By Matt O'Shea
National Bank Services
High risk. We're hearing this more and more in the merchant services world. Simply put, it's an industry term that classifies types of business most processors will not, or are not able to support with traditional merchant services accounts. These businesses could be solid and lucrative customers, but for certain reasons (business classifications, bank sponsor restrictions, etc.), many processors are not able to write merchant accounts for them.
Over time, certain industries, due to their business type, may develop a reputation for high instances of fraud, chargebacks, non-delivery of products, etc. In most cases, businesses classified as high risk have a higher than normal risk factor tied to them. Of course, just because they're classified as high risk doesn't mean they don't need or want to accept credit cards through a merchant account. In fact, it's typically the opposite. And plenty of reputable processing partners in our industry specialize in high-risk merchant accounts.
In today's business environment, we've witnessed a continued uptick in the need for and opportunity around high-risk merchant services. Some would even argue that the high-risk marketplace is exploding right now. But, as with any specialized offering, there are considerations to be aware of as you develop a high-risk partnership and begin targeting high-risk businesses (merchants).
In the end, it's about opportunity and having realistic expectations. While ISOs and merchant level salespeople (MLSs) won't make the traditional 80 to 90 percent residual splits with high-risk accounts, there is a huge opportunity to earn a smaller percentage, but on a higher-margin business. For example, a typical approved high-risk merchant account would earn you up to 150 to 200 basis points.
The high-risk marketplace is growing. Existing and new ISOs and MLSs have a new opportunity, through partnerships, to expand their footprint into this targeted, vertical space ‒ and, at the same time, significantly increase bottom-line earnings. With specialization, dedication and patience, building a high-risk portfolio will only add value to your business.
Matt O'Shea is Executive Vice President of National Bank Services. He can be reached by email at firstname.lastname@example.org or by phone at 800-353-6686, ext. 2888.
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