It is perhaps an oversimplification to suggest that the entire payment card system is really just a big insurance policy, but it’s definitely true to say that, as you zoom in to merchant-level, where there is more risk, there are more fees.
Card companies have a lot of historical data – several years and trillions of dollars’ worth, in fact. What kinds of transactions prove to be the most at risk for fraudulent behavior? If your “merchant type” is in the second highest risk category, Restricted Merchant Type – you might have a tough time getting the best deal on your processing account. If you’re in the highest risk group, Prohibited, you might have a tough time getting an account at all.
Whilst HOW you sell your merchandise/services plays an important factor (online, over the phone, via a catalogue), WHAT you sell is also important and there are some inclusions on these lists that might even surprise you, the purveyor of such goods. It’s not just online ammunition sales. Did you know, for example, that if you start up selling bespoke golf clubs you’re going to have a tough time getting decent processing rates? It doesn’t even matter if you’re brick and mortar – custom fitted golf clubs, in fact ANY tailor made products, are often at the highest risk of fraud. Why? Usually because that’s a final sale. Also, friendly fraud can be a go-to method of dispute resolution here. Don’t like the new clubs (not every round is par) and the guy won’t give you a refund? Chargeback.
Fraudulent activity is obviously more prevalent online – cardholders and thieves alike have a sense of anonymity behind the keyboard and have more sophisticated ways of masking their IP. It’s common sense to recognize that if you’re an online-only merchant, you’re more at risk of getting scammed.
Regardless, what can you do if your business type is “higher risk”? How can you be sure you’re getting the best deal?
Well, using a brokerage service to find you the best rate is a good start. Individual processors will closely guard their underwriting procedures – a brokerage service in THIS instance won’t just find you low rates, they’ll often start by grouping your business together with lower risk merchant types to find the best service provider for you. Now you’re playing on a more even playing field.
Also worth pointing out is that if you, the merchant, is doing the leg work yourself, going “from door to door” with different processors won’t get you a clear picture of all the options. By speaking to an expert in the processing industry, you can be sure you’re getting the best package without any hidden surprises.
Let us know in the comments what tribulations you’ve suffered trying to get your merchant accounts up and running.