How to set up an overall banking and payment strategy for high risk - Insights from The Soltesz Institute Webinar

In a recent webinar hosted by The Soltesz Institute, Viktoria Soltesz and Adam Chong from Precision Payments discussed how high-risk businesses can build successful payment and banking startegies to ensure stability and growth.

Diversification: A Pillar of Stability

Businesses often ask, "Which payment solution or bank is best for high-risk industries?" but this question is wrong from the start. The importance of working with multiple payment providers cannot be emphasized enough, and what is best for one company might be a disaster for another. Success lies in diversifying your partnerships and choosing providers based on your specific needs.

By collaborating with several providers, businesses reduce their reliance on a single point of failure and spread the risk.

Adam shared examples from his own experience, emphasizing that every provider has a threshold for risk. Some providers may accept high-risk clients as part of a balanced portfolio, while others might pursue this sector aggressively, often at the expense of long-term stability. This underscores the importance of conducting thorough due diligence to ensure you’re partnering with reliable institutions.

The Role of Compliance and Communication

Businesses today need to ensure not only that their activity adheres to regulations but also that their compliance processes minimize vulnerabilities and build trust with financial partners.

For high-risk businesses, due diligence on partners is not optional—it’s the foundation of a sustainable operation. Investing in a strong due diligence framework and appointing a dedicated risk officer who carefully plans banking and payment rails can make a significant difference between success and failure.

Transparency is vital. Open communication with banks and payment providers about the actual operations in detail, plans, and even potential changes is crucial. Whether the business is expanding into a new market, introducing a new payment method, or adjusting activity, keeping banking and payment partners informed fosters trust and reduces the likelihood of issues such as account freezes or rejections.

Adapting to Diverse Payment Methods

The growing variety of payment methods can be seen as a blessing; however, it can easily turn into a curse if not done right. From traditional card payments to crypto and localized solutions, each option comes with its own set of risks and rewards. High-risk businesses must carefully evaluate how these methods align with the overall strategy and the expectations of existing financial partners.

Introducing a new payment method without understanding its implications on the existing channels might seriously jeopardize relationships with current providers. For instance, adding crypto payments might damage a years-old good relationship with a traditional high-street bank if not done properly. By not understanding banking compliance, actions like these can lead to serious complications, as traditional banks often view crypto transactions as untraceable or non-compliant. Companies have to come to decisions with a clear understanding on a variety of factors, and understand that any change will impact broader operations.

Strengthening Relationships Through Data and Strategy

Maintaining strong relationships with financial partners also requires data. Having clear, traceable records that demonstrate the business's operational integrity can be invaluable. For high-risk businesses, metrics like chargeback ratios, transaction trends, and rejection rates can be crucial to optimize costs and risks. Sharing this data proactively can reassure partners of the business’s commitment to risk management.

Adam highlighted how hiring professionals from financial institutions can also strengthen the banking and payment strategy. Experts' knowledge of compliance, underwriting, and risk management can enhance any business's internal operations and fortify partnerships.

The Cost of Neglecting a Payment Strategy

The most significant takeaway was the importance of a payment and banking strategy. Too often, businesses either rush into partnerships with unreliable providers or fail to plan for contingencies like provider outages or changing regulations. This can lead to frozen accounts, increased costs, and even operational shutdowns.

High-risk businesses, in particular, must approach their payment and banking strategies as integral to their overall success. This means regularly reviewing these strategies to adapt to new challenges and opportunities while maintaining flexibility and resilience.

To learn more about creating an effective payment and banking strategy for high-risk industries, or to watch the full webinar, visit The Soltesz Institute at this link.