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high-risk

How Do I Know If I’m Considered A High-risk Business?

Businesses are designated as high-risk by banks, credit card processors and insurance companies. This is due to a combination of risk management factors, including whether your business type is heavily regulated by a government (or disparately regulated by various states), runs a higher risk of defaulting on a loan or incurring chargebacks, or operates in a market oversaturated with businesses of the same type.

A high-risk designation falls into two categories: red zone (you operate in an industry that is considered high risk independently from your individual business history), or grey zone (your business is high risk due to your processing history or performance).

Red Zone main factors

  • Your sector is listed on a high-risk industries list, please see restricted activities and industries below.
  • You are not compliant with the security regulations of your industry.
  • You are in a sector with high chargeback ratios.
  • You are in a sector with a high employee turnover rate.
  • You do business in countries with a high chargeback or which have sanctions imposed for political reasons (for example Brazil, Mexico, Russia, etc.)  

Grey Zone main factors

  • You’ve been previously labelled as a Terminated Merchant (TMF), which means that you’ve already lost a merchant processor due to excessive number of chargebacks.
  • Your business is relatively new, and with little to no credit card processing history.
  • You have a bad credit card history (such as not paying bills on time, or not providing a collateral for loans as high risk).
  • You are experiencing a high number of chargebacks (above 1%).
  • You are an international merchant with a multi-currency business.
  • You experience a high volume of refunds and returns.

Restricted activities and industries

Various businesses fall into the category of restricted activities and industries. You can read more about it here.

If your business is in the grey zone

If your company falls into the grey zone, your business history is going to play a huge role in the type of credit card processing that will be available to you. New businesses without processing history are usually at a disadvantage, especially in the case of card-not-present payments where fraud risk is higher.

However, businesses in the grey area with good processing and stable financial history can usually find a provider to help them enable online payments.

If your business is in the red zone

If your company falls into the red zone because you are operating in a high-risk industry, you can still find a provider to help you accept payments online.

For example, at PayPugs we understand that many of the activities on the restricted list are legal in some countries and not in others and that in many of the restricted industries business can be conducted in an entirely legal manner. 

Whether you are in either zone and you are unsure if you can register with us, please feel free to book a call with one of our Business Development Officers.

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