By Brett Husak
Deft Payment Systems
It seems more common these days to hear agents claim they can set up any high-risk business type. Some even go so far as to guarantee 100 percent approvals. High-risk businesses are already dealing with enough complicated matters without having to handle being dealt these false hopes.
I was recently notified by a merchant who was contacted by a company that claimed it could get the merchant's account moved over with no reserve requirement and a guarantee of no chargebacks. As the saying goes, if it sounds too good to be true, then it usually is. But there are a few things to look for when seeking a reliable high-risk referral partner that will help bring you profit and peace of mind.
The high-risk sector does not just deserve more attention and knowledge; it demands it. This sector requires more than simply learning what interchange means and how processing works, getting a few POS terminals, and then going out and trying to undercut other companies' pricing. It is not merely about submitting an application along with a voided check and then waiting for an approval that's 90 percent likely, as is typical with low-risk accounts. If this sounds like what your "high-risk" partner is doing, run for the hills.
At some point, we have all had a business relationship that did not go as expected. It may or may not have influenced your merchant customers. But if it did have a customer impact, then I am sure the affected business owners will remember it for as long they are operating ‒ and so will you.
Working with an inexperienced high-risk agent or firm will be frustrating not only to you, but also to your merchants. Collaborate instead with someone who takes the time to understand how the business works so that the bank feels comfortable with doing the processing. For example, if you are working with a cruise line, your partner should know what information will be needed as part of the application process. Such as, what kind of insurance does the cruise line have and what does it cover? Will the business be covered if the ship runs aground and there are personal injuries? What about if there is a food poisoning outbreak on board, and the cruise line must offer refunds to all the passengers?
A specialist should likewise be familiar with the current guidelines governing different high-risk industries. Marijuana-related businesses and payday loan establishments are excellent cases of industries constantly being shaped by changing state and federal laws. Tobacco and vape purveyors are also continually being altered by Food and Drug Administration regulations. The Federal Trade Commission even has guidelines under its best practices for truth in advertising that determines a requisite font size for disclosure statements. So you will want a partner who keeps up to date on these types of trends and shifts.
One of the main reasons a company is labeled as "high-risk" is due to it having a higher rate of chargebacks or disputes. A skilled agent will know that chargeback mitigation is important and have experience working with companies that reduce such occurrences. Of course, all chargebacks are not completely avoidable, but you want to deal with a person who knows how to diminish them considerably, retain sales and help dispute fraud. Inexperienced high-risk brokers may only submit applications to one or two banks that they have relationships with and basically see what sticks. This would be what I like to call the "pin the tail on the donkey" approach. Once they get declined, they randomly resubmit elsewhere – costing your merchants time and money.
Occasionally, there is only one domestic solution for certain high-risk merchants, and you only get a single shot to submit it the correct way. Butchering the paperwork on a high-risk deal right out of the gate will almost always end in a decline. Processors taking on the risk don't want unsuitable applications coming in. Not to mention, if you are working with an inefficient agent, a processor might already have a tainted view of that agent's deals before the paperwork ever hits the processor's desk.
Not only is it just as important that your high-risk colleague understand the merchant's business and the flow of a transaction, but the agent also must be extremely well-informed about the different processors' guidelines and familiar with their changing habits and preferences. For example, I know one processor that will approve an account for guns and ammunition online within 24 hours. Yet, if you send that same processor an application for a time-share business, you will get an instant decline.
Most of us have been in this industry long enough to know that relationships are paramount. The credit card processing world is small enough for waves to travel far, but large enough for everyone to have a seat at the table. Plenty of processors have agents who typically send them nothing but trash accounts. I have even seen agents have their contracts terminated because they were falsifying information. Hitching your merchants to that type of wagon is a dangerous game.
High-risk is truly a form of risk management, and you want to find the most knowledgeable and connected manager out there for your merchants. In sum: don't believe the hype; work with someone who is passionate about current trends and focused on relationship building in order to gain a competitive edge.
Brett Husak is a Managing Partner with Deft Payment Systems who specializes in high-risk partnerships. Our mission at Deft is simple: To provide savings and satisfaction. We are a one-stop solution for all your payment needs, www.deftpaymentsystems.com. Contact Brett at 844-549-3338 or firstname.lastname@example.org.
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