What is a high risk merchant account and how do you open a merchant account?
If you are a startup merchant (you are applying for a merchant account for the first time), then you might be considered high risk because your MCC code (industry type) is associated with high risk (tech support, dating services, adult services, CBD etc).
Beside that, some geographies are considered high-risk ones. This is one of the reasons why it is problematic for, say, Indian businesses to get merchant accounts in the US and/or EU. Even if the industry type (MCC code) does not belong to a high-risk category, acquirers are reluctant to “take such businesses onboard” because they have almost no control over the operations of these businesses (their prospective sub-merchants) in the high-risk region.
If you already have some processing history, then it matters a lot. In this case your underwriter will take a close look at your chargeback rate (and verify whether your business is on the TMF list), processing volumes, etc, before issuing a merchant account to you.
To open a merchant account you need to find an acquiring partner (bank) that is willing to underwrite your business as a merchant. If your processing volume (or future processing volume) is relatively small, then you will, most probably have to use the services of some intermediary entity (ISO or payment facilitator) instead of partnering with the acquirer directly.
If you expect to have high chargeback rates, then it might be beneficial for you to partner with a wholesale ISO, because for wholesale ISOs chargeback rates are calculated as average across all sub-merchants.
If you are a newcomer in the industry (applying for an account for the first time), your underwriter (acquirer) might withhold some amount as merchant services reserve to offset potential financial risk.
Plus, if your MCC code is classified as high-risk, be prepared to pay larger fees for merchant services.
Beside that, some geographies are considered high-risk ones. This is one of the reasons why it is problematic for, say, Indian businesses to get merchant accounts in the US and/or EU. Even if the industry type (MCC code) does not belong to a high-risk category, acquirers are reluctant to “take such businesses onboard” because they have almost no control over the operations of these businesses (their prospective sub-merchants) in the high-risk region.
If you already have some processing history, then it matters a lot. In this case your underwriter will take a close look at your chargeback rate (and verify whether your business is on the TMF list), processing volumes, etc, before issuing a merchant account to you.
To open a merchant account you need to find an acquiring partner (bank) that is willing to underwrite your business as a merchant. If your processing volume (or future processing volume) is relatively small, then you will, most probably have to use the services of some intermediary entity (ISO or payment facilitator) instead of partnering with the acquirer directly.
If you expect to have high chargeback rates, then it might be beneficial for you to partner with a wholesale ISO, because for wholesale ISOs chargeback rates are calculated as average across all sub-merchants.
If you are a newcomer in the industry (applying for an account for the first time), your underwriter (acquirer) might withhold some amount as merchant services reserve to offset potential financial risk.
Plus, if your MCC code is classified as high-risk, be prepared to pay larger fees for merchant services.
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