Payment processing involves accepting money from a customer through digital methods and delivering it to the service provider. Many industries are deemed high risk to processors. We discuss how this risk can be managed and used to drive growth. 

The classification of a business as high-risk by payment merchants is much more complex than you may think. This has led to some quite surprising industries and sectors being on the list. For example, even certain furniture retailers will be deemed as high-risk and have trouble finding payment processors. Yet for those who do qualify, it need not be a burden. Managing risk can be an asset that can drive growth. 

High-Risk Payment Industries

Generally, the amount of incoming and outgoing cash transactions is the main factor that decides risk. This is because it can result in an increased number of chargebacks, which are refunds requested with a debit or credit card. It does open up the possibility of fraud, but even general repeat chargebacks in high amounts are a drain on payment processors’ resources and time. When an industry is one where people frequently dispute these charges, then the risk is increased. Pharmaceuticals and travel are two areas that fall under this category. Many subscription-based methods that tend to switch to automated billing are also prone to high levels of chargebacks. 

Companies taking international transactions are also considered high risk. This increases if the main countries they are doing business with have a less stable economic infrastructure due to fluctuating currency rates and the levels of fraud detected there. There are others: High-ticket items, new businesses, or ones in new industries, along with ones facing regulatory scrutiny. 

Risk Management

One industry that has managed to overcome being labeled as a high-risk payment provider is the gambling industry. It has everything that would see it as high risk: regular transactions, high ticket amounts, international payments, and regulatory scrutiny. Yet you can find some of the most well-known payment providers in casinos, such as Visa and PayPal, to newer gateways like Neosurf and Klarna. So how did it get there? 

The industry has worked hard to manage the risk associated with payment processing. Even casino aggregators, who review online casinos, will now have the best casino payment methods in their list of factors they look over. Alongside the provision of games and bonuses on offer, the payment providers are important as they add an element of trust to a casino. If an operator is trusted by Visa and American Express, then it shows it is good enough for customers. 

Managing risk has been done by complying with regulatory authorities. This has been with organizations such as the Malta Gaming Authority and UK Gambling Commissions, who have given specific advice backed by research on payments. They have also introduced healthy gambling initiatives that set amounts on deposit types and withdrawals. This has worked to limit the random nature of incoming and outgoing transactions. Finally, by working with these authorities, they have followed guidance on fraud, making them safer for payment processors to use. 

The Future of Payment Industry Risk Management

There is no doubt that payment risks are going to continue to rise. Cybercrime is on the up, and this is almost exclusively targeted at the acquisition of personal details and financial information. It is no longer enough to turn off the tap to high-risk payment industries in a digital world where almost all companies are high-risk. Yet as new technology is used to conduct crime, like-for-like new technology can be used to combat it. 

Technology may control and mitigate payment industry risk. The casino industry shows that it can improve and grow. This can speed up transactions and simplify screening and compliance. In a growing price environment, the correct technology can reduce business costs. API technology can save payment service companies money.

Companies that employ technology to manage risk will likely succeed. Working with a variety of clients is a big competitive advantage. Risk management can benefit from due diligence, identity verification, and onboarding technologies.

Many processors are adapting to a new normal, which is the future of payment processing. Many high-risk payment merchants have disappeared. Following the worldwide events of the past five years, we are all increasingly dependent on Internet payments and more vulnerable to fraud. Thus, comprehensive strategies should be used across businesses, regardless of payment processing volumes, ticket amounts, and other criteria. The new payment processing era should be inclusive.

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