What is a High-Risk Industry? Guide for Merchants

If you’re a business owner in need of payment processing, you’re probably well aware that some financial institutions and payment processors tend to stay clear of businesses in high-risk industries. But which industries are considered high-risk? Industries where there are often a high number of chargebacks, have a poor credit history, high ticket volume, and industries that see a large amount of fraud are often considered high-risk. For businesses classified as high-risk, securing payment processing with traditional financial institutions can be difficult or nearly impossible. Here is what high-risk businesses are, so you can determine if you need to look at financial institutions specializing in this business type. Secure your payment processing today. Learn More

What is a high-risk business?

High-risk businesses typically fall under the following criteria:

Your business processes a large volume of sales
Multiple currencies are accepted
Your business is located in or conducts business in countries that are considered high-risk
Your business industry is considered high-risk as a result of fraudulent activity

But why does this category even exist? Payment institutions categorize some businesses as high-risk to protect themselves from potential financial losses, compliance issues, and reputational harm. Certain sectors experience more chargebacks or fraudulent transactions, such as travel, adult entertainment, or subscription-based services. When a customer disputes a charge or requests a refund, the processor often bears part of the cost, so industries with frequent disputes are flagged for closer monitoring. Legal and regulatory risks also play a major role since most businesses want to take care of their compliance efforts, especially with high value transactions. Businesses in areas like CBD, gambling, VPN or credit repair operate under complex or shifting regulations, meaning any noncompliance could expose payment institutions to penalties. Reputational risk is another factor since banks and processors prefer to distance themselves from industries that may attract public scrutiny, such as adult content, firearms, or vape sales. By labeling certain sectors as high-risk, payment processors and money transfer services can take additional precautions before approving merchant accounts. Before offering financial services, these institutions will take additional measures, such as anti-money laundering protection, transaction monitoring, assessing the business's risk level and more. These may also include stricter verification and regulatory compliance measures, holding reserves, or charging slightly higher transaction fees to offset potential losses. This approach allows them to balance opportunity and risk while still enabling legitimate merchants to operate.

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High-risk business types

Depending on the merchant, different types of organizations are considered high-risk businesses. However, these are some of the most common high-risk sectors recognized across merchants.

These business types aren’t necessarily bad or illegal. They simply carry higher financial or regulatory exposure and there are risk factors that cause certain concerns. Many of them work with specialized high-risk merchant service providers such as TailoredPay that understand their unique needs and can help them stay compliant while processing payments reliably.

Chargebacks and your business

Chargebacks play a significant role in determining whether an industry is high-risk since they can often be indicative of having high-fraud activity. As a result, merchant accounts can easily be closed if the risk department feels your business is receiving too many chargebacks. Banks typically rely on chargeback thresholds to determine if the business is receiving too many chargebacks – these can either be based on the number of your transactions or overall revenue that your customers might chargeback before the merchant account is flagged. A chargeback occurs when a cardholder disputes a transaction on their account. Each time this happens, the bank that issued the credit card will investigate the matter on behalf of the cardholder. If the bank determines there was fraudulent activity, the funds are returned to the customer. It’s then the responsibility of the merchant to prove the transaction was legitimate. A chargeback fee is charged as soon as the cardholder initiates the dispute. To get a chargeback reversed, the merchant needs to show that the transaction was legitimate (however, the fee will still apply).

High-risk classification factors

Your business might be considered high-risk if the following applies.

Poor credit: Just like in the personal finance space, businesses with bad credit (or no/limited credit history and a proven track record of transactions) might be classified as high-risk.
Free trials: If your business offers free trials that upgrade to paid subscriptions, it might be a high-risk business.
Recurring billing: Subscriptions and other forms of recurring billing are often labeled as high-risk clients by traditional payment processors.
High rates of fraud or chargebacks in your industry: As you might expect, if you go into an industry known for higher-than-average fraud or chargeback ratios, your business is likely to be labeled high fraud risk.

Merchant account fees in high-risk industries

It’s common for high-risk businesses to be charged higher fees for their merchant accounts than lower-risk merchants. When your business is deemed high-risk, it’s likely that many service providers will charge significantly higher transaction fees or even deny you service altogether. Here's how the fees usually compare in high-risk vs. "standard" industries:

	Standard-risk Industry (e.g., retail, SaaS, restaurants)	High-risk industry (e.g., CBD, adult, gambling, forex)
Transaction fee	2.5% + $0.10 per transaction	3.5%–6% + $0.25–$0.50 per transaction
Monthly account fee	$10–$25	$25–$100
Chargeback fee	$15–$20 per dispute	$25–$50 per dispute
Rolling reserve	Rarely required	Common, 5–10% of monthly volume held for 90–180 days
Setup fee	Usually $0–$50	$100–$500 depending on risk profile
Refund processing fee	Often waived or included	$0.25–$1.00 per refund
Early termination fee	Often waived	$250–$500 (some providers lock multi-year contracts)
Payout delay	1–2 business days	3–7 business days (some up to 14)
Gateway fee	$5–$15 monthly	$15–$35 monthly (some require proprietary gateways)

You should also know that there is no such thing as a free merchant account. But there’s good news – high-risk merchant account providers like TailoredPay help businesses keep their transaction costs down and avoid unnecessarily high merchant account fees. TailoredPay rates begin at 2.6% + $.15 per transaction. By partnering with a trusted merchant account provider, you can avoid unnecessary charges and surprise fees. Even if you're in a high-risk category, TailoredPay can ensure compliance and provide help for high-risk or cross-border transactions to keep your business moving.

Payment processing services for high-risk industry businesses

TailoredPay offers secure payment processing solutions for businesses operating in high-risk industries. Here are some of the services we offer for your business operations. Merchant accounts A high-risk merchant account is a payment processing account for businesses that traditional payment processors classify as high-risk. Our merchant account offers reliable and affordable payment processing to help your business grow. Applying for a high-risk merchant account with TailoredPay is easy and convenient. Payment gateways A payment gateway will enable you to securely accept credit and debit card payments, opening up plenty of new opportunities for your business. By integrating our fast payment gateway on your website, you’ll be able to take advantage of all that eCommerce has to offer while continuing to grow your business. Chargeback mitigation Get notified as soon as a customer disputes a charge and have the option to issue a refund before it turns into a chargeback. You’ll automatically receive an email and have up to three days to respond. By issuing the customer a refund and dealing with their issue, you can halt the chargeback process and dramatically lower your chargeback ratio.

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