In 2021, a total of $5.8 billion was considered lost from fraud according to the FTC and one shudders in anticipation for last year’s report.
Authorities are more eager than ever to clamp down on fraudulent transactions as a result.
While this is a good thing, too much regulation and surveillance can also put certain merchants in jeopardy of running legitimate businesses.
You might have a high risk merchant business that deals with large payments. These are the most scrutinized companies and you want to lower the risk of being accused of fraud.
Here’s what to do:
Your Bank Account
The first thing you must consider is getting the right bank account. You can use a service such as Bankcard which is used for risky transactions.
What happens when you send an invoice for $1,000,000 but it’ll take 30 days for your client to receive their product?
In such events, both the authorities and even your customers can get suspicious. If you receive a chargeback, this can cause issues with your bank account.
But if you choose a high-risk merchant account from the get-go this will be less of a problem. The bank will do its due diligence to investigate your company but once you’re cleared you’ll have fewer issues.
Offer Insurance to Clientele
Another option to consider is offering insurance to your clients in case of any issues.
Imagine a scenario: an entrepreneur in Dubai wants to have a Bugatti from Italy shipped to him. One can imagine that millions of dollars are being transacted and we shudder to think what would happen if the Bugatti gets damaged en route!
The Dubai entrepreneur will feel a lot more comfortable if Bugatti offers him some sort of insurance to cover such an issue. You must do the same for your clientele.
This is a surefire way to make you more trusted as a high-risk merchant. It’s also better for reducing chargebacks in the future.
Be Clear With Shipping Speeds
If you deal in a business that ships products, such as our previous example with Bugatti, you must be clear as to when they can expect the product to get shipped and delivered.
You must always provide them with tracking updates. It’s also best to show proof of signature confirmation and to request it in return.
Remember, fast shipping has become a norm for the average consumer. If your Amazon Prime order comes in three days rather than two you’ll be over the roof!
So imagine if you’re spending a six-figure sum and the whereabouts of your order are a mystery!
You must always give clear details as to when your goods are being shipped and when your customers can expect to receive them. Make sure you always use professional courier services. Focus on courier services intended for premium goods.
Never trust the postal service of any country for such goods. You also have to prepare for any delays by customs and border protection guards. Make sure you inform your clients of such delays so you’re not held responsible for something outside of your control.
Offer Services Fast
Now, what happens if you offer services rather than products? With these, you’ll also have to deliver fast.
Let’s say you charge $5,000 per week to coach serious entrepreneurs. You have to stick to your word for when you’ll meet your coaching obligations.
If, for example, you commit to a Zoom call each Friday at 10 AM then you must always make yourself available at that time – SHARP! If you have to miss out on your meetings, you must inform your clients in advance and reschedule immediately.
In such a scenario, you also have to communicate regularly with your clients. They shouldn’t wait more than 1 business day to receive a response from you — whether by phone or email.
Remain Compliant
Sometimes, you’re a high-risk merchant because of the type of products or services you offer.
For example, if you sell the following products or services you’ll get considered to be a high-risk merchant:
- CBD products
- Pornographic content/services
- Firearms and other weapons
- Pharmaceuticals
- E-cigarettes and vaping devices
- Supplements
When you offer such products and services, you have to ensure you’re staying compliant with local laws and regulations. Banks and customers alike won’t want to work with you unless you remain compliant.
Make sure you get any necessary licenses and permits you to need to sell such products and services. You’ll need the assistance of your lawyer to help you obtain these documents.
Your bank and customers alike will want proof of such documentation. This ensures that they’ll know your compliant and will reduce the likelihood of chargebacks, etc.
Best Practices
Finally, let’s end this guide by looking at the best practices that all high-risk merchants should follow.
You have to be financially responsible with your company at all times. This means that you should pay all expenses on time. The minute you get into debt you’ll harm your credit rating.
If you have a weak credit rating you can expect your bank to stop doing business with you. As a high-risk merchant, you also have to ensure you have a steady cash flow.
Without it, banks might feel it’s not worth the risk to do business with you. Your staff should also know how to recognize risk and not work with shady clients.
When you receive payments you want to always issue receipts. To play it even safer, ask the recipient to sign the receipt to show proof that they’ve received it.
Succeed As a High-Risk Merchant
Now you can succeed as a high-risk merchant and reduce the chances of being charged with fraud and avoiding chargebacks.
The first step is to work with a bank that accepts high-risk merchants. Make sure you show them documentation such as your credit report and any licenses and permits you may need.
You have to also be clear about when your clients can expect to receive their products and/or services. Make sure you always offer fast shipping speeds and deliver services promptly. You can find more great business tips on our website.
