In today’s digital era, online businesses are thriving, and India is no exception. However, certain industries are deemed high risk by traditional banking institutions, making it challenging for them to obtain a merchant account. These businesses often face higher fees, stricter regulations, and a greater likelihood of chargebacks. In this comprehensive guide, we’ll delve into the world of high risk merchant accounts in India, exploring the challenges, benefits, and best practices for navigating this complex landscape.
What is a High Risk Merchant Account?
A high risk merchant account is a specialized payment processing service designed for businesses that are considered risky by banks and financial institutions. These accounts enable merchants to accept online payments, including credit cards, despite the elevated risk associated with their industry.
Why are Certain Businesses Considered High Risk in India?
Several factors contribute to a business being labeled as high risk, such as:
- High chargeback rates
- Elevated fraud risk
- Regulatory scrutiny
- Reputational concerns
Industries commonly classified as high risk include:
- Adult content and entertainment
- Online gaming and gambling
- Forex and cryptocurrencies
- Travel and tourism
- Subscription services
- Nutraceuticals and health products
Identifying High Risk Businesses in India
Let’s take a closer look at some of the industries that often require a high risk merchant account in India.
Adult Content Websites and Entertainment
Adult-oriented businesses, such as online streaming platforms, dating sites, and novelty product retailers, frequently face challenges when seeking a traditional merchant account. The adult industry is heavily regulated, and banks are hesitant to associate with businesses that may be perceived as controversial.
Online Gaming, Gambling, and Casinos
Online gaming and gambling are strictly regulated in India, with only a few states allowing these activities. As a result, businesses operating in this sector often struggle to find payment processing solutions. The high chargeback rates and potential for fraud further contribute to the high risk classification.
Forex, Cryptocurrencies, and Financial Services
Foreign exchange (forex) trading and cryptocurrency-related businesses are subject to intense regulatory scrutiny in India. The Reserve Bank of India (RBI) has issued warnings about the risks associated with these industries, making it difficult for businesses to obtain traditional merchant accounts.
Travel and Tourism
The travel industry is prone to high ticket prices, last-minute cancellations, and chargebacks, making it a high risk sector. Indian travel agencies and tour operators may find it challenging to secure a standard merchant account due to these factors.
Subscription Services and Recurring Billing
Businesses that rely on subscription-based models or recurring billing, such as online learning platforms or software-as-a-service (SaaS) providers, may be considered high risk. The potential for customer disputes and chargebacks is higher in these industries.
Nutraceuticals and Health Products
The nutraceutical and health product industry is subject to strict regulations in India. Businesses selling dietary supplements, herbal products, or weight loss aids may face scrutiny from the Food Safety and Standards Authority of India (FSSAI) and other regulatory bodies.
Challenges Faced by High Risk Merchants in India
High risk merchants in India encounter several obstacles when attempting to secure a merchant account and process payments.
Difficulty Getting Approved for Traditional Merchant Accounts
Banks and financial institutions are often reluctant to work with high risk businesses due to the perceived risks and potential for financial losses. This makes it challenging for these merchants to obtain a traditional merchant account.
Higher Fees and Transaction Costs
High risk merchant accounts typically come with higher fees and transaction costs compared to standard accounts. Payment processors charge a premium to offset the increased risk associated with these businesses.
Rolling Reserves and Holdbacks
To mitigate potential losses, payment processors may require high risk merchants to maintain a rolling reserve. This means that a portion of the merchant’s sales is held back for a specified period to cover potential chargebacks or disputes.
Increased Risk of Chargebacks and Fraud
High risk industries are more susceptible to chargebacks and fraudulent activities. Merchants must implement robust fraud prevention measures and maintain a low chargeback ratio to avoid account termination.
Stricter Underwriting and Compliance Requirements
High risk merchants face more stringent underwriting processes and must adhere to strict compliance requirements. This may include providing detailed business plans, financial statements, and other documentation to prove the legitimacy of their operations.
Benefits of High Risk Merchant Accounts
Despite the challenges, high risk merchant accounts offer several benefits for businesses in India.
