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The Variables That Are Involved In The High Risk Merchant Account

By Harold Ward


Merchant accounts are types of bank accounts which are allowing the businesses to accept payments in different ways. These ways include through credit cards and debit cards. These type of accounts were established under a certain agreement between a merchant acquiring bank and an acceptor for the settlement of transactions that concern the payment cards.

There are some cases where in the ISO or the independent sales organization, the MSP or the member service provider, or the payment processor in Canada is a part also of the agreement. If ever the merchant will enter the agreement, this agreement will bind the merchant contractually in obeying the regulations that are implemented by card associations. However, there can be some reasons in having a high risk merchant account Canada.

Typically, the job of the merchants is to collect the advance payment of products and services and also of the provided quality assurance. It means that a providers risk is very similar to a credit line which is provided. An account provider is going to be hooked due to charge backs and losses when the merchants will be selling products which are not delivered due to some defects.

Other types of industries and also businesses may be considered as being risky in some ways. Here are the following reasons of why there is a need to understand the risks considerations. These are the risks surrounding the processes involved in a credit card and these are complex and also are nuanced. Knowing the risks include the variables such as business model, industry, longevity and financial stability of merchant, processing history, and products sold and services offered.

First is industry. Some industries are presenting more risks compared to others. The profiles are grounded well by a lot of merchants. Examples of these industries are restaurants which are considered as one of those having the lowest risk category of merchants with the average ratio of lesser than 1 for its basis point.

For payments made through mail or fax, website, or phone, risks are higher compared to those done personally. Personal payment is better it is because the person who will be paying is present, thus, the card used is swiped easily. Therefore, to personally accept a tuition is a medium risk only, but if is done online, it would be higher.

Second is the billing method. A payment acceptance method will either increase or decrease the business risks. An advance payment increases the risk and therefore, it is important that an account provider for the merchants will ensure all financial strengths and also processing history for the approval of billing method.

On the other hand, if payments are done after providing the service, surely the risk of account will be reduced. There are some merchants like the advertisers who are accepting payments on a retainer. This will allow the customers in putting money to the account with the merchants or people who will be deducting the fees when services are made.

There are times when some providers do not really have the knowledge on the risks. It means that not all providers are perfect and that some of them have a better understanding on expectation settings. Providers who are not properly doing the assessment often will terminate the processing of relationship, withhold funds, or require reserves.




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