Being labeled a high-risk merchant has its problems, and they can go as far as the eyes can see. Challenges that many merchants face today require consideration of the risks before discussing how they will accept credit card payments. Fees are naturally higher for ventures that are labeled high risk and most processors will avoid merchants that are labeled “dangerous.”
Merchants must obtain a merchant account from a bank. After this step, banking services come to the foreground. This service becomes valued when the severity of the risk is considered in reference to the risk of the merchant. There are several elements involved in what is considered high-risk. Countries that merchants sell to may be restricted, and dollar volume for monthly sales may also be restricted. All of this is hampered in terms of an online business where this is more likely to occur. In addition, the type of products or services being sold are in industries with high chargeback risk.
These so-called “dangerous” merchants can be a real problem for banks and processors as they can expose them to huge potential losses from chargeback. High premiums are charged on merchant accounts to minimize the risks associated with uncertain merchants. Excessive fees from administrative chargebacks eat into profits. To mitigate the risk of these chargebacks, banks have reserve requirements: around 5-10% of monthly revenue will be restricted for several months. Merchants cannot get access to this revenue for about 180 days. Major cash flow issues follow as the problems spout from restricted access to their revenue.
For online merchants, where their customers are international, they need a globally powered processor. Processors of this type are power e-commerce for the global economy, opportunities to sell in other markets outside of the leading global economy. Some sell products and services online in emerging markets like Columbia or Thailand. Merchants have access to a higher performing service that assists them in doing more business. The ability to sell their offers to overseas markets, subscription model startups can do this, much like recurring payments on a grander scale. Processors allow them to complete transactions in multiple currencies and allow them access to credit card payments that exceed $500 and are then able to process volumes over $20,000 a month. This is a tremendous value as, today, businesses are looking to grow beyond their own domestic markets by using high-risk processors as payment gateways. Having a higher compacity to do business, their earning potential goes up as well.
Buyers’ trust is one of the strongest indicators in e-commerce success. It is important to mention that trust in the seller is a necessity. E-commence success has been granted, because of the trust between buyer and seller when inclusive of a mediating third party. When dissatisfied with an online purchase, a buyer’s right to chargeback is the propensity for trust for all e-commerce. Accomplished transactions online have depended on the belief of trust among parties. Trust that, if a disagreement or dissatisfaction surfaces, a third-party can mediate the dispute to set things right. For this reason, without human input, we will not have mass adoption for e-commerce and all b2b b2c transactions when it comes to bitcoin and other cryptocurrencies.
We have come this far in the cryptosphere, and we are all realizing it now. Without that sense of trust, where trust is actionable and can be remedied, crypto is just a speculative asset for moonboyz only good for p2p transactions. We need a technology solution for trust.