Ability to Accept Credit Card Payments
A high risk merchant account enables businesses to accept credit card payments, which is essential for online transactions. This can significantly expand a merchant’s customer base and increase sales.
Access to Specialized Payment Gateways
High risk payment processors often provide access to specialized payment gateways that cater to the unique needs of high risk businesses. These gateways offer features such as advanced fraud detection, chargeback management, and multiple currency support.
Chargeback Protection and Monitoring
Reputable high risk payment processors offer chargeback protection and monitoring services to help merchants minimize the impact of chargebacks on their business. This may include dispute resolution assistance and tools to identify and prevent fraudulent transactions.
Offshore Account Support
Some high risk merchant account providers offer offshore account support, allowing Indian businesses to process payments through international banks. This can be beneficial for companies that face restrictions or limitations in the domestic market.
Potential for Higher Sales Volume and Growth
By accepting online payments, high risk merchants can tap into a broader customer base and potentially increase their sales volume. This can lead to significant growth opportunities, especially for businesses that operate in niche or underserved markets.
How to Get a High Risk Merchant Account in India
Obtaining a high risk merchant account in India requires careful planning and preparation.
Research High Risk Payment Processors
Start by researching high risk payment processors that cater to businesses in India. Look for providers with experience in your specific industry and a track record of success.
Prepare Necessary Business Documentation
Gather all required business documentation, including incorporation papers, business licenses, and financial statements. High risk processors typically require more extensive documentation than traditional banks.
Understand Fees and Contract Terms
Carefully review the fees and contract terms associated with each high risk merchant account provider. Pay attention to setup fees, transaction fees, chargeback fees, and any hidden costs.
Integrate with a Compatible Payment Gateway
Choose a payment gateway that integrates seamlessly with your high risk merchant account. Consider factors such as ease of use, security features, and customer support.
Maintain Low Chargeback Ratio and Mitigate Fraud
Implement strategies to maintain a low chargeback ratio and mitigate fraud. This may include using fraud detection tools, providing clear product descriptions, and offering excellent customer service.
Top High Risk Payment Gateways for Indian Merchants
Several payment gateways cater specifically to high risk merchants in India. Here are some of the top options:
PaymentCloud
PaymentCloud is a leading high risk payment processor that serves businesses in India and around the world. They offer a wide range of payment solutions, including credit card processing, ACH payments, and e-check processing.
Key Features:
- Specializes in hard-to-place merchant accounts
- Offers offshore account options
- Provides chargeback protection and fraud prevention tools
Host Merchant Services
Host Merchant Services is a reliable high risk payment processor that provides merchant accounts to businesses in India. They have a strong focus on customer service and offer competitive pricing for high risk industries.
Key Features:
- Offers a variety of payment processing solutions
- Provides 24/7 customer support
- Offers a free payment gateway with each merchant account
Durango Merchant Services
Durango Merchant Services is a well-established high risk payment processor that serves merchants in India and globally. They specialize in providing merchant accounts to businesses in challenging industries.
Key Features:
- Offers a streamlined application process
- Provides chargeback protection and dispute resolution services
- Offers a variety of payment processing options
SMB Global
SMB Global is a trusted high risk payment processor that caters to Indian businesses. They offer a range of payment solutions and have a strong focus on security and fraud prevention.
Key Features:
- Specializes in high risk merchant accounts
- Offers a secure payment gateway
- Provides 24/7 customer support
Soar Payments
Soar Payments is a reputable high risk payment processor that serves merchants in India and worldwide. They offer a fast and easy application process and have a dedicated support team to assist merchants.
Key Features:
- Offers a variety of payment processing solutions
- Provides a secure payment gateway
- Offers chargeback protection and fraud prevention tools
Best Practices for Managing a High Risk Merchant Account
To successfully manage a high risk merchant account in India, merchants should follow these best practices:
Implement Fraud Prevention Tools
Utilize fraud prevention tools, such as address verification systems (AVS), card verification value (CVV) checks, and 3D Secure authentication, to minimize the risk of fraudulent transactions.
