Importance of Merchant Account

A merchant account is one of those business tools that you just can’t do without third party processors. You need a place to store your company’s income, and financial institutions often won’t deal with an organization that doesn’t possess one of these options. When you want to accept debit and credit card payments, you’ll need a merchant account to get approval from processors. You’ll only hold your company back if you don’t have one of these relationships with a financial institution. But what if you can’t get one? This may seem like an abstract question to many, but for high-risk companies, it’s a reality they have to face every day. They find themselves unable to win approval from financial institutions for many reasons. Sometimes this involves the company’s unique practices or financial histories, but just as often the scenarios are common to a certain type of business. These industries will naturally find it more difficult to find effective options outside of a high-risk merchant account. These options have their own benefits, but if you don’t know to look for them, you may waste too much time looking for service providers that will just end up rejecting you. The organizations below represent just a few of the clients that may need a high-risk merchant account.
1. MEDICINAL MARIJUANA COMPANIES
Marijuana has seen its moment in the sun following announced legalization in Canada and actual legalization in four US. states. Businesses are forming to capitalize on the boom, and some merchants are set to accommodate heavy demand and high profits. While licensed producers and medical marijuana patients may celebrate this unrestricted access, commercial and acquiring banks haven’t been as keen to plunge into the pot industry. In September 2016, two major Canadian banks started denying accounts to companies related to the sale and distribution of marijuana. While the organizations claim to have obeyed the law, the banks cited their risk management policies as the reason for the ban. Companies even find it hard to find accounts in states with legal marijuana. It appears that risk will cling to these firms as long as the stigma around cannabis remains. Those who need a short-term solution will have to find a high-risk merchant account provider if they want to accept debit and credit card payments immediately.
2. SUBSCRIPTION-BASED SERVICES
If you’ve heard of businesses like Harry’s, Blue Apron, or Loot Crate, you probably understand subscription services’ popularity right now. Between these retailers’ effective marketing campaigns and the convenience that comes with having products delivered right to your door, it’s easy to see why these companies are succeeding. You may even be inspired to adapt your company’s business plan to fit a subscription model. But before you make any firm commitments, you need to understand why merchant service providers are wary of these methods. Subscription services bill customers at regular intervals, making the payment process more convenient, but also increasing the risk of chargebacks. If a consumer goes a few months without noticing these charges and decides to challenge them, more money comes out of the subscription service’s merchant account. This increases the likelihood that a client will default, and to some providers, this constitutes too much risk.
3. ADULT ENTERTAINMENT PROVIDERS
Sometimes optics can trump profit. Account providers could earn valuable clients if they partnered with profitable adult entertainment providers. But other clients may not want to do business with a company that also associates with organizations involved in sex work or other taboo subjects.
As a result, a high-risk merchant account may be the only option for some websites and entertainment providersEven