High Risk Agents: A dying breed?

High-risk merchants have always been a staple of the credit card processing world. These businesses are considered to be riskier for a variety of reasons, and as a result, they often have to pay higher fees for card acceptance.

In recent years, however, there has been a shift in the payments landscape. More and more processors are trying to take high-risk business directly, cutting out the middleman (the agent). Of course, this only serves to increase profits for the processor, but it doesn’t always mean what’s best for the merchant.

Agents typically have multiple relationships with processors all over the world. This gives them a lot of flexibility when it comes to finding the right solution for a high-risk merchant. And because they’re not beholden to any one processor, they’re more likely to fight for their clients and get them the best rates possible.

But as the industry continues to change, it’s becoming increasingly difficult for agents to stay afloat. So the question is: are high-risk agents a dying breed? Only time will tell, but we can’t help but wonder if this once-vital part of the payments ecosystem is slowly fading away.

This article will explore the role of high-risk agents in the current payments landscape. We’ll discuss the challenges they face, whether or not they’re truly a dying breed, and find out what the future may hold for them.

Let’s dive in!

What is a High-Risk Merchant?

• A high-risk merchant is any business that is considered to be at higher risk than the average company. There are several reasons why a business might be regarded as high risk, but some of the most common include:
• Selling products or services that are regulated by the government
• Having a high rate of chargebacks or refunds
• Operating in a high-risk industry, such as the adult entertainment or gambling industries (more recently, Cannabis and CBD have been a challenging area around debit and credit card acceptance)

High-risk businesses often have to pay higher fees for credit card processing because they’re considered to have more compliance requirements. In most cases, these merchants are denied service by traditional processors.

This is where high-risk agents come in.

What is a High-Risk Agent?

A high-risk agent is often thought of as the middleman between a high-risk merchant and a credit card processor. High-risk agents have relationships with multiple processors, which gives them the ability to place their clients with the right processor for their needs.

Not all agents are created equal, however. A good agent will work to get their clients the best rates possible and fight for them when problems arise. A bad agent, on the other hand, will simply place their clients with the first processor that approves them, regardless of whether or not that processor is a good fit for their business.

Now, this isn’t the reason why processors are trying to cut out high-risk agents. In recent years, there have been a lot of processors or ISO’s in the payments space who have tried to start taking high-risk business directly and cutting out agents. In most cases, this is because they’re simply trying to increase their profits by dealing directly with high-risk merchants. After all, why pay an agent when you can keep the entire processing revenue for yourself?

But what processors don’t always realize is that agents are more of an extension of the company rather than a middleman. A good high risk agent understands the operations of the business and any pain points the business has around their payment ecosystem. By carefully building relationships their clients and placing them with the right processors, agents can help to minimize risk for both the merchant and the processor.

The Challenges High-Risk Agents Face

A changing landscape

As we mentioned earlier, the payments landscape is changing, and that’s making it increasingly difficult for high-risk agents to stay afloat. With all of the new regulations and changes in the industry, it’s becoming harder and harder for agents to keep up.

Online businesses take over

In addition, processors are starting to direct more of their attention (and business) to online businesses. This is because online businesses are generally considered to be lower risk than brick-and-mortar businesses. As a result, processors are offering lower rates and fees to online businesses, which makes it even harder for high-risk agents to compete.

The rise of alternative lenders

And last but not least, the rise of alternative lenders is also putting pressure on high-risk agents. Alternative lenders are often able to offer better terms to high-risk merchants than traditional processors, making them a more attractive option for many merchants.

It’s the wild west out there for high-risk agents. Many processors are trying to cut them out, and those that remain are fighting for survival. So what does the future hold for these intrepid middlemen?

We’ll find out soon enough, but first, what exactly is a high-risk transaction anyway?

What is Considered a High-risk Transaction?

Now that we know what a high-risk merchant account is, as well as the challenges that high-risk agents face, it’s time to dive into what actually constitutes a high-risk transaction.

Generally speaking, any transaction that carries a higher-than-normal level of risk is considered to be high risk. But, what exactly is the normal risk level? Well, that varies from processor to processor.

Some processors are willing to take on more risk than others. So what might be considered high risk for one processor might not be regarded as high risk for another. It all depends on the individual processor’s risk tolerance.

There are a number of factors that processors take into account when assessing risk. We did mention some of these earlier, but we thought it would be helpful to go into a bit more detail.

Some of the most common factors that processors consider when assessing risk include:

• The type of business: Certain types of businesses are considered to be at higher risk than others. For example, companies that sell products or services that are regulated by the government (such as alcohol, tobacco, cannabis, CBD, and firearms) are typically considered to be high-risk.
• The business model: The way a business operates can also impact its risk level. For example, businesses that operate solely online are generally considered to be lower risk than those that have brick-and-mortar locations.
• The processing history: A business’s processing history is also taken into account when assessing risk. A company with a history of chargebacks or fraud will be considered at higher risk than a business with a clean processing history. The average transaction amount: The average transaction amount is another critical factor in assessing risk. High-risk businesses tend to have higher moderate transaction amounts than low-risk businesses.
• The customer base: The type of customer a business has can also impact its risk level. For example, companies that cater to customers in high-risk industries (such as gambling or adult entertainment) are typically considered to be high-risk.

