Some industries face particular challenges when it comes to payment processing. These industries, considered high-risk by banks and payment processors, are confronted with issues such as high debit rates, complex rules, and reputational risks that traditional payment solutions often struggle to address.
Understanding which industries fall into this category and why professional high-risk payment processing solutions are needed can help companies in these sectors manage their financial operations more effectively.
High-Risk Industries
Why “high-risk?”. A high-risk industry is generally defined by factors that present increased challenges for payment processing.
These can include:
High chargeback rates – industries where customers frequently dispute transactions, resulting in financial liabilities for merchants and processors.
Compliance challenges – sectors that encounter strict legal frameworks or highly volatile regulatory climates, such as cannabis businesses or online gambling.
Reputational risks – businesses that can damage the image of financial institutions due to societal perceptions or court controversies. Engaging in sectors that are perceived negatively by the public or authorities, can damage the reputation of financial institutions. Payment processors need to balance financial risk with reputational risk management strategies to maintain trust and remain compliant.
Examples of high-risk industries
Here are the industries that often require high-risk processing solutions
1. Adult content
The adult industry, which includes adult videos, webcams and related services, is profitable, but is considered high risk because of reputational issues and the tendency to have to recover debts. Banks are often hesitant to partner with these businesses, making “adapted” processors essential.
2. Cannabis and CBD products
With the legalization of cannabis in different regions, CBD and cannabis-related businesses are facing daunting compliance changes. These include age restrictions and differing legal statuses across jurisdictions, necessitating specialized payment solutions.
3. Subscription-Based Services
Business models that rely on recurring billing, such as subscription boxes, streaming services and software-as-a-service (SaaS) providers, often face high chargeback rates. This is mainly due to customer complaints, billing disputes or subscription cancellations, highlighting the need for customized payment solutions that can manage these risks.
4. Online Gambling and Gaming
The online game-playing industries, which have experienced exponential growth, are frequently ranked as high-risk due to offshore operations and vulnerabilities to fraud. These businesses require payment processing solutions capable of handling high transaction volumes and minimizing fraud risks.
5. Nutraceuticals and Health Supplements
Companies selling nutraceuticals, and health supplements often use so-called “push” marketing tactics and promise meaningful health benefits. However, discrepancies between marketing claims and actual product effectiveness can lead to customer dissatisfaction and subsequent returns. Payment processors who focus on this sector need to understand these nuances in order to provide effective risk management solutions.
6. Firearms and Ammunition
Both the firearms and ammunition industry are subject to rigorous scrutiny from regulators and the public. Processing transactions for these businesses requires adherence to strict compliance standards and age verification protocols, making this segment a challenge for traditional payment processors.
What’s the role of High-Risk Payment Processors?
High-risk payment processors play a big role in supporting industries that traditional banks often avoid. These specialized providers offer:
Technologically advanced measures of fraud detection and detecting the right behaviour to minimise transaction risks.
Knowledge of industry-specific laws, and specific compliance requirements to ensure the industry stays fully legal.
Customized payment processing solutions that accommodate high-volume transactions, recurring billing models, and international operations.
Take a look below at some of the statistics that prove the importance and usefulness of payment processors for these industries.
1. Adult entertainment vs banking uptight
Dedicated payment processors by integrating functional fraud prevention measures and customer support strategies have managed to lower the debit rate by over 2%.
2. Cannabis industry vs sales revenues
Statistics show that high-risk processors have enabled legal cannabis industry transactions of more than $10 billion annually, demonstrating how important they are to the sector.
Cannabis legalisation in several US states anticipates industry revenues of $43 billion in 2025.
3. Online Gaming
Trends in the global online gambling market show that its revenues will exceed $100 billion within a year or two.
Despite this growth, these businesses face regulatory controls and operational challenges, particularly in international payment processing.
In this situation, high-risk processors step in to ensure operational continuity for gaming operators by helping them comply with laws and remain compliant.
Bottom Line
The basic point to emphasize is that industries that bear the hallmark of “high risk” require different payment processing solutions.
When these industries are properly addressed, and the factors are identified as to why these businesses are termed high-risk, processors, banks or other stakeholders can find effective solutions, as high-risk payment processors play a critical role in supporting these industries by providing customized solutions that ensure compliance, reduce risk and facilitate sustainable business operations in an increasingly complex financial landscape.
For businesses that operate in high-risk industries, partnering with a reputable high-risk payment processor is essential to maintaining financial stability and regulatory compliance in today’s competitive market environment.
Read our article “How to Choose the Right Payment Gateway for your High-Risk Business?” for the latest industry insights.
We can become your solution. When finding the right processor for your type of business. Book a free consultation with our experts now.
Disclaimer
Widelia and its affiliates do not provide tax, investment, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, investment, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Please consult https://widelia.com/disclaimer/ for more information.
