Every business is built around the point of sale. Some businesses approach it in a different way than others. There are sales people who will use pressure tactics to make a sale as quickly as possible. There are convenience stores that focus on impulse buys. There are business models that are more about the slow burn, like a blogger who posts free content for years in order to attract the attention of publishers, before finally introducing a book that they’re selling. A good real estate agent might show you a dozen homes before asking if you’re ready to buy.
But sooner or later, you have to make the sale. If money isn’t exchanged for goods or services, then you’re running a non-profit or a charity. And that’s great, there’s nothing wrong with that. But if you’re an entrepreneur, if you’re a businessperson, then the sale is the backbone of what you do for a living. You make the sale and you keep the lights on, or you don’t, and you don’t. So it’s no wonder that savvy business owners tend to take their time in selecting a payment gateway provider.
The point of sale is the backbone of your business, and you wouldn’t trust a chiropractor just because they’re the first name in the phone book. The same goes for finding a reliable payment gateway provider.
Payment Gateway for High Risk Business: What Makes You High-Risk?
The short answer is that it comes down to chargebacks. Some industries, like adult entertainment, come with a certain stigma, but ultimately it has to do with the high rate of chargebacks people within these industries tend to suffer. Different merchant account and payment gateway providers may have different criteria for what qualifies as high-risk, but there are certain industries that are almost universally regarded as high-risk, and most providers will count any company with a chargeback rate of around two percent or higher.
At two percent, that means one out of fifty sales is coming back to you. That’s a bad rate to have no matter what.
There are ways to keep your chargeback rate down that are worth pursuing even if you’re content with high-risk payment gateway providers. A high chargeback rate is no fun for any business. One of the most important steps that you can take is to make sure to contest every chargeback with the banks and credit card companies through which those chargeback claims are filed. Even if they don’t overturn the chargeback, having your contestation on record can help to establish a precedent. When someone makes a chargeback that seems contestable, the bank won’t be able to say “Well why didn’t you say anything when someone else did the same thing a year ago?”
Industries that have high chargeback risk tend to be those that involve expensive purchases and the kind of purchases that people might be embarrassed about or have buyer’s remorse. Potato chips aren’t a risky sale. By the time someone might file a chargeback, they’ve already eaten the chips and forgotten about them.
Firearms, on the other hand, are the kind of thing you might buy on an impulse and then regret. And because refunding a gun can be tricky, they might choose to go the chargeback route, instead.
This brings us to your refund policy. You can’t just have a no-questions-asked policy on something like firearms. You don’t know how they’ve been operating the firearm or whether it’s safe to sell to someone else after a return. But your refund policy does need to be transparent. If you can make a refund safely, make the refund. You lose a sale, but you don’t get a chargeback.
Make sure that anyone visiting your website can easily find your refund policy information, and don’t try to fight every single refund that someone asks for, or they’ll just go to their bank.
Even if your industry makes you high risk by default, it’s still worth trying to keep your chargeback rate down because it’s just plain good business to do so.
When you are categorized as a high-risk business, your options become severely limited. There are a lot of payment gateway providers who won’t even answer your calls, and the ones who will might charge you much higher rates than they would a comparable business in a lower-risk industry or with a cleaner chargeback history. Here’s the thing though: This is kind of a blessing in disguise.
The Upsides Of High-Risk Selling
One of the first major upsides to being categorized as a high-risk seller is the fact that you actually have fewer payment gateway providers to choose from. Think about it like this: If you’re shopping for a car, you don’t go looking at every single car in the entire world. You set a budget, you probably look for cars that are in your local area, and you focus on cars that fit your locale and lifestyle. There’s not much point driving a compact car if your home is up a rocky hill that demands four wheel drive. Likewise you don’t exactly need an SUV if you live alone in the city. You look for what suits your needs, is in your budget, and is accessible.
This might leave you with anywhere from ten to a few dozen cars to choose from. And maybe you cut that in half by deciding you only want a new car. And cut that number in half again because you’d really like to drive a red car, and again when you prioritize good gas mileage. The more focused your search, the easier it’s going to be to pick the best car. Eventually you might be down to two autos and you could safely make the choice with a coin toss.
So having your options limited by your status as a high risk seller can be for the best, because it cuts out a lot of the payment gateway providers who really aren’t suited to your needs. If you work in an industry like online gaming, then it is especially important to work with a company that understands your industry and what your needs are within your field.
The same goes for a lot of businesses classified as high-risk merchants, including travel agencies and airlines, eCigs, alcohol and so on. Even if you could get any old provider to sign you up, chances are that you would find out soon enough that they’re a bad fit.
A company that mostly works with, say, food trucks and shoe stores is not going to know what to do when you tell them that you just got hit with a bunch of illegitimate chargebacks. This isn’t the kind of thing that they’re used to, and they’re not going to know how to handle it as well as a company that specializes in people who work in your field.
In other words, it’s not so much that you don’t have any options when you are categorized as high-risk, rather, your choice just becomes a little easier. You don’t have to sift through the hundreds of providers who have no idea how to meet your needs. And now that your selection has been narrowed down, you’ll want to take a few steps to narrow it down further so that you can make a choice that truly suits your business and your future goals within your industry, whatever that industry may be.
Do They Cover Your Field?
Not every high-risk payment gateway provider covers every high-risk industry. Some may specialize in money based businesses like check cashing and payday lenders, while others might want nothing to do with that industry. Others may cover just about every high-risk industry, but not alcohol. Most payment gateway providers will list somewhere on their website which fields they work in and which fields they specialize in. Finding just the providers who work in your field will help you to narrow the selection down further.
How’s Their Customer Service?
24/7 service is pretty important when it comes to anything relating to your point of sale. A financial issue might only take seconds to correct, but it could become more expensive every minute it goes unchecked. With round the clock service you can be fairly certain that if you have an issue that needs to be resolved at one in the morning, that someone will be able to pick up the phone, forward you to the relevant department, and get your problems sorted. Again, this is something you’ll probably be able to find on the company’s website. It’s not the sort of thing you’re allowed to lie about in this field.
There are a lot of questions of compatibility that will come up when signing with a new payment gateway provider. If you have an established customer base, then you risk losing a lot of buyers when a payment gateway only accepts certain cards. Many users will just go to your nearest competitor rather than sign up for a Visa because you don’t accept their bank card anymore.
There are also payment gateway providers that only cover their own hardware. Though it is becoming more common for gateway providers to offer a simple tablet app that works on any iPad. Of course you’ll probably have to install a new card reader at the register all the same, but some gateway providers have a more demanding hardware installation process than others, and if you like the way you’re running things right now on that front, then this might be reason enough to look elsewhere for your payment gateway needs.
You may want to look at what kind of a commitment you have to make, as well. Some payment gateway providers will have you signed up for a multi-year contract. If you come to a point where you want to pivot your business, you’re still going to have these guys attached and that might limit your options in a negative way.
Finally there’s just that business person’s intuition that comes into play.
Do you get a good vibe from them? Do they seem honest and fair in their dealings?
You can check online reviews, and obviously this might raise some red flags. But ultimately you’re going to be faced with a few roughly comparable choices, and you’ll have to make a decision, and the decision might not be obvious. But, that’s what you sign up for when you become an entrepreneur. A lot of the job isn’t so much making the best choice as just making the choice. You have to move forward with the information that you have available to you.
Whatever choice you make, don’t think of your high-risk status as a negative. People have to travel so someone has to sell the tickets, even if that means taking on a higher risk of chargebacks than other businesses. There are a lot of businesses out there geared specifically to your needs as a high-risk merchant.