If you run a high-risk business or work in a high-risk industry, your credit card processor may view you as a high risk. That means you may face higher rates and additional terms and conditions that other businesses are not subject to. Furthermore, if you have volatile revenue streams, bad credit, low cash reserves, a high number of chargebacks, and other red flags, you may end up paying more for services that others can get for less.
When it comes to high-risk credit card processing and other payment processing mechanisms. Expect to pay higher rates, additional fees, and be subject to high reserves that could make day-to-day operations difficult. Sure, if you can reduce chargeback and other negative factors, you’ll have some resources. But a high-risk designation can be a serious problem for any business.
Payment Gateways: How do they work?
All payment processing begins with the customer providing a form of payment to the merchant. To keep things simple, consider how the process works with credit card payments, which are one of the most common types of online payment.
Step 1: The customer enters his or her credit card information.
The customer starts the payment processing process by entering their credit card information. It includes their name, card number, expiration date, billing address, and card verification value (CVV).
Step 2: Encryption and anti-fraud detection.
The payment gateway encrypts the card information and conducts a preliminary fraud check. This is the first of many steps to reduce risk and the possibility of fraud during the transaction approval process.
Step 3: Send data to the credit card network.
Once the payment information is safely stored in the payment gateway. It is transmitted to the appropriate credit card network, which performs another fraud check and confirms that credit is available.
Step 4: Send information to the issuing bank.
An issuing bank is a financial institution that actually provides credit card borrowing and lending services. In collaboration with credit card companies, they issue cards to their account holders. They conduct another round of fraud screening once they receive transaction information.
Step 5: The issuing bank either approves or denies the transaction.
The issuing bank decides whether or not to authorize the transaction after reviewing the transaction details. It forwards that decision to the acquiring bank, which is linked to the merchant account.
Step 6: The issuing bank sends funds to the acquiring bank.
It then transfers the funds to the merchant account, because the actual transfer of funds can take several days. Banks use a series of credits and debits to expedite the process for customers and merchants.
Step 7: The payment gateway receives the transaction details.
The merchant’s payment gateway will notify them whether the transaction was approved or not by sending confirmation details or requesting that the customer provide a different form of payment. This complex procedure is completed in a matter of seconds. No customer wants to waste time staring at a payment screen, unsure of whether or not their payment was successful.
PayCly is one of the prominent High-Risk Payment Gateway service providers that helps merchants that are associated with high-risk industries such as adult entertainment, e-commerce, gaming, and the travel industry retain their potential customers by providing them with efficient payment processing solutions. We understand the businesses, which is why we have come up with tailored payment solutions.
5 ways to cut high-risk payment processing fees
Given the impact that fees can have on your business, it’s always a good idea to consider ways to avoid or reduce them. While some processing fees are unavoidable, there are steps you can take to keep them as low as possible.
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Accept credit cards in person whenever possible.
While this is obviously not possible for many online businesses, in-person transactions have a lower processing fee because they are less likely to be fraudulent. Avoid accepting credit card payments over the phone and do everything you can to encourage customers to charge their purchases in person.
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Make a Minimum Purchase Requirement for Credit Card Sales
A large number of low-volume transactions can quickly add up to a significant amount of fees. Setting a minimum purchase amount for credit card sales can help reduce these fees. But there are some legal considerations to keep in mind. However, depending on the issuer, debit cards may be subject to different rules, so check with your payment processor to see how much flexibility you have.
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Use a Credit Card Authorization Form to Reduce Chargebacks
A chargeback occurs when a customer disputes a charge from your company and requests that their credit card company reverse it. Having this documentation increases your chances of winning chargeback cases with the card issuer, as well as lowers the overall number of chargebacks your business experiences in order to keep your processing fees low.
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Address Verification Service (AVS)
An AVS, which requires customers to enter their address during the checkout process, is one of the most effective tools for combating credit card fraud. Businesses that use AVS on their eCommerce platforms frequently qualify for lower interchange rates from credit card companies.
When it comes to payment processing services, we at PayCly believe that transparency should be a core business value. As a result, our High-Risk Payment Gateway provides flexible credit card processing to high-risk merchants with no reserve requirements or hidden fees.
