Why Are eCommerce Merchant Accounts High Risk

Florence Carpenter

With the growing popularity of online shopping worldwide, the number of digital transactions keeps climbing. However, this means that eCommerce businesses are also becoming more attractive targets for hackers and scammers. Often, online retailers are classified as high-risk businesses by merchant accounts, especially those that sell their goods internationally.

This classification is due to a number of factors, mostly related to the lack of security and privacy for card-absent transactions. Because of the increased risk and potential for fraudulent online sales, the annual fee for high-risk merchant accounts tends to be higher than average.  

Changing of legal regulations

For physical retailers, a customer often presents a government-issued ID when making a purchase for adult products like tobacco, alcohol, drugs, or those related to gambling. However, online sales of these products can be much more difficult to verify.

Because of this, online merchants selling these goods can often be classified as high-risk. In addition, shifting regulations can make the legality of advertising and selling these products rather complex, leading to increased risk for payment processors. 

Greater risk of fraud and identity theft 

For eCommerce merchants who deal in high-volume sales or high ticket items, there is a higher chance of identity theft and fraud. If a malicious actor steals financial information from an individual and uses it to make a purchase, this can lead to chargebacks and refund requests once the target in question discovers the charge on their bill.

As your chargeback rate increases, this makes you more likely to be viewed as a high-risk merchant by payment processors and banks. 

However, adding security measures to your website such as PCI compliance and requiring card verification codes for mobile transactions can help you protect your eCommerce website and reduce the risk of fraud. 
For some guidance on choosing the best high-risk merchant processor for your online business, read more at Processing Card today!

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