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

  1. Is the company’s industry high risk like online gaming or adult entertainment?
  2. How does the business rate with compliance and regulation?
  3. Can the company provide transaction and credit history?
  4. What is the business’s risk of financial failure?
  5. 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

  • online eGaming companies

  • 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.

Recommended for you

What is a Company Certificate of Incorporation?
07.10.21
A certificate of incorporation is a legal document or license with some relevance to the formation of a company or corporation. The exact meaning of the term differs depending on the legal system in which it is being referenced.   In the U.S. and Canada,...
About Tranzbase
06.10.21
What is Tranzbase?     Tranzbase is a network of convenient banking solutions based on a unified online platform: all types of innovative banking services and internal services for managing personal and family assets, online transfers, and payments. This includes bulk payments, contactless cards for...
The World's Largest Banks
12.09.21
The same banks have remained at the top of the list of the largest banks since 2017. The largest banks in Europe are still the U.K.'s HSBC followed by French financial institutions BNP Paribas and Crédit Agricole. The leading European bank, HSBC has total assets...