The State of High Risk Processing Today

By Laura Kaiser


The lure of high risk processing and its potential for windfall profits is nothing new. Since becoming a legitimate and bankable income source some 15 years ago, more and more consulting firms and processors claim they can place categories not widely accepted. So when your organization decides it’s time to diversify its portfolio with some less traditional accounts, it’s important to know how to separate smart risks from just plain risky business.

There are plenty of non-traditional accounts with excellent income potential, but the rules regarding which to consider accepting are constantly changing. To stay current, profitable and within the confines of the law, it helps to have strong connections to consultants or partner processing banks that know the laws and have experience managing risk appropriately. And as a bank executive, it’s always wise to network with experts who can provide sound advice on what types merchants to look for and which ones to avoid.

Gene Lieb, consultant with Business Financial Resources, a consultancy in the high risk processing field since 1992, says, “In the beginning there were a few processors out there willing to take on furniture and flooring sales with maybe a few escort services thrown in. That’s how it all started. Today, future delivery status still factors into the equation, especially with Internet sales, but market globalization has made this business more complex.”


A Global Reach

Lieb is referring primarily to the thousands of online merchants operating all over the world with the ability to sell to nearly anyone with a computer or smartphone. With good reason, this has made many banks more cautious about the types of accounts they will accept. It’s important to proceed with caution when navigating international processors – many don’t recognize U.S. laws – and when dealing with varied rates and conditions between regions. This is especially true when choosing to work with gaming, replica, nutraceutical, cigarette, tobacco clients, etc.

Unfortunately, it has become common practice to disguise these types of businesses for the purpose of securing accounts. Earnings from prohibited items such as sea salts, controlled pharmacy items, firearms and other objectionable goods has created a darker, greedier side of high risk processing. The allure of a large payday can be tempting and less reputable organizations will promise creative solutions to get around the laws governing these types of merchants.

Lieb stresses the importance of avoiding this type of risk, saying that “these items are illegal and potentially dangerous – that’s obvious. Working with this type of business can also damage your reputation. You risk having your accounts turned off and becoming black-listed by processors at the very least. And it just gets worse from there.”

Financial institutions that do their own processing, as well as those that don’t, can benefit from consulting services that specialize in understanding how to rate all types of accounts, including those with future delivery. Whether it’s an outside consulting firm or someone within your organization, an expert can help assess cancellation and chargeback risks and suggest emerging safe-bet categories. It’s important to keep in mind that just because online services come with future deliveries, doesn’t automatically make them high liability business types. All merchants should be judged on a case by case basis. Even traditional retail stores, though generally considered low risk, must be judged on their credit and performance because they too have been known to shut down with unfinished customer business.

Lieb says that with proper sales and delivery monitoring, travel, multi-level marketing, foreign exchange, dating services, adult products, gaming, psychic services and others make excellent accounts.


Laura Kaiser is a professional freelance writer and creative consultant working with companies in the NY/NJ/PA Tristate area.