Why High Volume Businesses Are Considered High Risk

A higher risk of high volume comes with more transactions and increased exposure to potential fraud.
Redde Payments
4 min to read

Why High Volume Businesses Are Considered High Risk

Your business has been growing and you are now finding yourself being labeled as “high risk”. First off, congratulations! You are well on your way to financial success, if you don’t consider yourself there already.

There are plenty of obstacles to overcome as a business owner. You may experience long days, customer service complaints, product shipments and more! But now that you finally feel like you're on the right path, you might hear your payment provider refer to you as "high risk". This can be from high ticket items or from a large volume of smaller tickets. Either way, you are now considered high risk. But why does more risk come with more success? Let’s find out!

High Volume Businesses

When a merchant signs up with a payment processor, they will open a merchant account that allows them to run transactions. Upon signing up with the provider, the provider will set a volume cap and a transaction limit. This is typically referred to as your monthly volume and your high ticket amount. These limits are in place to prevent fraud and they are determined based on several risk factors including your business type. If you consistently process more than the agreed-upon limits, there are a few things that could end up happening to your account.

  1. You can have your funds placed on hold or in a reserve
  2. Your account can be closed

However, for your first offense of processing more than what the limits permit, the bank will analyze your business and transactions. The bank will analyze your business if you exceed your limits because:

  • It could be fraud:
  • The activity is unusual for your account and doesn’t follow your current agreement. Thinking it might be fraud, the bank may take action to try to protect the merchant from this unusual activity. Or in other circumstances, scammers will open merchant accounts and run a large amount of charges using stolen credit cards.
  • You’re increasing the bank’s financial exposure:
  • With these higher volume/transaction increases, you are increasing the bank’s financial exposure. If the merchant doesn’t have funds to cover a chargeback for the higher volume, the bank will need to foot the bill for the merchant.
  • You might be selling new items:
  • The bank will need to know where the higher volume is coming from. What products are you selling? Are these products legal and within guidelines?
  • You might not be able to fulfill the order:
  • The bank will also need to know if the merchant can fulfill the products being sold. For example, a hat seller typically sells about $5,000.00 worth of hats per month. One month, the seller runs a transaction for $500,000.00 for an order that contains more hats than they typically sell in several months. The bank will need to know that the seller can fulfill this much larger order on time and in quantity. If the seller cannot, the bank will be financially responsible for a chargeback on that large order if the seller doesn’t have the funds.

Common High Volume Industry Types

The most common businesses that run into high volume issues are:

  • Subscriptions or recurring billing
  • Travel
  • MLM’s
  • Contract workers
  • Construction
  • B2B businesses
  • Dropshippers
  • Furniture sales
  • Collection agencies

Any business that runs high volume is considered high risk. This could be from the merchant running a high number of small tickets or from the merchant running only a few large tickets.

Finding a merchant account for higher volumes

If you run a high volume business, you might want to consider a merchant provider that specializes in high risk. A high risk business requires more understanding and flexibility than an average merchant account. With a high risk payment provider, you will receive more protection that can help mitigate potential fraud and unjust holds. A high risk payment provider will use a verification process on your payment gateway so the bank can ensure that each transaction is certified. This helps prevent fraud and potential chargebacks on your account.

The first step to obtaining a merchant account that can support your high volume business is to do your research. When you find a payment provider, express your expectations and what performance they can anticipate from your account. A provider will appreciate your candidness and inform you of all your options and if they feel that they can best serve your business. If you decide to move forward with the merchant account provider, they will direct you through their onboarding process.

The first step in a payment provider’s onboarding process starts with an application. The merchant application is used to obtain all of your account information so the processor can further investigate your business details. They will generally ask for your processing history (if any), your photo ID and bank account information for your deposits.

With all of this information in mind, they will pre-vet your account for approval. The goal is to weigh the potential risk factors that you pose and what they can do to minimize those threats. Initially, they might start you out with a monthly volume cap. As time progresses, you can request a larger volume cap after they’ve gained trust in your business and the way it performs. In the payments industry, the more your payment provider knows you, the more flexible they are willing to be.  

In conclusion

Joining together with an experienced payment provider can make all the difference to your high-volume business. Redde Payments is well-versed in high volume/high risk businesses. That means we have the knowledge and flexibility to approve your account with the limits you need. Or, you may continue to build your relationship with the provider that you choose. Eventually, they will start to gain confidence in your business, opening you up to more options. Or even better, you can join us to get those same benefits now!

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