In the realm of online payments, every business is assessed in terms of risk for payment systems and banks.
These risks are associated with the possibility of chargebacks, fraud, regulatory restrictions, and reputational issues.
To classify businesses, categories are applied: high-risk, middle-risk, and low-risk. Let’s take a closer look at each category and the criteria for classifying businesses.
What are high-risk payments?
High-risk payments refer to businesses that are associated with a high frequency of chargebacks, potential fraud, or operations in jurisdictions with increased regulatory requirements.
High-risk businesses include:
– Casinos, betting, gambling.
– Dating platforms.
– Cryptocurrency exchanges and projects.
– Subscription services (e.g., online courses or content subscriptions).
– Adult websites.
– Travel agencies and airlines.
Features of high-risk payments:
– High percentage of chargebacks.
– Difficulties in choosing a payment provider.
– Increased processing fees.
Middle-risk payments: what are they?
Middle-risk payments are characteristic of businesses that have moderate risks associated with chargebacks and fraud.
Such companies may include: Retail online stores with a wide range of products. Sellers of electronics or household appliances. Online services with subscription payments (e.g., SaaS).
Features of middle-risk businesses:
– Lower fees than high-risk.
– Average documentation requirements when connecting to a payment system.
– Fraud risks are present but to a lesser extent.
Low-risk payments: low-risk business
Low-risk payments refer to businesses with minimal risks for banks and payment systems.
Examples of low-risk companies:
– Retail stores with mass consumer goods.
– Online education without a subscription model.
– Sale of books, accessories, or inexpensive items.
Features of low-risk businesses:
– Minimal level of chargebacks.
– Ease of connecting payment solutions.
– Low transaction processing fees.
Criteria for classifying businesses by risk category
Banks and payment systems use a number of factors to assess the level of risk: Industry of the business. Gambling, casinos, and cryptocurrencies always fall into the high-risk category.
Frequency of chargebacks. If chargebacks exceed 1% of the total number of transactions, the business may be classified as high-risk. Jurisdiction. Companies registered in offshore zones are more likely to fall into the high-risk category.
Average ticket size and sales volumes. High transaction amounts or large volumes of operations increase the risk of fraud. Reputation of the company. Complaints from customers or issues with regulators increase the level of risk.
Conclusion
Understanding risk categories in payments helps businesses choose appropriate payment tools and avoid problems with banks and providers.
SharPay is a reliable tool in the field of high-risk, middle-risk and low-risk payments.