant account for a high-risk business?

First, there must be a suitable financial provider. We advise checking Genome, which offers merchant, business, and private accounts with one easy-to-manage ecosystem. It offers features for clients in Europe, including France. 

To open an account for merchant money acceptance there are several simple steps. By this link, we include the full tutorial with screenshots. 

1. Primar registration for personal and business accounts. The registration process is simple and will require some personal data input, along with fast verification.
2. Creating a merchant account. For this step, it is essential to input the information about the company along with some scanned documents such as domain ownership proof, processing history or a business plan, and others.
3. Passing the verification. The moment the application is sent, it is the job of Genome’s experts to check, if it’s in order and then to send a notification of approval.
4. Ready to go. After the approval, an account can be used for the payments. 

Genome account fee for the risk category

Initial EUR IBAN account opening	500 EUR
Monthly account fee	100 EUR for a month or 1000 EUR for a year
Additional (EUR or multicurrency*) account opening	1000 EUR for USD account500 EUR for each additional account in other currencies except EUR0 EUR for additional EUR account
Monthly multi-currency account fee	100 EUR
Monthly administration fee (is charged monthly in % of monthly average balance based on annual rate)	1%
Account confirmation letter	5 EUR
Account balance confirmation for audit purposes	20 EUR
Dormant account fee (applies monthly after 6 months of inactivity until the balance reaches 0)	200 EUR
Funds safekeeping fee	0.005 % of daily balance stored
Code generator (Token)	50 EUR

FAQ

What are high-risk merchant services?

Merchant services are those services that providers can offer. Usually, all of them support online merchant banking in one or another way. Examples of merchant services: payment processing, payment gateway, chargeback alerts, fraud prevention.

How do I become a high-risk merchant account?

There are lots of factors that can influence this. The most evident one is a potential high generation of chargebacks. But the type of the industry, credit history, and location can affect it as much.

What is considered a high-risk business?

It is that company that can be tricky for banks to work with. Mostly because of the high money returns caused. But there are also other reasons that we have described above.