A label of a high-risk business may sound a little overwhelming. But in reality, this term refers to the classification of businesses that face increased financial, regulatory, or operational risks due to their nature as enterprises or industries.
It’s important to note that being labeled as a high-risk business does not mean an unfortunate unsuccess. The proper approach to a business with high-risk status will most likely generate impressive returns to a bank, payment platform, and merchant. Here, we will discuss how to operate a high-risk business properly and how to find the right approach.
What is a high-risk business?
A high-risk business often implies that payment processors anticipate more disputes within the industry. Several factors may identify your business as being at high risk:
- Elevated chargeback rates;
- Regulator scrutiny due to the nature of some industries like gambling or adult entertainment;
- Higher potential for fraud;
- Unpredictable income streams.
Now, let’s discuss the main complications that a high-risk business can face:
- Complications in providing secure and reliable payment processing service;
- Strict regulation policy can definitely challenge operating the business in some regions;
- Higher operational costs of adapting effective security measures and fraud protection;
- Limited access to financial services because of the cautiousness of the lenders and investors.
Modern high-risk businesses
Here are a few business fields labeled as high-risk businesses these days, including the following:
1. Online casino and gambling
The gambling industry has always been at high risk due to strict regulatory measures, the high potential for fraudulent actions, and the complexity of online payments while placing bets. It’s not a secret that most regulatory authorities worldwide have strict policies for this particular industry. Such platforms as online casinos, betting websites, and others are facing difficulties in even starting the business.
2. Cryptocurrency and forex trading
Finance is always about risks, but the number of potential complications significantly increases when it comes to digital currencies. Businesses involved in multicurrency trading, investment, and forex will always be associated with financial losses, which is a top issue.
3. Adult entertainment
The adult entertainment industry is one of the most discussed markets. Among the challenges for this type of business are social and moral norms, age verification, regulatory scrutiny, and more. It is difficult to predict which videos adult stores will air. Therefore, the main concern for any bank and payment provider is not to be associated with companies that promote prohibited activities and go against the law or public morality.
4. Travel and booking
This one may be a surprising pick for this list. However, this sector is considered high-risk due to several factors. The prevalence of chargebacks and frequent cancellations is the nature of this business.
Other high-risk businesses may also include the following:
- pharmacy;
- Ticket events broker;
- real estate investing;
- tobacco and e-cigarettes.
How to choose a payment gateway for a high-risk business?
Choosing a payment gateway is crucial, especially for high-risk businesses. There are a few factors to consider while choosing a provider:
- Experience working in the industry
- Security measures
- Global reach and currency support
- Chargeback management
- Transparent fee structure
- Regulatory compliance
Why is acquiring important in payment gateway operations?
The acquiring process is easily described as collecting and transferring funds from customers to the merchant account. The intermediary between the merchant and the payment gateway is the acquiring bank.
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Conclusion
The status of the high-risk business does not mean the unfortunate destiny for the company, it just requires a special approach. Before diving into the business, it’s crucial to understand how to navigate the possible challenges effectively.
The universal tip for any high-risk business would definitely be to select a reliable and secure payment gateway provider. The available payment methods for your customers play one of the most important roles.
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