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Commonly used payment methods:
In North America, several payment methods are commonly used by merchants and consumers. Credit and debit cards remain the most popular payment method, accounting for over 50% of online transactions. Other payment methods include digital wallets, bank transfers, and prepaid cards. Digital wallets, such as Apple Pay and Google Wallet, are becoming increasingly popular due to their convenience and security.
Popular Payment methods for high-risk merchants:
Most Commonly Accepted Currencies in the North America:
In North America, the most commonly accepted currencies are the US Dollar (USD) and the Canadian Dollar (CAD). However, some payment service providers and acquiring banks may also support other currencies, such as the Euro (EUR) or the British Pound (GBP), depending on their services and target market. It is essential for high-risk merchants to verify which currencies are supported by their chosen payment service provider or acquiring bank.
Payment service providers play a crucial role in facilitating online transactions. They help merchants to accept and process payments from customers. Some of the popular payment service providers in North America include PayPal, Stripe, and Square. PayPal is one of the most popular payment service providers, with over 300 million active users worldwide. Stripe, on the other hand, is known for its developer-friendly APIs, which make it easy for merchants to integrate payment processing into their websites or mobile apps. Square, on the other hand, is known for its point-of-sale hardware and software solutions.
High-risk merchants face significant challenges when it comes to finding a payment solution. High-risk merchants are businesses that are at higher risk of chargebacks or fraud.
The high-risk merchant industry is growing in North America, with some estimates putting it at over 12 million merchants. This is a significant segment of the market, with high-risk merchants accounting for over 25% of all online transactions. The size of the industry is expected to increase further due to the rise of e-commerce and the increasing demand for online payments.
High-risk merchants usually pay higher payment processing fees than low-risk merchants because payment service providers consider them a higher risk of chargebacks or fraud. The fees charged can be as high as 10% of the transaction amount.
Payment service providers may impose additional technical requirements on high-risk merchants, such as requiring the use of 3D Secure, a protocol designed to prevent fraudulent transactions.
Chargebacks occur when a customer disputes a transaction and requests a refund from their bank. High-risk merchants are more likely to experience chargebacks, which can result in higher chargeback fees ranging from $20 to $100 per chargeback.
Payment service providers may require high-risk merchants to maintain a cash reserve as a security measure against chargebacks or fraud. The reserve can take different forms, including a capped reserve, rolling reserve, or upfront reserve. A capped reserve is a fixed amount that the merchant must maintain in their account. A rolling reserve is a percentage of each transaction that is held in reserve for a specific period. An upfront reserve is a lump sum payment made by the merchant to the payment service provider.
High-risk merchants face additional requirements when seeking a Merchant Identification Number (MID) with a Payment Service Provider (PSP) or Acquiring Bank. These requirements are in place to mitigate the additional risks associated with high-risk industries. Some of the specific requirements that high-risk merchants must fulfill are:
Detailed Business Information: High-risk merchants must provide detailed information about their business, including their business model, industry, and target audience. PSPs and Acquiring Banks want to know as much as possible about the business to assess the level of risk involved.
Financial Statements: High-risk merchants must provide financial statements, including balance sheets, income statements, and cash flow statements. This information is used to assess the financial stability of the business and its ability to manage chargebacks and refunds.
Compliance with Industry Regulations: High-risk merchants must comply with all relevant industry regulations and standards. For example, online gambling merchants must comply with the regulations set forth by the Gambling Commission, while adult entertainment merchants must comply with age verification requirements.
Technical Requirements: High-risk merchants may be required to use specific software or hardware to process payments. For example, online gambling merchants may be required to use a specific type of gaming software that is certified by the regulator.
Reserves: High-risk merchants may be required to maintain a cash reserve, which can take the form of a capped reserve, rolling reserve, or upfront reserve. These reserves help PSPs and Acquiring Banks mitigate the risk of chargebacks and fraud.
Volume Caps: High-risk merchants may be subject to volume caps, which limit the amount of transactions they can process in a given period. This is done to manage the risk of chargebacks and fraud.
Being on the TMF/MATCH List: High-risk merchants must not be on the Terminated Merchant File (TMF) or the Member Alert to Control High-Risk (MATCH) list. These lists contain merchants who have been terminated by a PSP or Acquiring Bank due to chargebacks, fraud, or other reasons.
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