Payment processing for high-risk industries: Challenges and solutions

Payment processing can be tricky for any business, but for high-risk industries, it’s especially challenging. From navigating complex regulations to managing higher-than-average fees, merchants must overcome significant hurdles to thrive.

Whether you’re in the world of online gambling, forex trading, or video game items, finding a reliable and efficient payment solution can be a game-changer. Let’s dive into the challenges high-risk industries face and uncover actionable solutions to overcome them.

What are high-risk industries?

High-risk industries are sectors that financial institutions and payment processors deem to have an elevated likelihood of chargebacks, fraud, or regulatory complications. Some examples include:

• iGaming and online gambling: Due to legal restrictions and high chargeback rates.
• Adult entertainment: Often stigmatised and heavily regulated.
• Travel and ticketing: Prone to cancellations and disputes.
• Forex and cryptocurrency trading: Complex and volatile.
• E-cigarettes and tobacco: Subject to changing laws and regulations.
• Subscription services: Susceptible to recurring payment disputes.

These industries operate in dynamic, fast-paced environments, and their risk factors make them less appealing to traditional payment processors.

Key challenges faced by high-risk businesses in payment processing

1. Higher fees and stricter terms

Being labelled as high-risk often translates to higher costs. Payment processors charge elevated transaction fees and hefty chargeback penalties and may require longer rolling reserves to mitigate risk. These expenses can eat into profit margins and strain resources.

2. Limited options for payment processors

Many mainstream payment processors simply refuse to work with high-risk businesses. Those that do often impose restrictive terms, leaving businesses with fewer choices and less negotiating power.

3. Regulatory and legal compliance challenges

High-risk industries are heavily regulated, with businesses needing to navigate a labyrinth of laws that vary by country and region. Non-compliance isn’t just costly – it can shut a business down entirely.

Learn about payment regulations in Asia.

4. Increased risk of chargebacks

Chargebacks – when a customer disputes a transaction and requests a refund – are more frequent in high-risk industries. This could be due to subscription misunderstandings or fraudulent claims. Excessive chargebacks can lead to account termination.

5. Exposure to fraud and cybersecurity threats

Fraudsters often target high-risk industries, exploiting vulnerabilities to commit payment fraud. This puts businesses at financial and reputational risk, making security a top priority.

Practical solutions to payment processing challenges

Overcoming payment processing challenges in high-risk industries requires a strategic approach and the right tools. By implementing tailored solutions, businesses can not only mitigate risks but also streamline their operations, improve customer satisfaction, and drive growth.

Work with specialised high-risk payment processors

Not all payment processors shy away from high-risk industries. Specialised high-risk payment processors offer solutions tailored to the unique needs of these businesses. Their advantages include:

• Flexible policies: Accommodating the specific risks of your industry.
• Global reach: Supporting multi-currency transactions to expand your market.
• Advanced tools: Fraud detection, tokenization, chargeback management, and real-time reporting.

Invest in advanced fraud prevention technology

Fraud can be a hazard to high-risk businesses, but technology provides robust defences. Consider implementing:

• Real-time transaction monitoring: Detect suspicious activity instantly.
• 3D Secure authentication: Adds an extra layer of security for card transactions.
• AI-driven tools: Analyse patterns to predict and prevent fraud before it happens.

Take proactive steps to reduce chargebacks

Chargebacks don’t have to be the bane of your business. Proactive strategies can help reduce their impact:

• Clear billing descriptors: Avoid customer confusion with precise descriptions.
• Exceptional customer service: Resolve disputes quickly and amicably.
• Chargeback management services: Partner with specialists to handle disputes effectively.

Stay updated on legal and regulatory requirements

Compliance isn’t just a box to check – it’s a cornerstone of business longevity. To ensure your business meets all legal requirements:

• Hire compliance experts: Professionals specialising in your industry will help you navigate all the difficulties.
• Implement KYC and AML protocols: Verify customer identities and prevent money laundering.
• Keep up with changes: Regulations evolve, so staying informed is crucial.

What Payop has to offer

Navigating the high-risk landscape is easier with the right partner. With seven years of experience, Payop knows precisely what your business needs to optimise your payment flow and boost conversion. We offer: 

• Competitive pricing: No onboarding, monthly or other hidden fees that can strain your resources. You pay only for successful transactions. 
• Advanced security measures:  Payop uses modern technologies such as tokenization and real-time transaction monitoring to protect your data and prevent fraudulent activities.
• Global capabilities: With the ability to accept payments from over 170 countries and more than 500 payment methods, Payop will help expand your business reach and cater to diverse customer preferences. 
• Dedicated support: Our experienced support team provides personalised onboarding, ongoing assistance, and quick resolution of any issues. 

With Payop, you gain not just a payment processor but a partner who understands the unique needs of high-risk businesses.

Contact our team at [email protected] to learn more.