These are just some of the factors that processors take into account when assessing risk. As you can see, there is no one-size-fits-all definition of what constitutes a high-risk transaction.

It’s essential to keep in mind that even if a business is considered to be high-risk, that doesn’t mean that it will necessarily have difficulty getting approved for a merchant account. It just means that the business will likely have to pay higher fees than a low-risk business.

High-Risk Merchants and Chargebacks

One of the most common questions we get from high-risk merchants is, “How can I reduce my chargeback ratio?”

Chargebacks are always challenging, but they can be especially difficult for high-risk businesses. That’s because high-risk companies tend to have higher chargeback ratios than low-risk businesses.

Again, there are several reasons for this:

• First, high-risk businesses are more likely to sell products or services that are subject to fraud.
• Second, high-risk businesses are more likely to have customers who are dissatisfied with their purchase.
• And third, high-risk businesses are more likely to be targeted by chargeback scammers. Chargeback scammers are criminals who attempt to defraud businesses by initiating fraudulent chargebacks.

Fortunately, there are also a number of things that high-risk merchants can do to reduce their chargeback ratios. We’ll go over some of the most effective chargeback prevention strategies in the next section.

Chargeback Prevention Strategies for High-Risk Merchants

There are several chargeback prevention strategies that all merchants should be using, regardless of their risk level. But there are also some strategies that are specifically designed for high-risk businesses.

Here are some of the most effective chargeback prevention strategies for high-risk merchants.

Use AVS and CVV verification

AVS (address verification system) and CVV (card verification value) verification are tools that can be used to verify a customer’s identity.

By requiring customers to provide their AVS and CVV codes when making a purchase, you can help to ensure that the person making the purchase is actually the cardholder. This can help to prevent fraud and chargebacks.

Get to know your customers

One of the best ways to prevent chargebacks is to get to know your customers. If you have a good relationship with your customers, they are more likely to contact you if there is a problem with their purchase. And if you are able to resolve the problem directly with the customer, that will help to prevent a chargeback from being filed.

Use fraud detection tools

There are different fraud detection tools that you can use to screen orders for fraud. These tools can help to identify and flag suspicious orders.

Some of the most common fraud detection tools include:

• Velocity checks: Velocity checks help to identify orders that are being placed by the same person within a short period of time. This can be a sign of fraud, as it is often used by scammers who are trying to place multiple orders using the same credit card.
• IP address checks: IP address checks help to identify orders that are being placed from a suspicious IP address. This can be a sign of fraud, as it is often used by scammers who are using stolen credit cards.
• BIN range checks: BIN range checks help to identify orders that are being placed with a credit card that has a suspicious BIN range. This is often used by scammers who are using stolen or counterfeit credit cards.

Find a good high-risk processor

If you are a high-risk business, it is crucial to find a credit card processor specializing in high-risk businesses. These processors will have experience working with companies in your industry, and they will be familiar with the unique challenges that you face.

PayBlox is an excellent option for high-risk businesses. We have decades of experience working with high-risk businesses, and we can help you to avoid chargebacks and keep your account safe.

The Future of High-Risk Agents

The future of high-risk agents is anything but certain. In recent years, we’ve seen a lot of consolidation in the industry, with smaller processors being bought out by larger ones. This trend is likely to continue, which means that there will be even fewer options for high-risk merchants in the future.

However, as consolidation continues and more processors move away from high-risk businesses, it’s possible that we’ll see a resurgence in the use of high-risk agents. After all, if there are fewer processors willing to work with high-risk merchants, then those merchants will need someone to help them navigate the increasingly complex payments landscape.

As we mentioned at the beginning of this article, only time will tell what the future holds for high-risk agents. But, for now, they remain an important part of the payments industry, even if their role is changing.

It seems that nothing will be able to replace the human element when it comes to working with high-risk businesses. And as long as there are high-risk businesses, there will be a need for high-risk agents.

As the industry continues to evolve, we’ll be sure to keep you updated on the latest developments.

Go High Risk with PayBlox

PayBlox is a high-risk merchant account provider that can help your business get the credit card processing it needs. We know the ins and outs of the payments industry, and we can help you navigate the complex landscape. To learn more about our services, contact us today.

Conclusion

So, are high-risk merchant account providers a dying breed?

For now, no.

High-risk merchant account providers play an essential role in the payments industry, and will likely continue to do so for the foreseeable future.

As the industry continues to evolve, we will be sure to keep you updated on the latest developments. In the meantime, if you need a high-risk merchant account provider, PayBlox is a great option.

Our team not only boasts years of experience working with high-risk businesses, but we also have a deep understanding of the industry. As a result, we can help you navigate the complex landscape and avoid chargebacks, ensuring that your business gets the credit card processing it needs.

Contact us today to learn more about how we can help your high-risk business thrive in a sea of change.