High Risk Businesses & Industries: The Complete Guide for 2024

Being labeled as high risk can have significant implications for businesses, including increased scrutiny, limited access to traditional payment processors, and potential revenue loss.

In this blog post, we’ll explore which industries are considered high risk in payment processing, the reasons behind their classification, and strategies to mitigate the associated risks and prevent revenue loss.

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Which Industries are Considered High Risk in Payment Processing?

High-risk industries encompass a range of sectors, but some notable examples include:

Nutraceuticals and Supplements: The nutraceutical industry faces regulatory complexities and a higher likelihood of chargebacks due to product efficacy or dissatisfaction. 

Payment processors may view businesses in this industry as higher risk due to the potential financial burden resulting from chargebacks.

Adult Entertainment: Adult content businesses encounter reputational risks and increased chargeback rates, leading to challenges in obtaining payment processing solutions. 

Due to the sensitive nature of the industry, payment processors may consider adult entertainment businesses as higher risk and subject to stricter underwriting requirements.

Online Gambling and Gaming: The online gambling industry is often subject to strict regulations, legal complexities, and a higher potential for fraudulent transactions. 

Payment processors may classify online gambling businesses as high risk due to the inherent risks associated with the industry and the need for robust fraud prevention measures.

Travel and Tourism: Due to the higher incidence of cancellations, chargebacks, and potential fraud associated with travel services, this industry falls under the high-risk category. 

Payment processors may perceive travel and tourism businesses as higher risk due to the potential financial losses resulting from chargebacks and fraudulent activities.

Cryptocurrency & Forex: These industries face volatility, regulatory scrutiny, and the potential for fraudulent activities, making them higher risk in the eyes of payment processors. 

The inherent risks associated with cryptocurrency and forex transactions, such as market fluctuations and potential fraudulent schemes, can lead to payment processors categorizing businesses in these industries as high risk.

Tobacco, E-Cigarettes and Vaping: With health concerns and legal restrictions surrounding these industries, payment processors often view them as higher risk due to potential chargebacks, legal disputes, and reputational issues.

E-commerce and Dropshipping: While e-commerce as a whole is not inherently high risk, certain niches within this industry, such as electronics or high-value products, may be viewed as higher risk due to a higher likelihood of fraud and chargebacks. 

Additionally, dropshipping businesses, which rely on third-party suppliers, may face challenges related to product quality, shipping delays, and customer satisfaction.

Online Dating and Matchmaking: The online dating industry experiences challenges related to chargebacks, customer disputes, and potential fraudulent activities. 

Payment processors may consider online dating and matchmaking businesses as higher risk due to the potential for dissatisfaction among users and associated financial risks.

CBD and Hemp Products: While the legalization of CBD and hemp products has opened new opportunities, these industries still face regulatory complexities and varying legal restrictions. 

Payment processors may categorize CBD and hemp businesses as high risk due to the potential for changing regulations, reputational concerns, and chargebacks.

Gaming and Esports: Businesses involved in online gaming, esports, and virtual currency exchanges can be classified as high risk due to the potential for fraud, chargebacks, and legal implications. 

The virtual nature of these industries and the risk of unauthorized transactions make payment processors cautious when dealing with gaming-related businesses.

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Why are These Industries Considered High Risk?

Several factors contribute to the classification of certain industries as high risk in payment processing:

Regulatory Requirements: Industries with complex regulations, licensing requirements, or legal considerations, such as nutraceuticals, gambling, and adult entertainment, are often classified as high risk. These industries need to navigate stringent compliance measures, which can pose challenges for payment processors.

Chargeback Rates: Industries with higher chargeback rates, such as travel and adult entertainment, may be deemed high risk due to the potential financial burden on payment processors.

Chargebacks occur when customers dispute a transaction and request a refund, which can result in revenue loss for businesses and additional costs for payment processors.

Reputational Risks: Industries associated with controversial or sensitive content, like adult entertainment, may face challenges due to potential reputational risks for payment processors.

Processing payments for businesses in these industries can impact the public perception of payment processors, leading to potential negative associations.

Fraudulent Activities: Industries prone to fraudulent transactions, such as online gambling and cryptocurrency, are often considered high risk due to the potential financial losses and legal implications.

Payment processors need to implement robust fraud detection and prevention measures to protect themselves and their clients from fraudulent activities.

Turn High-Risk into High-Reward: Take the First Step  and Contact Us Today!

What Are The Financial Implications of Being Classified as High Risk?

Do you feel like you’re rolling the dice with your payment processing solutions? Let’s take a closer look why traditional payment processors shy away from high-risk businesses, leaving you in a constant search for a lifeline.

When a business falls into the high-risk category, several implications arise:

Limited Payment Processor Options

Traditional payment processors may decline high-risk businesses, making it difficult to find suitable payment processing solutions. This limited availability of payment processors can hinder business operations and expansion.

Higher Processing Fees

High-risk businesses often face higher processing fees and additional risk management costs imposed by payment processors. These fees reflect the increased risks associated with these industries, such as chargebacks and fraud, and can impact profit margins.

Stricter Underwriting and Monitoring

High-risk businesses undergo more rigorous underwriting and ongoing monitoring by payment processors. This includes scrutinizing business models, financial stability, chargeback ratios, and compliance measures.

Non-compliance or a significant increase in chargebacks can result in account holds, penalties, or termination of payment processing services.

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What Do You Do if Your Business Is Classified as High-Risk?

To prevent revenue loss and minimize fees, high-risk businesses can utilize a series of strategies:

• • Partner with High-Risk Payment Processors: Collaborate with specialized high-risk payment processors, such as PayFasto, that understand the unique challenges of your industry.

    These processors have expertise in managing the risks associated with high-risk businesses and can provide tailored solutions.

• • Implement Robust Fraud Prevention Measures: Invest in advanced fraud prevention tools and technologies to detect and prevent fraudulent transactions.

    This can help reduce chargeback rates, mitigate financial losses, and improve overall transaction security. Do it by yourself or simply partner with a reliable merchant account and payment gateway provider like PayFasto. 

• • Monitor and Analyze Chargeback Data: Regularly monitor chargeback data and analyze the root causes to identify patterns or areas of improvement.

    Understanding the reasons behind chargebacks can help implement preventive measures, such as refining product descriptions, improving customer experience, or enhancing fraud detection systems.

• • Maintain Regulatory Compliance: Stay updated with industry-specific regulations and ensure compliance with relevant laws and standards.

    Non-compliance can result in penalties, reputational damage, and potential loss of payment processing services.

How PayFasto Can Help Your High-Risk Businesses

Understanding which industries are considered high risk in payment processing and the reasons behind their classification is crucial for businesses operating in these sectors.

With our expertise in high-risk industries, robust fraud prevention measures, global payment solutions, and personalized support, we provide tailored payment processing solutions to meet your unique needs. 

Sign up today for a free quote and let us help you navigate the challenges of operating in a high-risk industry while maximizing your revenue potential.

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