| |
A merchant account is determined to be “high risk” when there are certain aspects that can create an environment more prone to fraud. A merchant who obtains a large amount of chargebacks due to the nature of the transaction is one of the red flags for high risk. For example, a person who is gambling online can get caught up in the moment. The same feeling that brick and mortar casinos hope for; to get you to spend more money than you intended. Now you are stuck with a large bill and without a purchase to return. The funds are spent, and now the person will claim there was fraud on his/her account. Or similar, a person on a pornography site will get the intended outcome, and then decide they want their money back. There are also legitimate fraud purchases on both of these businesses more so than a regular type of business. So, immediately any company that falls into pornography or gambling genres will become a high risk merchant. On the other hand with the gambling site, if there is strategic play, and not a predetermined outcome, such as “luck” there has since been an exemption implemented. This is due to the fact there is less of a chance of fraud capabilities from the website/operator itself. This is a very gray area for poker websites; in the United States they have yet to decide if poker is strategic or chance. Even though, it is ultimately at the discretion of the bank, and they will probably still consider strategic play high risk, it is after all still gambling.
Even merchants with high volume, or occasionally high priced items, can be considered high risk. Some of the main high risk categories are pharmacies, travel, adult (pornography) websites, and gaming. If you notice, a major trend amongst these merchants is that the product is intangible, with the exception of the pharmacy. Other high risk categories include:
- mail order or telephone order (including herbal supplements, cigarettes, auctions)
- direct marketing
- infomercials
- dating sites
- escort services
- outcall services
- telecom
- timeshares
- subscription services
- herbal supplements
- membership services
- tickets
- multi-level marketing
- bail bonds
- pawn shops
- water filtration
- high volume merchant accounts
- international merchant accounts
| Most of the categories listed above have a high buyers remorse rate. Which means once the product is used or bought they decide it wasn’t worth the money. Therefore, a chargeback is created, when refunds are denied, a buyer will sometimes claim fraud. With a signature there is really no way to prove it was or was not fraud. Even a computer’s IP address can be disputed since there are friends or family with access to it. Generally speaking just about any internet purchase including auctions and the like, will be generalized as high risk. Any of the categories mentioned are usually very lucrative as well. The specialized services required when being a high risk merchant will require a larger fee per transaction from their processor, but this will usually allow them to accept Visa, MasterCard, Discover and American Express. |
|
|
|
