High-risk merchant accounts and cryptocurrency merchant accounts have transformed the way payment processing is done for businesses considered as high-risk. Before these specialized merchant account offerings existed, it was nearly impossible for a high-risk business to operate within the e-commerce space. It also meant they could only accept cash and check transactions, significantly limiting potential customer reach.

What is a Merchant Account?

Merchant accounts are an important part of running an e-commerce business. Specifically, it is a bank account enabling your business to accept credit card and debit card transactions. An example is when a client pays for your services using their credit/debit card, the payment is temporarily held in the merchant account and then transfers to your business account. The merchant account makes it possible for your e-commerce business to efficiently process payments from consumers. Without a merchant account, your business would only be able to accept cash and check payments, which is extremely limiting to the business overall. This is why most e-commerce businesses choose to use a merchant account from a third party.

Why Your Business Might Need A High-Risk Merchant Account

Some businesses are considered high-risk and therefore some banks will not work with them. High-risk typically refers to a higher probability of fraud and chargebacks, as well as transaction size, sales model, order fulfillment timeframes, and its specific industry. The solution for these high-risk businesses is to open up a high-risk merchant account. A high-risk merchant account is a payment processing account for businesses that traditional payment processors classify as high-risk.

There are several reasons your business might be considered high-risk by a payment processor. They include: 

• Having a bad credit: A business owner with no credit/limited credit or a poor credit score might qualify the business itself as high-risk. 
• Offering free trials: Financial institutions sometimes consider the offering of free trials as high-risk. 
• Recurring billing: If your business offers recurring billing services, it might be considered high-risk. 
• High-ticket sales: Processing large ticket amounts might qualify your business as high-risk.
• Your industry has a high rate of fraud or chargebacks: If the industry has a high rate of fraud or chargebacks (higher than what is considered average), it might be labeled as high-risk. 

However, some high-risk industries fall under separate reasons for why they are categorized as high-risk. One particular example is cryptocurrency. 

Cryptocurrency vs. Fiat Currency 

To understand what a cryptocurrencies merchant account is and how it can benefit your business, it helps to understand the difference between fiat currency and cryptocurrency. Fiat currency is what we primarily use today (it’s paper and coin, and is physical). It’s backed by banks and governments and therefore is considered to be centralized. One of the major downsides of a fiat currency is that banks and governments tend to have the most control over it, including the amount that is available (printed). 

Cryptocurrency is the complete opposite. It’s a digital currency that is decentralized. Cryptocurrencies such as Bitcoin, Dogecoin, and others have become popular because of the anonymity they provide, the reduced amount of processing fees, and also because there is no potential of chargebacks for business owners.

What is a Cryptocurrency Merchant Account?

A cryptocurrency merchant account enables customers to purchase various forms of cryptocurrency using a credit or debit card. Cryptocurrency exchanges are considered high-risk to most merchant account vendors primarily because of the following reasons:

• Significant volatility: Cryptocurrency is known for being an extremely volatile market, often having unexpected increases and decreases in prices. 
• Considered CNP transactions: Also known as card-not-present transactions, this means a credit or debit card was not physically present for the crypto purchase. 
• Potential for money laundering: Cryptocurrency is not backed by a central authority and it has no physical presence which means the currency is susceptible to money laundering. 

Benefits of Cryptocurrency Merchant Accounts For High-Risk Businesses

• No chargebacks: Cryptocurrencies are peer-to-peer and utilize advanced blockchain technology that makes it unlikely for chargebacks to occur. 
• Reduced fraud activity: Blockchain technology is known for being extremely secure, making it very unlikely for customers to experience fraudulent activity. 
• Multi-processing options: Another benefit of crypto merchant accounts is that they are able to process credit/debit card payments in addition to cryptocurrency payments, whereas a traditional merchant account can only process credit/debit cards. This has the potential to ultimately widen the reach of a high-risk business to a much broader customer base. 

Other Examples of High-Risk Businesses

In addition to cryptocurrency accounts, the following industries are commonly considered to be high to medium risk:

Merchant Account Fees in Cryptocurrency and Other High-Risk Industries

One main concern for high-risk businesses opening up a merchant account is the question of fees. And while it is common to be charged a much higher transaction fee than low-risk businesses, this is typically only true when trying to go through a traditional payment processor (if the high-risk business is even able to get approved). High-risk merchant account providers are often able to keep those transaction fee costs low.

How To Apply For a Cryptocurrency High-Risk Merchant Account

If you are applying for a US cryptocurrency merchant account, you will need to include the following documents with your application:

• Proof of anti-money laundering compliance 
• Passport, Driver’s License, or government-issued ID
• Voided check or bank letter
• If applicable, 3 months of most recent credit card processing statements from your previous or existing provider
• 3 months of most recent business bank statements. If the business is new, 3 months of most recent personal bank statements are required

Your Reliable Payment Processing Solution

At TailoredPay, we’re high-risk merchant account and payment processing experts that have our clients’ best interests in mind. Our carefully selected range of online and virtual payment gateways are ideal for high-risk businesses of all shapes and sizes.