What Are High Risk Transactions

In recent years, the prevalence of eCommerce has become a great opportunity for merchants to expand their business. But as online businesses rise, it also presented areas of errors that affect how they can process online payments.

With the Internet being the most preferred platform to search and do almost everything about anything, eCommerce became prone to fraudulent transactions and scams. Merchants with a high level of chargebacks due to these activities are deemed high risks by acquiring banks and payment processors.

Your business practices can put your business in a bad light. So it makes sense to avoid errors or risky transactions. In addition, it is always a good idea to resolve customer issues promptly to avoid filling of chargebacks.

But what exactly are transactions considered to be high risks?

Abundant Chargeback

A high chargeback percentage rate is considered a high risk transaction regardless if you have made a mistake during the payment processing, a batch of faulty products, or any other reasons.

Although chargebacks are normal when doing business, there are ways to minimize them. Despite not being able to control customers from disputing, there are ways to prevent customers from filling chargebacks.

And also, your business must stay below 1% (number of chargebacks-to-transactions) for your business not to be deemed high risk.

Card-Not-Present Transactions

Online or electronic payments, over the phone, or mail orders are considered high risk transactions by banks and processors. Payments without the actual card are prone to identify theft, fraudulent transactions, or unauthorized purchases because the cardholder is not present to sign the receipt of the transaction.

Payment methods that do not require the actual physical card like monthly subscription, recurring monthly bill, and such are also tagged high risks.

Customers tend to forget their subscription and will resort to filing a dispute when they fail to recognize the bill on the statement. Customers are likely to cancel their subscriptions and file a dispute afterward.

Processing Volume

When setting up a merchant account, normally, there is a transaction and volume cap set to prevent fraud. Thus, when your merchant account starts processing more than the allowed monthly volume, the bank will consider your account high risk.

If this happens, your acquiring bank will hold your funds or your merchant account will be suspended. Doing so will protect your business as scammers are known to set up an account and run on a large volume of charges using stolen credit cards.

For a business to be categorized as high risk poses some drawbacks. This means you need to set up a high risk merchant account, pay higher set up costs, higher transaction costs, and monthly fees as compared to a regular merchant account.

Stricter rules by high risk merchant account processors can also limit your business growth. To protect it from fraudsters, there is a possibility of customers declining including genuine transactions. Constant declines due to heightened security measures will push back your customers.

So, look for a payment processor that can help you come up with the best solution for your business including proper precautions from fraud and suspicious activities.


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