The Approval Process for High-Risk Merchant Accounts: A Beginner’s Guide

Welcome to the wild west of the financial world: High-Risk Merchant Accounts. These tailored accounts are offered by technically forward fintech companies and online banks, who are helping businesses tackle the challenges within the online e-commerce world – Making sure that high-risk businesses can trade globally without getting held up by technical hitches, chargebacks, and red tape. Let’s be realistic, just because a business is operating in a “high-risk” industry, it doesn’t mean that the business is not entirely legitimate. So why should business owners in these industries be held back by traditional banks? New and tailored banking platforms offer advanced solutions and security measures to help company owners reduce fraudulent activity, which is of course increased within high-risk industries.

High-risk merchant accounts are a handy key for businesses to unlock new customer pools by scaling up business with fewer limitations compared to when using traditional business bank accounts. The bottom line and unique selling point of high-risk merchant accounts are that they are for businesses that deal with products or services that experience higher rates of chargebacks, fraud, and general social stigma. An example of this could be selling adult toys or a service related to adult content – typically, your average bank will take issue with this and it’s because the customers that use these services tend to request refunds and chargebacks more often than, say, selling stationary equipment or food. 

Before you go ahead and apply for a high-risk merchant account, there are a few things to consider, as not just any business owner can open one right away. We’ve put this quick cheat sheet together for you so that you know what to expect and how to prepare.

How Do You Apply For a High-Risk Merchant Account?

So you’ve made a decision to apply for your high-risk merchant account, but how do you get started? Well, it’s not quite as simple as just phoning up a bank and saying “I want to be approved!” but luckily for you and your business, it’s hardly rocket science either. Here’s a general idea of what you’ll need to do, though keep in mind that this process may vary a little from one bank to another:

1. Check your credit history before applying, every person has a unique credit score and this will impact your application. This is not necessarily associated with your business, but with you as an individual. It’s best to know where you stand before you begin.

2. Find the right payment processor: Not all processors are created equal, and some specialize in high-risk merchant accounts. Use your virtual compass to navigate the web, and compare fees, services, and reputation to find the best fit for you.

3. Prepare your documents: This includes things like your business registration, VAT (tax) codes, and current banking information. The important thing to note here is to prepare documents for you as an individual, but also documents for your business. Getting these bits and pieces organized at this stage will make your process much quicker once it all gets going.

The basics tend to be, proof of address, ID, a bank statement, and tax information.

4. Complete an online application: Typically you will need to fill out an initial form on the banking platforms site, this could be a basic initial form so that the bank can consider what type of business you have before allowing you to apply for an actual account, as these types of services are quite specific they tend to specialize and some may not be suitable. Then, it’s likely they’ll get in touch to get some more information from you.

5. Once your application has been submitted, the banking platform will conduct a review process to make sure that you meet their qualifications and the criteria, this is usually all online but they’ll usually have the option to give them a call for support if you get stuck.

6. Wait for the verdict: After the review process, the processor will let you know if you’ve been approved or not via email, typically these advanced fintech sites are very fast compared to traditional banks.

7. Get set up within your account – If you’re approved, you’ll need to fill out some fields and make sure your account is completed. You’ll be given access to an online portal where you can log in and do all of this.

8. Embed the payment portal on your e-commerce store or website. Generally, a high-risk merchant account will be associated with a payment portal (sometimes known as a payment gateway), this will allow you to accept payment from your customers and it will be integrated with your merchant account and banking.

9. Sit back and enjoy the smooth business and spend more time focusing on growing your business, instead of worrying about chargebacks and bank account freezes. You’re now set up for success.

Where to obtain a high-risk merchant account

Savvy fintech companies are starting to clock on to the fact that high-risk business owners are in need of tailored banking solutions that help to reduce the slowness and barriers caused by red tape that is associated with normal banks. Due to this, there are multiple online companies offering this type of service and they’re accessible for you to find on search engines.

From our research, we noted that Monneo is an advanced fintech company that helps high-risk businesses operate efficiently. Find out about their high-risk merchant accounts. The advantage of this provider is that businesses can send and receive different currencies easier using their account. They’ve also won a bunch of awards for being forward-thinking, so if you’re looking for an account under a bank that offers the latest services, we’d go with something like this.

The other thing to consider is that new “banks” are popping up every day, as all it takes is for them to make a quick website with a template. So be careful of very new companies that do not have partners. Do your checks to make sure you’re working with a reliable company before beginning your application. If something seems too good to be true, it probably is!

How Long Does it Take to Get Approved?

Most good services will typically respond to your application within a business week or 5 working days. But often a lot quicker, depending on the demand. Businesses have been known to be approved in 3 days at times, but it’s worth checking when you are making your application to know for sure. The main thing is to ensure you’ve done everything you can to be approved, rather than the time it takes.

Getting Approved with a Low Credit Rating

If you’re worried about your low credit history, there are ways to mitigate the impact of this on your application. Firstly, it’s good to know that these services can often still help business owners with low credit scores – they tend to understand that typical banks will “judge” business owners for high-risk transactions and services, so won’t hold it against you per say. Rather, they may just increase costs to cover the additional risk that they are dealing with.

If you can show that you have a steady income, tax receipts, and show invoices, this will also help you. Being transparent about your business and service is the best thing you can do to build up trust with your provider.

The other way to deal with this is by taking steps to improve your credit score. There are many ways to do this and that could warrant a full separate guide in itself. Paying off any debt, and overdrafts and obtaining feedback from partners can be some positive initial steps for improving your score. There are also some more detailed ways to do so if you take the time to do a little bit of research. 

Further Reading:

– Choosing Technologies for a Startup

– Obtaining Personal Loans from Banks