High-Risk Business with Stripe, PayPal, Square, Venmo

Certain activities, or the industry you work in, may cause payment processors to characterize your merchant account as high risk and, in worst-case scenarios, ban it. It isn’t uncommon for some businesses to process online payments and get higher-than-average returns, but your reputation and industry play an important role.

This article discusses what high-risk merchant accounts are, the reasons why different payment processing companies may drop your account, and how to avoid it altogether.

What Is a High-Risk Merchant Account?

If your payment processor determines your business is involved in fraudulent activities, has a questionable reputation, has a high rate of chargebacks, or has a high volume of returns, among other things, it will flag you as high risk. Being high-risk leads to more frequent audits and even higher fees, while some payment processors may entirely shut your account.

A high-risk merchant account is an inconvenience for any payment processor, as illegal activities may jeopardize their reputation and lead to legal challenges. Therefore, high-risk merchants usually have a risk of having a limit on deposits, higher fees, as well as longer processing times.

However, working in certain industries may automatically flag your merchant account as high-risk, even if you’re not doing anything illegal. Knowing that your niche will face higher charges and limitations will help you avoid those disadvantages that restrict your running operations.

In fact, some business owners seek payment processors that specialize in their unique industries and are ready to maintain smooth operations.

Examples of High-Risk Businesses

The following industries are considered high-risk:

• Adult entertainment
• CBD, e-cigarette, and vape shops
• Gambling
• Debt collection
• Firearms sellers
• Online dating
• E-commerce
• Electronic shops
• Subscription-based service providers
• Travel agencies

Stripe High-Risk Business

Reasons for Stripe to Suspend Merchant Accounts

Stripe has a strict approach to businesses operating in selected countries and to what products are prohibited from being sold using the merchant processor. An example of this is selling alcohol in India or adult toys in Singapore and Malaysia. Going against Stripe’s policy is likely to get you banned from the platform.

Stripe runs check-ups on businesses that they think lack information or may be involved in illegal activities. Therefore, ignoring Stripe’s request to clarify or provide answers regarding your company may cause problems with payment processing until the issues are resolved.

Apart from suspicious activity and rescripted products, Stripe is likely to terminate a merchant account that has a bad reputation and doesn’t deliver sold goods to customers.

How to Avoid Ban by Stripe

To avoid Stripe high risk business suspension, you should always verify the following information on Stripe:

• Business identification with address and website ownership
• Business bank account information
• Supportability of your business
• The risk level of your business

Stripe has a list of restricted businesses for which they do not accept payments. However, some niches are allowed to use Stripe merchant accounts after being investigated and approved by the merchant processor.

Another thing you should do to avoid being banned is to accurately and clearly describe your products and update your marketing materials regularly.

Lastly, you should also ensure your website accepts credit and debit cards securely and that you have no access to customers’ personal information.

High-Risk PayPal Payment Account

Reasons PayPal Drops Payment Accounts

Any PayPal high-risk merchant account is usually at a disadvantage when it comes to processing payments.

The payment processor creates certain limitations and obstacles, making business operation processes bumpier. Some of such dents include greater fees and chargeback costs, a higher chance of having your merchant account frozen, and significant deposit delays.

The most common reason for PayPal to limit high-risk accounts is a high chargeback ratio. Ideally, every payment processor wants to deal with as few chargebacks as possible. However, when the ratio is over 2%, it’s an instant red flag for any account provider, including PayPal.

The same can apply if a company processes a small number of big transactions per month instead of dealing with smaller amounts but in a much higher quantity of transactions.

How to Avoid Ban by PayPal

There are a few things you can do to reduce the risks of owning a high-risk merchant account:

• Always inform PayPal about an upcoming large deposit or withdrawal beforehand.
• Verify your PayPal merchant account information and always keep it up to date.
• Create a clear and accurate return policy for your customers to reduce the ratio of chargebacks.
• Maintain an accepted PayPal credit score.

Square High-Risk Business

Reasons for Dropped Payment Accounts

Like other payment processors, Square labels certain businesses as high-risk not because of illegal activity but because of the industry they work in. According to Square’s policy, the provider will not support merchant accounts that accept payments for selling adult entertainment products, firearms, drugs, and many more. Violating the policy by using it for Square prohibited businesses will lead to the closure of your account.

How to Avoid Ban by Square

Square takes great pride in keeping its platform safe for merchants and their clients. The best way to avoid a ban by Square is to adhere to its rules and guidelines – and that means following the rules to a T, especially if you’re part of Square restricted businesses. This means if the account provider notices something out of the ordinary, it will take quick measures and possibly freeze your transaction until the case is resolved.

Venmo High-Risk Merchant Accounts

Reasons Your Merchant Account Is Dropped

The obvious reason why a high-risk merchant account is frozen by Venmo is to protect its users. If Venmo suspects a business has acted against the provider’s policies, it will flag the company or even suspend it. The payment processor may also stop current transactions and request additional documentation.

How to Avoid Ban by Venmo

It may be confusing trying to avoid being banned on Venmo, since even private users sometimes have their accounts frozen. The first thing you should do is to always follow the provider’s policy and rules. If you’re planning on processing a big transaction, always inform Venmo about it beforehand, as your merchant account may be flagged or immediately frozen due to suspicious activity. Otherwise, Venmo can hold money in your account for up to 180 days if you’ve broken its rules.

How to Recover High-Risk Merchant Accounts

Most businesses can have their accounts reinstated if they follow a set of guidelines. So, how do you get back your high risk merchant account on specific payment processors?

Stripe Merchant Account

Unfortunately, when Stripe shuts down a merchant account, most of the time, it is an irreversible decision. You can try contacting Stripe customer support, but for the most part, your Stripe high risk payment account might not be recovered.

Paypal Merchant Account

Unlike Stripe, a PayPal merchant account has a higher chance of recovery. Once your PayPal account is dropped, you should immediately contact customer support and find out the reason behind your suspension. For an obvious reason, when your account is reactivated, you shouldn’t make the same mistake.

PayPal allows suspended high-risk merchant accounts to file an appeal. This action will push PayPal to investigate your case deeper and reverse the decision.

However, if your credit score is poor and you’ve had too many chargebacks, it might be unlikely to reinstate your PayPal merchant account.

Square Merchant Account

Depending on the nature of your business, you can contact customer support for Square and request the reactivation of your account. Square should provide you with the reason why your account was dropped, take another look at your case, and decide whether to return the account or not. However, the decision will not be instant; on the contrary, it can take up to 90 days to finalize your request.

Venmo Merchant Account

When your account is frozen, Venmo always sends an email to inform you about their decision. You need to reply to that email and request to unfreeze your account. It can be the case that the provider will ask for extra documentation or will need to screen your business activities before giving you access. You can also call Venmo directly or contact them through the app.

Final Thoughts

Being classified as high-risk isn’t what merchants wish to see. However, some industries automatically fall under this category. Ignoring the policy is what usually gets many companies banned from using a selected payment processor. However, it shouldn’t be your case.

Understanding how your business operates and what action may lead to suspension will help you avoid breaking the rules and keep your business active.

When running an ecommerce business, it is natural to receive chargebacks and returns, the way you handle them is key here. Paypal and other aggregate merchant providers list their requirements, so following those will minimize the risks of being banned.

Payment Savvy believes that having a high-risk merchant account doesn’t mean you’re involved in illegal activities. Some industries are just more regulated than others. We value every client and offer payment solutions to suit your business and budget.

Explore our custom payment solutions to run your company smoothly and risk-free.