What To Expect From a High-Risk Merchant Account Underwriting Process?

by Confidential Banking #1 Merchant Processing Services

The merchant account underwriting process can be invasive and enraging for business owners. This is particularly true of high-risk merchant accounts and those businesses that banks and other traditional processors have turned down. There are businesses in every industry that defy regulations and create a bad name for those who are legitimate. Due to these untrustworthy few, banks and payment processors are unwilling to work with businesses in a high-risk industry. In turn, the underwriting options a high-risk company has are sparse.

If you are a high-risk retailer (say, you run an online poker business), you will likely be denied your merchant account. The online poker industry is too risky for most payment processing companies, but where they decline, a high-risk merchant account specialist like Liberty Enterprises approves. With an extensive network of banks, processors, and direct relationships, they can help you get your online poker merchant account with minimal hassle.

Note: Although most reputable high-risk merchant account specialists can provide solutions for almost any industry, it is always a good idea to inquire first-hand if the provider in question works with your particular industry.

How does the ideal high-risk merchant account application look like?

While there is no standard for a perfect high-risk merchant account applicant, there are a few variables that can speed up the application process:

The right applicant will have a consistent track record of actively communicating with its clientele and a minimal chargeback ratio. Most processors look for applicants with a chargeback ratio of less than 1%. That being said, it is likely that some processors might be willing to accept applicants with a chargeback ratio of over 1%, but under 1.5%, provided that the applicant’s history does not show evidence of increasing ratios over time.

Processors also consider the monthly processing volume when it comes to underwriting high-risk merchant accounts. Liberty Enterprises, for example, will only accept applications with minimum monthly processing of $75,000. Again, other providers will willingly board smaller high-risk merchants as long as they fulfill the other underwriting conditions.

Avoid waving the red flags.

When it comes to high-risk merchant account underwriting, the most obvious red flag is a poor reputation in past dealings, as evidenced by the Better Business Bureau (BBB) or the Consumer Financial Protection Bureau (CFPB). If there is an indication of poor practices, underwriters may refuse your high-risk merchant account application.

Another discouraging indicator for underwriters is when you have a history of litigation, negative media coverage, or anything else that reflects poor or unfavorable business practices. That being said, past problems may not always be a deal-breaker. If you have something in your background that could be construed negatively by underwriters, it is best to disclose it early on in the application process.

Other red flags include:

● A consistently high or increasing chargeback ratio

● Frequently changing or attempting to change processors

● Bad credit or low credit score

● Other retailer accounts on a bank statement

● Financial instability

● Sharing an account with another retailer

Conclusion

Since the underwriting process when applying for a high-risk merchant account can sometimes be confusing, it is invaluable to have the right payment processor to guide you through the process.