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Balancing Speed and Risk in High Risk Merchant Processing

High-risk merchants have few options when it comes to payment processing, and unfortunately, ISOs often struggle to collect payment when it comes to these customers as well.

For years this has led to a bottleneck in the high-risk merchant processing system where ISOs are waiting a month or more to see their commissions from their merchants. Fortunately, some companies are finding a better way to get the job done. 

Balancing Speed and Risk

For companies that specialize in high-risk merchant processing, the question is really how much risk they are willing to take. The real danger that these merchants pose is that they seem okay for a while, and then suddenly their chargeback rates begin to balloon out of control.

If the ISO has already been paid its commission, the payment processor has to go to battle to keep from losing money on the deal. This is why processors usually hold out on commissions for so long.

Now, high-risk processing companies are putting potential merchants through more strenuous risk assessments ahead of time to discover what their real level of risk is. In some cases, they have created detailed systems that track all transactions live, flagging fraudulent transactions and stopping payments on the spot, and even identifying individual bad actors within the organization that could be causing the chargebacks, while leaving the main body of the merchant account open for business.

With these advanced systems in place, processors are able to pay out commissions instantly on accounts that have passed the vetting period and hold out on accounts that have reasonable chargeback fear. 

Despite the high-risk label associated with some of these businesses, the fact remains that their business model continues to propagate, and they do need payment processing services from someone. ISOs should not avoid these accounts just because of the label but should be looking into tools that help lower the overall risk to everyone involved. 

Contributor:

John Hughes

John is currently the Senior Vice President & Head of GlobalOnePay leading business development and partner teams. John has over over 20 years experience in the electronic payments industry, with roles including co-founding a successful businesses in the financial services and merchant acquiring space. John has held senior management positions with multiple top tier acquirers and was CEO/Co-founder of Base Commerce.