Why do Payment Processors Cancel Legal but High Risk Business?
If you’ve been wondering why a payment processor would suspend a legal but risky business then this article will answer your question. Most merchants new to the payment processing world usually rush for either Stripe or the famous PayPal. But for high risk entities, acquiring a reliable processor is very challenging because they have to find one who offers high risk credit card processing.
Traditional processors e.g. PayPal & Stripe group businesses into; low-risk/normal companies which they willingly support. Prohibited entities e.g. online drug sales and gambling. And lastly, high-risk businesses which are risky in nature and a category that’s amazingly broad.
Reasons Stripe/PayPal Would consider You Risky and Terminate You
There are three prime reasons;
One is the nature/type of service you offer or products you deal in. Companies that trade in software, digital products, and deliverables are viewed as risky simply because;
- It’s tricky to track their shipping.
- It is not easy to verify their delivery.
Traditional processors want to confirm that the good/item was actually delivered to the customer. Without substantial proof, they view you as the merchant exposed to fraud and one who risks suffering chargebacks more often.
Secondly, PayPal has an issue with the level of disputes and chargeback rates. Digital products are susceptible to chargebacks because they’re vulnerable to scam.
Lastly, PayPal fears taking financial accountability for a business that records too many chargebacks. Such companies may choose to liquidate and escape leaving the payment processor the burden of clearing all chargebacks. So instead of getting into problems with their sponsor banks, they’ll simply cut you off.
The problem with Stripe & PayPal is that they give merchants false hope. At first they’ll readily approve you, only to later scrap you off when they conduct a check and notice you could be risky.
So now you understand why PayPal or Stripe may choose to cancel your account after a month or so. Yes, they’ll definitely accept you with open hands, but not for so long. That’s why you’d rather spend much time looking for a dependable processor like FAM who is ready to accommodate your risks.
Electronic payments expert, Blair Thomas, co-founded eMerchantBroker in 2010. His passions include writing/producing music, and travel. eMerchantBroker is America’s No.1 High Risk Credit Card Processing company, serving both traditional and high-risk merchants.