So you’re a high-risk merchant, now what?
Blog post from Basis Theory
High-risk merchants are businesses viewed by card networks and payment service providers as more likely to generate fraud, disputes, or chargebacks, either because their chargeback rate exceeds roughly 1% or because they operate in industries such as gambling, cannabis, adult content, e-commerce, subscriptions, travel, and digital health. These merchants often face stricter underwriting, higher processing fees, reserve requirements that may withhold up to 5% of transactions, longer contracts, and possible payment interruptions, with classifications determined by network-specific risk programs and factors including transaction volume, international sales, limited operating history, credit profile, and industry affiliation. While merchants classified because of excessive chargebacks may lower their risk designation by improving customer communication, refunds, fraud prevention, compliance, and transaction monitoring, businesses in inherently restricted sectors may remain high-risk indefinitely. The text recommends working with experienced processors, maintaining relationships with multiple payment service providers, using tokenization to retain control of customer card data when switching providers, and prioritizing transparent policies and customer service, illustrated by creator platform Passes, which adopted a multi-provider strategy after a processor unexpectedly shut off its service.
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