The industry of high risk merchant processing continues to change and evolve within the payments ecosphere. Companies that were once considered traditional merchants are now considered high risk and vice-versa. New merchant industries, with the advent of emerging technologies continues are being born and payment processors, banks, acquirers, issuers, the Association (ie. Visa and MasterCard) and American Express, Discover, loyalty companies, PCI companies and other players within the payments industry need to find their fit amongst within the industry. Credit card processing companies play a significant and important role as these companies are the conduit between the high risk merchant and the Associations and play the part of providing real service and value to the online store or retail merchant.
The industry is fluid and applications like ApplePay continue to reinforce the ubiquity of the payments marketplace. Although ApplePay is currently focusing on the retail merchant, we must anticipate that these new solutions will become apparent in the high risk credit card space in the near future. Apple is not interested in the payments industry; Apple is interested in selling more iphones and their senior management understands that joining the payments space will do that just. 10 millions being sold in the first day of the launch of the iphone is incredible with ApplePay being one of the most innovative features of this new model.
Credit card payment processing companies are facing significant challenges with their risk underwriting and credit risk managers needing to determine which merchants to accept. Unlike ApplePay and the retail merchant, high risk and hard to place merchants cover a variety of industry types from the relatively new market of vapor/electronic cigarettes, debt collection, of course, the adult industry and hundreds of other vertical types.
Even Congress is now getting involved with high risk merchant accounts with the launch of Operation Choke Point. Launched in 2013 by the United States Department of Justice, which is investigating banks in the United States and the business they do with payment processors, payday lenders, and other companies believed to be at higher risk for fraud, money laundering, and terrorist financing.
High risk merchant accounts could be public or private companies, CEO’s with good or bad credit and its important to understand that the term “high risk” or “hard to place” merchant is not a negative reflection on the business – it’s just a fact that these industries are placed into a different underwriting bucket than that of your local neighborhood restaurant or dry cleaner where risk and chargeback ratios are significantly less.