When it comes to organizations regarded to be high-risk, high-risk merchant accounts as well as cryptocurrency merchant accounts have completely revolutionized the way payment processing is done. When these specialist merchant accounts account like Tailored Pay products were first introduced, it was practically difficult for a high-risk organization to function successfully in the e-commerce environment. It also meant that they could only take cash and check transactions, which greatly restricted their potential consumer base.
How is a Merchant Account Defined?
Merchant accounts are a critical component of running an e-commerce business successfully. To be more specific, it is a bank account that allows your company to accept credit card and debit card payments. For example, if a client pays for your services using a credit or debit card, the payment is briefly held in the merchant account before being transferred to your company account to complete the transaction. The merchant account enables your e-commerce firm to handle payments from customers in a timely and effective manner. Without a merchant account, your company would only be able to take cash and check payments, which would be incredibly restrictive for the general operation of the company. This is why the majority of e-commerce enterprises opt to utilize a merchant account provided by a third party.
Many reasons Why Your Company may want a High-Risk Merchant Account
Some firms are deemed high-risk, and as a result, some financial institutions will not do business with them. High-risk often relates to a higher likelihood of fraud and chargebacks, as well as the size of the transaction, the sales model, the timeframes for order fulfillment, and the industry in which it operates. An account with a high-risk merchant services provider is the best choice for these high-risk enterprises and this is because they are reserved for firms that are considered to be high-risk by standard payment processors.
Your firm may be classified as high-risk by a payment gateway for a variety of reasons. They are as follows:
- Having bad credit: A business owner with no credit/limited credit or a poor credit score may be deemed high-risk, as may the company.
- Free trial offerings: Financial institutions may view the provision of free trials as a high-risk practice in specific cases.
- Recurring billing: If your company provides recurring billing services, it may be seen as high risk by the government.
- High-ticket sales: If your firm deals in significant ticket quantities, you could be considered a high-risk enterprise.
- Your industry has a high rate of fraud or chargebacks: Your industry may be classified as high-risk if it has a high rate of fraud or chargebacks (which is greater than the national average).
On the other hand, some high-risk businesses are classified as such for reasons that are distinct from the reasons that they are classified as high-risk and one famous example of this is cryptocurrency.
Comparing Cryptocurrency against Fiat Currency
To fully grasp what a bitcoin merchant account is and how it may benefit your business, it’s necessary to first grasp the distinction between fiat currency and cryptocurrency. Today, we mostly utilize fiat currency and this consists of paper and coins and is physically present. Because it is supported by banks and governments, it is deemed centralized. One of the significant disadvantages of a fiat currency is that banks and governments often exercise the most control over it, including the amount accessible (printed).
On the other hand, cryptocurrency is the exact opposite of fiat currency as it is decentralized digital money wherein some of its famous examples are Bitcoin, Dogecoin, and other cryptocurrencies that have grown in popularity due to the anonymity they enable, the low processing fees, and the absence of chargebacks for company owners.
What is a Merchant Account for Cryptocurrencies?
Customers may purchase several types of cryptocurrencies with a credit or debit card when they open a cryptocurrency merchant account. Cryptocurrency exchanges are deemed high-risk by the majority of merchant account providers for the following reasons:
- High volatility: Cryptocurrency is a notoriously volatile market, frequently experiencing surprise price surges and losses.
- Regarded as CNP transactions: Also referred to as card-not-present transactions, this refers to crypto purchases made without the actual presence of a credit or debit card.
- Money laundering potential: Because cryptocurrency is not supported by a central authority and has a physical presence, it is prone to money laundering.
The Advantages of Cryptocurrency Merchant Accounts for Businesses with a High-Risk Profile
- No chargebacks: Because cryptocurrencies are peer-to-peer and based on sophisticated blockchain technology, chargebacks are extremely unlikely to occur.
- Reduced fraud activity: Because blockchain technology is incredibly secure, it is exceedingly rare that clients would encounter fraudulent behavior.
- Multi-processing capabilities: Another advantage of bitcoin merchant accounts is that they can process both credit/debit card and cryptocurrency payments, whereas a standard merchant account can only handle credit/debit card payments. This can significantly expand the consumer base of a high-risk firm.
Merchant Account Fees Relating to Cryptocurrency and Other High-Risk Industries
One of the primary concerns of high-risk organizations when it comes to creating a merchant account is the issue of fees. And, while it is normal for high-risk firms to be charged a significantly higher transaction cost than low-risk enterprises, this is often true only when using a traditional payment processor (if the high-risk business is even able to get approved). Providers of high-risk merchant accounts are frequently able to keep transaction fees low.
Application Procedure for a High-Risk Cryptocurrency Merchant Account
If you are looking for a US bitcoin merchant account, you must provide the following documents:
- Documentation demonstrating anti-money laundering compliance;
- Passport, driver’s license, or other government-issued photo identification;
- Voided cheque or letter from the bank;
- If you have a former or a current provider, you should provide the credit card processing statements for the last three months;
- Business bank statements over the last three months or if the firm is new, then the three months of most recent personal bank statements will do.
If you are looking for payment processing experts like Tailored Pay, always ensure that you only contract with those who have your best interests in mind. Engaging with a payment processor that has a variety of online and virtual payment gateways if you are a high-risk merchant is going to be a good call as they are equipped to cater to high-risk businesses of all shapes and sizes.
