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4 Ways to Understand High-Risk Merchant Accounts – ReadWrite

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4 Ways to Understand High-Risk Merchant Accounts - ReadWrite


Did you realize that your enterprise merchant account can be classified as a high-risk account? After accepting debit and credit card transactions from consumers, providers will process your payments and deposit them into a given bank account. A transaction fee is deducted per processing carried out.

However, not all businesses pay the same amount in fees. The reason is those payment processors separate businesses into two groups; high-risk accounts and low-risk accounts.

Ways to Understand High-Risk Merchant Accounts

If you plan to open a merchant account, you should know that your account will fall into either a high or low-risk merchant account. A high-risk account is often considered to be at a higher risk of fraud and chargebacks. Higher-risk higher processing fees to better protect themselves in case of chargeback or fraud.

Here is what you should know about high-risk accounts if your processor categorizes you as an increased risk.

How can one define a High-Risk Merchant Account?

When your payment processor identifies a higher probability of fraud or chargebacks, you will be categorized as a high-risk merchant account. This directly impacts the processing fees that you’ll have to part with to accept debit and credit card transactions from customers. Low-risk merchant accounts are flexible. The pricing terms and the processing fees are negotiable.

To better recognize a high-risk account, payment processors often evaluate your tax information, credit check, and business financials to conclude whether you belong to that category.

How Payment Processors Determine a High-Risk Merchant Account

You can be identified to be a high-risk merchant account if;

  • Your credit score is below average.
  • Your business financial status is unstable
  • Your financial history has some evidence of chargebacks or fraud.
  • Your enterprise is newer and does not have an established financial history
  • The business address provided is different from where you conduct your operations.
  • The geographical region you operate from is high-risk.
  • The products and services you provide to your consumers are risky or questionable. Things like online gaming, adult entertainment, firearms, and pharmaceuticals can be classified under potential red flags.
  • The services and products you provide are costly

If You Are Classified under High-Risk Merchant Account, What’s Next?

It would be better financially not to be listed as a high-risk account. Various payment processors differ slightly on established standards to identify what qualifies as high-risk or low-risk merchant accounts. Some may choose to categorize you under risky merchants, while others may opt not to.

If you are labeled as a high-risk merchant account, you will most likely experience the following;

  • Higher transaction fees
  • You may be required to sign a long-term contract with your payment processor
  • In case of a chargeback request from a customer, you will be paying additional chargeback fees.
  • You have to accept automatic contract renewals or untimely termination charges
  • Sometimes, your processor may demand to temporarily withhold some of your sales to be better prepared in case of fraud.
  • Acknowledge that your processor is capable of freezing your account if they find questionable or risky behaviors in your processing.

How Can One Avoid A High-Risk Merchant Account

Indeed, there are some things you can do to avoid the high-risk merchant account’s classification. However, these interventions need to be invested over time. For example, you need to identify the steps to take to increase your credit rating and repeatedly avoid chargeback fraud. Invest in cultivating a good merchant account history with time, and the scales will sooner or later begin to favor you. For the time being, you can search for a favorable payment processor while you develop a better account history.

One example is Transcend Pay payment processors. These payment processors work with diverse financial institutions and banks to offer payment processing services that have friendly transaction fees. Transcend has the necessary tools to assist you, whether you are starting a new venture and prepared to start collecting payments, a corporation seeking more flexibility, or in a High-risk business willing to open a high-risk merchant account.

Final thoughts

There are numerous reasons why your enterprise can be classified under the high-risk account. However, if you pick a dependable payment platform to handle your high-risk account, the process becomes a lot less complicated. There are businesses with a higher likelihood of disputes. Therefore, they come with more rigid terms. However, when you allow your payments to go through a trustworthy high-risk payment processor, you can comfortably carry on with your daily activities, knowing that the chances of chargebacks and fraud are significantly reduced.

Image Credit: karolina grabowska; pexels; thank you!

Politics

Fintech Kennek raises $12.5M seed round to digitize lending

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Google eyed for $2 billion Anthropic deal after major Amazon play


London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from Kennek.io; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

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Fortune 500’s race for generative AI breakthroughs

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Deanna Ritchie


As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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Politics

UK seizes web3 opportunity simplifying crypto regulations

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Deanna Ritchie


As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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