You should already be acquainted with payment service providers like paypal, Square, or Stripe if your company accepts payments online.
They are often the option of vses and smes since they are well-represented on the national and international market.
To make things clearer, Stripe is a well-known PSP (Payment Service Provider) that gives businesses access to online payment services.
The number of merchants across all industries is rising steadily nowadays, which also causes an increase in accidents.
Upon getting letters informing them that their Stripe accounts were closed or frozen overnight, merchants may be labelled as “high-risk merchants” due to this increase.
If a PSP is chosen by a merchant instead of a single merchant account, the risks and hidden expenses involved should be taken into consideration.
How do psps determine a trader’s risk tolerance?
For financial institutions and payment service providers, the risk associated with a merchant account is a critical concern. As a result, one of the key factors used to identify high risk merchant account in USA for the default percentage.
The better for psps, the fewer chargebacks there are. Psps must keep a trusting connection with financial institutions in order to carry out their operations (banks, credit card companies). Due to this, psps are quite stringent when it comes to the number of chargebacks, even if it means losing clients.
For psps, arrears are another cause of difficulty. The PSP will be responsible for paying out losses if a merchant chooses to terminate their Stripe account due to a high chargeback rate.
Paypal, for instance, requires a bank account to guarantee its security in this kind of scenario in order to lower the risk. Furthermore, a PSP will get a poor image if its merchants have a high percentage of delinquent payments.
The location of your company premises, the history of your merchant accounts, the duration of your business, and the reputation of your industry are among the other factors that psps take into consideration when determining if you are a high-risk merchant in addition to the chargeback volume.
Your PSP may terminate or freeze your account without your permission if you suddenly fall under the dangerous merchant category. This has occurred, for instance, with several retailers that use Stripe as their payment processor.
What procedures does Stripe use to cancel or lock off its merchant accounts?
Psps (like Stripe) often employ one of three categories when registering a merchant:
- Selling tracable and provable products and services makes a business low-risk (low or zero outstanding payments)
- Medium-risk business: gambling and clairvoyance (depending on the level of chargebacks)
- Selling products and services that are difficult to detect, verify, or are untraceable is considered to be a high-risk business practise.
- However, this last categorization is still quite ambiguous, making it possible for a trader who was previously deemed low risk to suddenly be labelled a “high risk trader.”
The merchant gets an automated email advising them of the situation when a Stripe account freezes or is closed. The lack of personalisation and information about the reasons why their accounts were locked or cancelled worries merchants.
They have a hard time changing their habits for no particular cause. There have been instances when merchants with no chargebacks had their accounts cancelled, despite the fact that the number of chargebacks is often the primary factor.
Merchants who had their Stripe accounts suspended or closed have expressed their displeasure by giving Stripe a poor rating on the BBB (Better Business Bureau). However, despite some comments from the BBB, Stripe did not provide them any more details on the closures’ causes, and the majority of their suggestions went unheard.
The absence of fraud protection has been brought up by former Stripe merchants as another problem. Despite using every anti-fraud filter possible, retailers are not completely safe. Additionally, there is no method for a business to challenge a fraudulent chargeback, which is disappointing.
Therefore, former merchants criticise Stripe for both not providing enough security against fraud and for its strategy of keeping cash frozen for 90 days. A 90-day rolling reserve protects against chargeback disputes, but it has a negative financial effect on merchants that have already fallen victim to fraud and are unable to process any payments (both old and new).
I was given a high-risk merchant designation; how can I start a new merchant account?
Despite having a strong market presence, Stripe and paypal don’t focus on high-risk merchant accounts.
Some payment service providers, nevertheless, are. You may also discover psps with robust anti-fraud filters that can be customised, anti-debit chargebacks that warn you in real time, or psps with dedicated account managers that can provide you with individualised monitoring and quick response in an emergency.
Although psps like Stripe and paypal are simple to use and fast to set up, there may ultimately be substantial risk for merchants. So, take the time to thoroughly consider your PSP and evaluate its dependability.