Acquiring a merchant account is typically beneficial for both parties involved, because when your business makes money, that means the payment gateway companies are also making money, and when everyone’s bringing in revenue, everyone’s happy.

risk levelsWhile this all sounds fine and dandy, and tends to create a highly competitive marketplace, the payment gateway companies must still take the time to do their due diligence and evaluate the associated risks and liabilities involved before enabling your business to acquire a merchant account. These companies facilitate the processing of payments and provide a gateway for the safe and secure transfer of money between merchant and customer.

Each time they process a payment on behalf of your business, the payment gateway company incurs a potential risk of losses based on assurance by the major credit card companies that their cardholders are entitled to receive either the purchased good or service, or their money back. Due to this, your business must apply and get approved before obtaining a merchant account. A variety of factors go into the approval process and are considered as a whole to determine whether or not your business will be approved. Let’s take a look at some of these factors to equip you with the tools to better evaluate your business’s risk level to payment gateway companies.

Industry-Specific Product Risk

There is a positive correlation between a high-level of risk and high discount rates, as more precarious goods and services require increased levels of security and larger reserves. A business dealing with online gambling or adult entertainment presents a higher risk than one providing groceries or musical instruments. The riskier something is, the more difficult it will be to gain approval from various payment gateway companies, although this doesn’t mean it’s impossible. It’s imperative that you familiarize yourself with the potential provider and their services ahead of time so you can present a convincing proposal and increase your likelihood of approval.

High Trade Volume

The more money that travels through an account, the riskier it is for the payment gateway company. Therefore, higher trade volume creates more risk for the provider. Your processing history is a big determining factor in the approval process because it shows how much money the gateway can expect to be responsible for. If you are a startup who lacks a feasible processing history, then it will be up to you to illustrate what type of volume the company can reasonably expect and how you will be able to respond to these demands.

Credit cards in a wallet Poor Credit

No one wants to admit when they’re dealing with bad credit, but it happens to the best of us. If this applies to you, be open and honest throughout the approval process so that the processing company isn’t caught by any surprises. Acknowledging problems and faults also goes a long way in the eyes of the payment gateway company, as they are reassured to be working with someone who doesn’t shy away from adversity and issues.

Stay informed with all the services and rates that each payment gateway company has to offer, and make sure you familiarize yourself with them before submitting an application just as much as they will familiarize themselves with you and your business throughout the process.