High-Risk eCommerce Websites- High risk eCommerce websites are more common than you think. Depending all on the type of eCommerce website you have, you may technically have a high risk eCommerce website. High risk eCommerce sites can be more costly.

It may not be until a new etailer is declined for a merchant account that he or she realizes that some aspect of the business model he or she has designed is seen by banks as being excessively risky. This article explains high-risk eCommerce sites.

Although it might not occur to the new etailer, eCommerce sites can be considered to have excessive risk if they transact business in certain industries, if they accept MOTO (Mail order/Telephone Order) credit card sales, and/or if the proprietor has a problematic credit history. Let’s consider each of these issues in more detail.

• MOTO Sales- Order taken by mail or over the telephone are processed without the credit card being present for the transaction. The fact that the merchant cannot do a physical check of the card and that the checking processes that are in place when a customer has an ongoing account at an online merchant aren’t in place, means that the bank covering the sales takes a larger risk.

• Merchant’s Credit History- A merchant’s credit history can be problematic either because there have been specific credit problems (such a having had one’s merchant account shut off), because a merchant has received what the bank considers to be an inordinate number of chargebacks (this could also be related to the type of business the merchant is in), or simply because the merchant does such a high volume of business.

• Merchant’s Products or Services- Apparently, banks offering merchants accounts have found that certain industries are simply more problematic and provide more credit issues, leading them to assume that merchants offering these products and/or services online are running high-risk eCommerce sites.

Products that may lead banks to consider a merchant at high risk are highly regulated and/or may or may not be legal in certain locations or for certain people (e.g., minors) to own, and products that are restricted by the FDA, which may, for example, not be legal to be possessed without a prescription from a physician. Products in these categories include adult DVDs, videos, and toys; electronic cigarettes; regulated and unregulated drugs, including herbal supplements, diet pills, and Viagra, and pharmacies; ticketing agencies; guns; used cars; pre-paid telephone cards; and water filtration systems.

Service offerings that may lead financial institutions to consider an eCommerce site at high risk include services in the adult category, such as dating, escort, streaming video, and other adult membership sites, like massage parlors; sites offering services in which large amounts of money trade hands, such as bail bonds, debt collection, pawn shops, lotteries, competitions, and raffles; online auctions, and legal gaming, such as casinos or sports wagering; as well as weight-loss centers; VoIP services, entertainment, timeshares, telecom services, horoscope and fortune-telling sites, and sites offering direct marketing and MLM (multi-level marketing) services.

Some financial institutions specialize in high-risk credit card processing. It’s important to vet any such business extensively and make sure that you understand all the fees and rates that apply.

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