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What Makes a Company High Risk?

Companies are considered high risk for a number of reasons including:

  • Is the company’s industry high risk like online gaming or adult entertainment?
  • How does the business rate with compliance and regulation?
  • Can the company provide transaction and credit history?
  • What is the business’s risk of financial failure?
  • Does the company face a high volume of returns, refunds and chargebacks?

If your company gets labeled as high risk you will have a hard time getting insurance, merchant accounts or financing. Businesses categorized as high risk in Europe can get a high risk merchant account in order to accept credit or debit card payments. The level of risk associated with a business may vary depending on the type of business.

Which Businesses Are Considered High Risk?

More and more online businesses are applying for high risk merchant accounts as they are considered in risk of failing or encountering problems in the future. A lot depends on the type of industry your company is involved in. The types of internet businesses that are considered high risk companies include:

  • eCommerce
  • Internet dating sites
  • Online auction sites
  • Internet gaming sites
  • Online media
  • Fortune telling and horoscope sites
  • Online affiliate businesses
  • Multi-level marketing
  • Software download companies
  • Online travel industry sites
  • Telemarketing businesses
  • Telecommunications 
  • Online holiday planners
  • Forex companies
  • VoIP services
  • Property rental sites
  • Health supplement, pharmaceutical and vitamin sites

Why are Online Businesses Considered High Risk?

Banks and financial institutions consider online businesses particularly prone to be high risk because of their vulnerability when receiving credit card payments online; canceled transactions; the high number of chargebacks; returned items and refunds. It doesn’t really matter how ethical, organized or well-planned your online business is; if it is online it inevitably comes with a high level of risk and this is recognized by banks and financial institutions.

Online businesses that experience a high volume of traffic and turnover are at risk of fraud from within the company and from the clients. Many online businesses, especially gaming businesses and Forex are based in offshore jurisdictions where historically money laundering and fraud have been a problem in these industries.  Gaming companies are a typical example of high risk businesses. With a gaming business risks include chargeback disputes; legal issues; the danger of gambling addiction; clients from many different jurisdictions across the globe and simply the nature of the business. 

Whatever the risks, all online companies need a payment gateway, merchant bank account and business bank account. If the online business is new they will have no credit and transaction history to show potential banks. If startup businesses are in one of the high risk industries, then that makes it even harder to find a bank willing to offer them an account. 

2020-07-08T13:35:34+00:00
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