By Matt O'Shea
National Bank Services
High-risk merchant accounts. When you hear those words, your mind may automatically head toward business types like adult entertainment, casinos and online gambling, e-cigarette sales, or gun stores. However, in reality numerous business types, for some reason or another, are classified as potential high-risk accounts. These include check cashing businesses, credit counseling services, electronics sales, financial planning specialists, travel agencies and more. As a merchant level salesperson or ISO, there are significant benefits associated with having an established partner that can help you service high-risk merchant accounts that cross your path. While the earnings model is different – typically you're earning 150 to 200 basis points versus the traditional 80 to 90 percent residual splits, the opportunity is definitely there.
If you're not able to place or refer high-risk merchants today, your first step is finding an experienced partner who specializes in high-risk merchant accounts. As I mentioned in "The high-risk merchant opportunity," The Green Sheet, Jan. 25, 2016, issue 16:01:02, a lot more detail is required for these account types, so evaluating and selecting the right partner is critical. Another important reminder pertaining to your selection and evaluation of a high-risk merchant account partner is centered on chargebacks and fraudulent transactions. High-risk merchant accounts are typically card-not-present accounts. As such, they have a tendency to be targets for fraudulent transactions, which are then followed by chargebacks. As you evaluate potential partners or processors, be sure to ask what percentage and number of "bad" transactions they manage, specifically what their thresholds are for fraud and chargebacks.
You may even want to do ancillary research, on behalf of your merchant customers, to find a secondary third-party company that specializes in managing fraud and chargebacks directly for merchants. The last thing you want is for your customer to be approved for a high-risk merchant account, but then be shut off due to high volumes of fraud and chargebacks in the first three months. Having a secondary resource is a great value-add for any high-risk merchant customer you suspect may be at even higher-risk. A simple referral or even the fact that you're addressing this potential concern upfront will likely be a key differentiator in your service delivery versus the competition.
Matt O'Shea is Executive Vice President of National Bank Services. He can be reached by email at moshea@nationalbankservices.com or by phone at 800-353-6686, ext. 2888.
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