An In-Depth Look At Hard-To-Place Merchant Services

For many businesses, securing reliable and efficient merchant services is straightforward. However, some fall into the category of ‘hard to place,’ which means they face significant challenges in obtaining standard payment processing solutions. This blog post examines why these businesses are labeled as such, the risks they pose to payment processors, and the innovative solutions that can help them secure hard to place merchant services.

Understanding Hard-to-Place Merchant Services

The term ‘hard to place’ generally refers to businesses that payment processors and banks consider high-risk. These businesses often operate in industries associated with high chargeback rates, legal uncertainties, or reputational concerns.

Examples include adult entertainment, e-cigarettes, telemarketing, travel services, and many others. These industries face stricter scrutiny due to their higher likelihood of financial instability, regulatory changes, and fraudulent activities.

The primary challenge for hard-to-place businesses, in addition to just finding a payment processor willing to take them on, is managing the higher fees and stricter contract terms that come with high-risk processing. These conditions are set by payment processors to mitigate potential losses from chargebacks and fraud, which are statistically more common in these sectors.

The High-Risk Factors: Why Some Businesses Are Considered Hard to Place

• High Chargeback Ratios: Chargebacks occur when customers dispute a charge and the payment is required to be refunded. Industries like travel and entertainment have higher chargeback rates due to the nature of their transactions, which can involve high ticket values and advanced booking times.
• Regulatory and Legal Issues: Businesses that face frequent changes in legal regulations or operate in legally complex environments (like CBD products or certain financial services) are often labeled as high-risk. This is due to the potential for significant legal repercussions if the business fails to comply with applicable laws, leading to fines or business closure.
• Reputational Concerns: Industries that may attract negative public perception or media scrutiny (such as adult entertainment or gambling) are also categorized as high-risk. Payment processors are cautious about associating their brands with these types of businesses due to potential backlash or damage to their reputation.
• Fraudulent Activities: Some sectors are prone to higher levels of fraudulent transactions. For instance, businesses that operate online or deal with digital goods and services have a greater exposure to fraud risks, such as identity theft or payment fraud.

Mitigating Risks and Securing Payment Processing

For hard-to-place businesses, demonstrating reduced risk to payment processors is key to securing merchant services. Here are some strategies these businesses can employ:

• Enhanced Due Diligence: By conducting thorough background checks and implementing robust verification processes, businesses can prove their credibility and stability to potential processors. This might include detailed financial reports, compliance checks, and security audits.
• Chargeback Prevention Plans: Implementing effective strategies to reduce chargebacks is crucial. This could involve clearer communication with customers about what they are buying, improved customer service, and rapid dispute resolution mechanisms.
• Security Measures: Adopting advanced security technologies like SSL encryption, two-factor authentication, and PCI DSS compliance can reassure processors of a business’s commitment to secure operations and customer data protection.
• Transparency: Being upfront about the nature of the business, its customer base, and transaction volumes can build trust with payment processors. Transparency helps mitigate the perceived risk by showing that the business manages its operations responsibly.

By adopting these comprehensive risk management strategies, high-risk companies can improve their chances of securing stable, reliable merchant services.

Solutions for Hard-to-Place Businesses

For businesses categorized as hard to place, finding the right payment processing solution requires going through a complex landscape of service providers, each with their own set of criteria and tolerance for risk. Consider effective strategies that can help these businesses secure the payment processing services they need to operate efficiently and grow.

Tailoring Solutions to Business Needs

Hard-to-place businesses must seek out payment processors that specialize in providing high-risk merchant services or those that offer customizable services tailored to specific industry challenges. These specialized providers often have a deeper understanding of the risks associated with certain industries and are better equipped to offer solutions that address these unique needs.

• Specialized Payment Processors: Certain processors focus exclusively on high-risk industries, offering terms and services that are specifically designed to handle higher levels of risk, such as flexible chargeback protection plans and specialized fraud prevention tools.
• Negotiating Terms: Businesses can sometimes negotiate the terms of their payment processing agreements to better suit their needs and risk profiles. This might include adjusting reserve requirements, transaction fees, or even settlement times.
• Diverse Payment Options: Offering a variety of payment methods can help mitigate risk by diversifying the transaction base. This includes international payment methods, which can cater to a global customer base, thereby spreading transaction risk across different markets.
• Building a Positive Processing History: By maintaining a low chargeback ratio and demonstrating a history of stable transactions, businesses can gradually build a positive reputation with processors. This could eventually lead to more favorable terms and lower fees.

Leveraging Technology for Compliance and Security

Adopting the latest technologies in payment processing can also play a crucial role in securing merchant services for hard-to-place businesses. By leveraging technology, these businesses can enhance their compliance with regulatory standards and improve their overall security posture, making them more attractive to potential processors.

• Advanced Fraud Detection Systems: Implementing state-of-the-art fraud detection tools that use machine learning and artificial intelligence can significantly reduce fraudulent transactions and associated chargebacks.
• Regular Compliance Audits: Staying ahead of regulatory requirements through regular audits and compliance checks can demonstrate to payment processors that the business is serious about maintaining high standards of operation.

Why Choose AVP Solutions for High-Risk Merchant Services

AVP Solutions is a premier provider of payment processing solutions, especially suited for hard-to-place businesses. Our extensive experience with high-risk industries allows us to offer customized, secure, and compliant payment services that address the specific challenges our clients face. With AVP Solutions, your business gains a partner who understands the intricacies of high-risk payment processing and is committed to facilitating smooth and reliable transactions.

Securing the Future for Hard-to-Place Businesses

While hard-to-place businesses may face significant hurdles in securing standard payment processing services, there are numerous strategies and solutions available to navigate these challenges effectively. By understanding their own risk profiles, negotiating with the right payment processors, and leveraging advanced technology, these businesses can secure the services they need to operate successfully and grow.

Additionally, partnering with our knowledgeable and experienced team can provide the specialized support and tailored services that high-risk businesses require. With the right approach and partnerships, hard-to-place businesses can thrive, turning their payment processing challenges into opportunities for innovation and development.