Provide Clear Product Descriptions and Refund Policies
Ensure that your website provides clear and accurate product descriptions and refund policies. This helps set customer expectations and reduces the likelihood of chargebacks.
Offer Excellent Customer Service
Provide prompt and efficient customer service to address any concerns or issues that may arise. This can help prevent disputes from escalating into chargebacks.
Keep Chargeback Ratio Under 2%
Strive to keep your chargeback ratio below 2% to maintain a good standing with your payment processor. Implement strategies to prevent and manage chargebacks effectively.
Stay Up to Date with Industry Regulations and Compliance
Stay informed about the latest industry regulations and compliance requirements in India. Ensure that your business adheres to all relevant laws and guidelines to avoid legal issues.
Conclusion
Navigating the world of high risk merchant accounts in India can be challenging, but with the right knowledge and preparation, businesses can successfully accept online payments and grow their operations. By understanding the challenges, benefits, and best practices associated with high risk merchant accounts, merchants can make informed decisions and find the right payment processing solutions for their needs.
Key Takeaways:
- High risk merchant accounts cater to businesses in industries deemed risky by traditional banks.
- High risk merchants face challenges such as higher fees, rolling reserves, and increased chargeback risk.
- Benefits of high risk merchant accounts include the ability to accept credit card payments, access to specialized payment gateways, and potential for higher sales volume.
- Researching high risk payment processors, preparing necessary documentation, and understanding fees and contract terms are crucial steps in obtaining a high risk merchant account.
- Implementing fraud prevention tools, providing excellent customer service, and staying compliant with industry regulations are essential best practices for managing a high risk merchant account.
By partnering with a reputable high risk payment processor and following best practices, businesses in India can successfully navigate the complexities of high risk merchant accounts and unlock new growth opportunities in the digital marketplace.
Considering a high risk merchant account for your business in India? As an online seller or other high risk industry, you may struggle to get approved for traditional payment processing. That’s where understanding high risk merchant accounts becomes vital.
This complete guide will teach you everything you need to know, from defining high risk merchant accounts to choosing the best providers in India.
What is a High Risk Merchant Account?
A high risk merchant account provides payment processing services tailored specifically for high risk businesses.
High risk merchant accounts have features like:
- Higher processing limits
- Enhanced security and fraud tools
- Dedicated account management
Businesses may be considered high risk if they have a higher likelihood of:
- Chargebacks
- Fraud attempts
- Changes in businessstability
- Financial losses
Common high risk industries include:
- Online gambling
- Adult content
- Supplements and nutraceuticals
- Cryptocurrency exchanges
Because these businesses can pose larger risks, many traditional banks avoid providing accounts. That’s where high risk providers step in to meet the need.
Benefits of High Risk Merchant Accounts
The right high risk merchant account provides specialized services that facilitate business growth. Benefits include:
Access to Payment Processing highrisk payment gateway
Most importantly, a high risk merchant account enables acceptance of major credit cards and digital payments. Without these facilities, developing an online business becomes extremely difficult.
Added Security Featureshigh risk payment
High risk providers implement specialized fraud prevention tools and AI monitoring to watch for suspicious transactions. This protects the business from threats.
Improved Approval Odds
While traditional processors avoid uncertainty, high risk providers have expertise evaluating unique business cases. This improves the chances a high risk business gets approved for high risk payment account.
Cost Savings
Contrary to popular belief, high risk merchant accounts can actually cost less in fees compared to standard options. Leading providers are able to optimize rates.
Top High Risk Merchant Account Providers in India
Choosing from the many providers in India comes down to factors like reliability, security, and customer service. Here are five top options:
1. PaySpace
PaySpace tops the list as a dedicated high risk processing expert. All client accounts come with customized fraud prevention plus chargeback protection. Their approval rate also outpaces competitors.
2. InstaReM
InstaReM is a fast-growing online payment enabler serving both low and high risk accounts. They provide currency exchange and global payment options.
3. PayPal
A globally recognized leader, PayPal offers advanced fraud monitoring. Their user-friendly platform enables rapid scaling to new markets.
