Banks and credit card associations label merchants as high risk if they pose an increased risk of fraud and chargebacks. This could be the result of the nature of the merchant’s industry, consumers, payment terms, volumes, or ticket sizes. Theoretically, you could label any merchant that processes card-not-present transactions as a high risk merchant. However, these are broad definitions of the term High Risk Merchant.
In the Global Brand Protection Program (GBPP) Guide, Visa clearly defines High Risk or High-Brand Risk Merchants for payment processors and acquirers. The card-not-present merchants Visa categorizes as high-brand risk include:
|5962||Direct Marketing Travel Related Arrangement Services|
|5966||Direct Marketing Outbound Telemarketing Merchants|
|5967||Direct Marketing Inbound Telemarketing Merchants|
|7995||Betting, Lottery Tickets, Casino Gaming Chips, Off-Track Betting, and Wagers at Race Tracks|
|5912||Drug Stores and Pharmacies|
|5122||Drugs, Drug Proprietaries, and Druggist Sundries|
These merchant categories sometimes have deceptively attractive business schemes, and often a business model with a higher tendency for risk. If you're a merchant who falls under one of Visa's High-Brand Risk Merchant Category Codes, how does this affect operating your business?
Application Process for High-Brand Risk Merchants
The process of applying for a merchant account always consists of paperwork and verification whether you are a high-brand risk merchant or not. If you do fall into this bucket of being a high-brand risk merchant, however, this means that processors and acquiring banks will be more thorough with the approval process. Some of the key items processors and acquiring banks will review include:
- Accuracy with submitted corporate documents and business information
- Compliance with Visa’s website standards
- A trustworthy business model
- Previous credit card processing history
Accuracy with Corporate Documents and Business Information
If you’ve applied for a merchant account, you know that along with a merchant application, you are need to submit some or all of the following documents for verification:
- Certificate of incorporation
- Memorandum of association
- Beneficial owner ID, preferably a passport
- Business license, if applicable
- Beneficial owner proof of residence
Merchants should verify that the information they fill out on their application matches the information on their supporting documents before submitting it to their account manager. For example, the registered address of the company that included on the merchant application should be the same as the registered address on the certificate of incorporation. The more accurate this information is from the beginning, the easier and quicker the merchant account application process will be.
Compliance with Visa’s Website Standards
A merchant's website must contain:
- Visa brand mark in full color
- Complete and precise description of goods and services
- Customer service contact information, including a working telephone number
- Clear return, refund, and cancellation policies
- Shipping policy, including the delivery timeframe and geographical areas covered, and whether additional costs are involved for specific regions
- Transaction currency
- Security capabilities and policy for transmission of payment card details
- Legal restrictions, if any
Trustworthy Business Model
Merchants can easily prevent chargebacks and fraud by employing a trustworthy business model. An online business with a model that deceives customers into opting into recurring charges by offering free trials as well as other schemes will increase the risk for high chargebacks and fraud.
To qualify for a merchant account, high-brand risk merchants must practice full disclosure of their services and charges. The order process must disclose the following information:
- Terms and conditions of a promotion
- If offering a trial period, include the length of the trial period and a clear disclosure that you will charge the cardholder unless the cardholder expressly rejects it
- The date any charges will commence
- A cancellation policy including clear steps the cardholder must take to cancel the transaction prior to the end of the trial period
Previous Credit Card Processing History
If you're a high-brand risk merchant applying for a new merchant account, the greatest asset you can have is previous credit card processing history. There is no easier way to prove to a processor or acquiring bank that you’re an established and dependable merchant than to provide credit card processing history that demonstrates good monthly volume, few chargebacks, and few refunds.
Merchant Account Solutions for High-Brand Risk Merchants
As a high-brand risk merchant, I'm sure you've had your fair share of merchant account application denials. With Instabill, that's a thing of the past. We take Visa's Global Brand Protection Program very seriously and we can also work with you if you fall under one of their High-Brand Risk Merchant Categories. For information on our high risk merchant accounts, call me toll-free at 1-800-318-2713 or contact me online today.