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The Advantages of a Merchant Account

Bank Account for High Risk Business

Time to read: 3 minute(s)

In order for those businesses that have received the status of “high-risk” to be able to conduct transactions with payments using credit and debit cards, they need to open a European online bank account for merchants. Such a business will be classified in this category if there is a suspicion of a high probability of fraud or chargebacks. These are not the only conditions for high-risk business bank accounts, there are a number of other factors that are determined individually.

In the payments industry, there is no specific structure or special body that would deal with determining the level of risk for a high risk business for banks. Therefore, all high risk acquiring banks or payment systems set their own specific risk factor standards.
Before you start working with any company, they may warn you that they do not serve certain industries. But most do not refuse immediately but begin their investigation and study of your business for risks. Based on the conclusion they make, whether the business gets rejected or not. Everything is ultimately determined by the internal criteria that the payment system has established, as well as what its view of risk management is.

What is the Difference Between High Risk and Traditional Accounts?

At first glance, it seems that if your business has received the stigma of high risk, then this is something intimidating. Even the fact that the payment processor can cancel the application you sent already causes negative emotions. But take into account the fact that some payment systems meet in such a situation, accepting your request, but setting some measures to make it possible to open a European online bank account. There are several ways that a company can mitigate risk. This is also the difference between the account you are already used to and the bank account for high risk business.

Lengthy Application Process

When your business is classified as high risk, your profile will be scrutinised in order to open a high risk account in banking. You will most likely be asked to provide details or demonstrate past patterns of your finances. Typically, payment processors check your partnerships, and business processing history, or ask you for your personal credit history.

Payment Processing Costs More Due to Fees

The standard transaction processing fee for small businesses does not exceed 0.3% of the payment amount, but when it comes to high risk merchants credit card processing, the fee rises to 1.5%. Despite the fact that each company puts its own commission on the transaction, the fact remains the same: the amount of the commission is proportional to the level of risk.

Cash Reserve Requirements

In practice, certain payment processors have been observed to hedge certain amounts of money for the business. They use several methods to maintain the limits of this reserve:

  • They use rolling reserves, setting aside the part of the transaction that you process at a rate that can be as high as 10%. For example, if you entered into a tolling agreement for 6 months, then you will be refunded the balance from the period January-July.
  • The processor can create a limited reserve, which means holding a certain part of each transaction made until the reserve appears at the desired level. When this happens, the transaction fees no longer apply, but the reserve remains.
  • You may also be required to make an advance reservation, which means holding transactions until the seller provides the required amount.

Opening an account for a business that is recognized as a high risk business can be troublesome and intimidating, PayDo offers the most comfortable conditions for opening such an account. You will know what awaits you thanks to technical support and open access to all necessary information on commissions and risk areas.

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