The process of onboarding a high-risk merchant account provider and what to expect?

Introduction:

Onboarding a high-risk merchant account can seem like a daunting task due to increased compliance and scrutiny from payment processors and acquiring banks. However, taking a methodical approach and being prepared for additional documentation requirements can help smooth the process. This article will outline the typical steps involved in onboarding a high-risk merchant account as well as what merchants in high-risk industries like gambling, adult, forex trading, and IPTV can expect.

Key High-Risk Industries

While every industry poses some level of risk, some are deemed higher risk than others by payment processors and banks. The industries that typically fall under the "high-risk" merchant umbrella include:

- Gambling (casinos, sports betting, lottery, etc.)

- Adult/Pornography

- Forex/cryptocurrency trading

- IPTV/streaming services

- Dating services

For merchants operating in these types of businesses, expect enhanced due diligence and compliance requirements throughout the onboarding process and ongoing monitoring.

Step 1: Find a Processor Willing to Onboard High-Risk Merchants

The first step is locating a payment processor and bank willing to work with high-risk merchant categories. Not all processors accept all high-risk industries due to compliance risks. Research processors that have a proven track record in your specific industry. Ask for client references you can contact.

When contacting potential processors, be fully transparent about your business from the start. Provide thorough documentation on your products/services and compliance measures. Ask what additional documentation they will require for review. The goal is to find a partner committed to high-risk verticals.

Step 2: Complete the Onboarding Application

Once you've selected a processor, it's time for the formal application. Expect the application to be significantly more detailed than a standard merchant application. Provide:

- Business structure/ownership details

- Extensive product/service descriptions

- Website screenshots/demos

- Marketing materials

- Banking/funding documentation

- Compliance policies and procedures

- Licenses/permits as required by your state/industry

- 3-5 years of financials/tax returns

- Business/personal credit reports

Thoroughly answering all questions upfront helps speed up the review process. Incomplete applications will result in delays.

Step 3: Site Inspection and Business Verification

Most processors will conduct an on-site inspection of your business premises. This allows them to verify the physical operation matches the documentation. They will also verify business filings, licenses, permits, and ownership. Additional documentation may be requested at this stage.

Have all relevant compliance materials organized and readily available. Be prepared to demonstrate security, age verification, and KYC processes. The goal is to show that the operation aligns with disclosures.

Step 4: Background Checks

Background checks on business principals are standard but more extensive for high-risk merchants. Expect checks into criminal history, civil lawsuits, regulatory actions, and media coverage. Derogatory findings can result in an application decline. Make sure to disclose any potential issues upfront.

Step 5: Compliance Review

The processor will conduct a thorough review of all compliance policies, procedures, and controls. For industries like gambling, adult, or lending, expect questions around age/ID verification, geo-blocking, responsible gaming, advertising/marketing, chargeback handling, and more. Fully addressing compliance concerns is critical at this stage.

Step 6: Underwriting Decision

Once all documentation has been reviewed, the processor will make a "go/no-go" underwriting decision. For approved applications, the next steps involve funding, integration, and launching payments on the website. For declines, request specific reasons and see if issues can be addressed to re-apply.

Step 7: Ongoing Monitoring

Even after onboarding, high-risk merchants require constant monitoring. Expect ongoing reporting around metrics like chargebacks, returns, and risk/fraud rates. Processors may conduct periodic audits and site inspections. Maintain strong policies and be prepared to address any compliance issues that arise.

Common Questions to ask with a high-risk payment provider.

Here are answers to some frequently asked onboarding questions:

Q: How long until I'm approved or declined?

A: 2-3 months is typical but depends on complexity and response speed. Providers aim to decide within 8 weeks.

Q: What if my application is declined?

A: You'll receive the specific reasons in writing. Consider addressing issues and reapplying later with a stronger case.

Q: Can I get paid faster than net 30?

A: Not likely for high-risk, but ask about accelerated options once you've proven low chargeback rates.

Q: What if chargebacks spike temporarily?

A: Have a plan to address the root cause and work with your provider. Spikes may trigger reserves or suspension until resolved.

Q: Can I outsource my risk/fraud team?

A: Yes, but providers will still hold you responsible. Ensure any partner is vetted and you oversee their work.

Q: How do I get approved more quickly?

A: Submit complete, high-quality documents; be responsive/honest; and demonstrate strong risk controls from the start.

Conclusion:

Onboarding a high-risk merchant account takes time but a methodical approach can help smooth the process. Be fully transparent, provide thorough documentation, and address all compliance concerns upfront. Finding the right processor experienced in your industry is also critical. With diligence at each stage of the onboarding process, merchants have a strong chance of getting approved and launching payments. Ongoing monitoring is also key to maintaining merchant status over the long term.

#HighRiskMerchant #PaymentProcessing #Compliance #Gambling #Adult #Forex #IPTV #MerchantAccounts #Onboarding #RiskMitigation #FraudPrevention