4. CCAvenue
CCAvenue brings two decades of digital payments experience in India. They offer merchants robust API integration options to enable custom checkout experiences.
5. Cashfree
Known for lightning fast payouts, Cashfree provides seamless reconciliation using their proprietary payment gateway.
When comparing providers, be sure to confirm:
- Reliable uptime – Choose players with proven infrastructure
- Security standards – Check for PCI DSS and data encryption
- Chargeback rates – Lower ratios indicate better protection
- Customer service – Support response times and availability
- Developer docs – Assess resources for custom integration
Steps to Getting Approved for a High Risk Merchant Account
Gaining approval requires presenting your business in the best possible light and partnering with specialists. Follow these steps when applying:
Choose an Established Provider for payment gateway tech
Work with a processor that specializes in your particular industry with a track record of approvals. Having an expert support your application strengthens success odds.
Gather Necessary Documents
Collect details like ownership information, projected processing volumes, average order values, website data, and policies. Thorough preparation demonstrates legitimacy.
Highlight Security and Fraud Prevention to avoid high risk payment
Emphasize existing measures that protect your business, showing steps you take to avoid problems proactively. Discuss plans to enhance efforts further.
Outline Business Processes
Document internal systems, operations standards, product/service guidelines, and customer management workflows. Detail promotes trust.
Prepare an Action Plan
If the initial application faces challenges, prepare an action plan for increasing eligibility on resubmission. Show a commitment to transparency and continuous improvement.
With attentive customer service and the right risk mitigation approach, many high risk merchants can get approved on their first or second attempt.
The Cost of High Risk Merchant Accounts
Pricing for high risk merchant accounts has three core components:
Account fees – Monthly and annual charges
Payment processing rates – Charged as percentage of transaction value or fixed cost per sale
Non-sufficient funds (NSF) fees – Levied if sales fund payouts
Rates vary based on provider type and perceived risk factors. Costs generally fall between 3% to 6% of transaction value for online and card-not-present sales. Providers may also implement tiered pricing based on processing volume or average order value.
Upfront application, setup and annual PCI compliance fees generally range from Rs 5000 to Rs 35000. NSF fees typically start around Rs 800.
Select providers also take a percentage of revenue as collateral with high rolling reserves. These contingencies allow absorbing losses in case of problems. Reserves are slowly released after demonstrating responsible operations for 6 to 12 months.
Tip: Negotiate pricing during onboarding or renewal periods when you have maximum leverage. Hit volume tiers reliably to qualify for rate reductions.
Ensuring High Risk Merchant Account Success
Once approved, working diligently to reduce risk makes good financial sense. Prioritize security and compliance.
Fraud Prevention Best Practices
Actively manage fraud with steps like:
- Screen orders with negative lists
- Analyze transaction histories
- Confirm identities for large purchases
- Delay shipping expensive goods until payments clear
Meet Data Protection Standards
Follow security guidelines like installing firewalls or HTTPS web access. Conduct periodic vulnerability scans. Maintain compliance certifications.
Optimize Dispute Handling
Document detailed evidence and timeline records for every dispute filed. Communicate promptly and courteously with issuing banks.
Review Statements Closely
Carefully audit statements to identify fees suggesting problematic transactions. Watch for patterns requiring intervention.
Stay Within Approved Scope
Carefully manage account use to adhere to approved business activities, average order values and monthly volumes. Ask before adjusting limits.
Diligence pays off by keeping accounts healthy and maintaining competitive processing rates!highrisk merchant account
Ready to Choose Your High Risk Merchant Account Provider?
Now that you know the critical considerations for securing a high risk merchant account in India & credit card processing, the final step lies in selecting your high risk payment gatewaypayment partner.
Assess providers in your niche industry based on previous success supporting similar business cases. Choose operations with solid reputations, robust feature sets, and expertise tailored specifically to your needs.
With an experienced high risk account manager guiding your onboarding process, gaining that crucial payment infrastructure becomes readily achievable. You can focus fully on profitably growing your online venture!
