What Makes a Business High Risk?
Determining a business’s overall risk level is based on multiple compounding factors. Here are a few examples of factors that differentiate between the two types of risk labels:
Low-Risk Merchant | High-Risk Merchant | |
Average monthly sales volume | Less than $20,000 | Over $20,000 |
Average credit card transaction | Less than $500 | Over $500 |
Number of currencies accepted | One | Multiple |
Offer recurring (subscription) payments | No | Yes |
Placed on MATCH list/history of excessive chargebacks | No | Yes |
Main product offering | Books, office supplies, clothing, home goods, etc. | Software, digital, tickets, seasonal items, etc. |
Based in or sell to a high-risk country/region (anywhere outside the US, EU, Canada, Japan, or Australia) | No | Yes |
Low-Risk Merchant High-Risk Merchant
Average credit card transaction Less than $500 Over $500
Number of currencies accepted One Multiple
Offer recurring (subscription) payments No Yes
Placed on MATCH list/history of excessive chargebacks No Yes
Main product offering Books, office supplies, clothing, home goods, etc. Software, digital, tickets, seasonal items, etc.
Based in or sell to a high-risk country/region (anywhere outside the US, EU, Canada, Japan, or Australia) No Yes
Each payment processor has its own set of guidelines. One processor might label you high-risk while another may not. Once a processor evaluates your business, they'll make an “either/or” decision as to whether you qualify as high risk.
High-Risk Industries
Processors may be concerned about high-risk product categories. This is based on trends within the industry as a whole. They calculate factors like fraud instances, returns, debit card chargebacks, credit card chargebacks, and sales volume. This information is used when classifying business types. A merchant category code (or “MCC”) identifies the category your business falls under.
Some of the high-risk products and industries usually flagged by processors include (but are not limited to):
Casinos or online gaming
Prepaid debit cards
Calling cards and PBX VoIP systems
Pharmaceuticals and online drug providers
Tobacco/E-cigarettes/cannabis products
Telemarketing sales
Adult entertainment and dating services
Airlines, accommodations, and ticketing agents
Subscription services (magazines, collectibles, etc.)
Financial counseling/credit repair/debt reduction
Recurring billing/subscriptions
Timeshares
Cryptocurrency
Why Does Your Risk Factor Matter?
Understanding why banks and payment processing providers classify businesses as high risk is crucial. But what implications does this have for high-risk companies in need of payment processing solutions?Here are some key points to consider:
Compliance Requirements Are Stricter
If your business is identified as high risk, or is operating within high-risk industries, you c could face more stringent compliance requirements. Whether they're local, state, or federal mandates, these requirements often correlate with the nature of high-risk operations.Higher Chance Of Getting MATCHed
A common consequence for high-risk businesses is an elevated chargeback rate. This could result in your company being placed on the MATCH list. Not all high-risk businesses will face this issue. But, if you see excessive chargebacks (even by high-risk standards), then it might come up.High-Risk Services Are Expensive
Acquiring a merchant account for a high-risk business typically costs more than for businesses considered to be of lower risk. This often means higher account fees, increased processing charges, and long-term contracts with substantial early termination fees.An Account Reserve May Be Required
Due to the perceived financial risk to banks and processors, your business might be asked to “freeze” a portion of your profits with a merchant account reserve. Although these profits are returned in the long run, most businesses would understandably prefer immediate access to their earnings.Risk of “Guilt By Association”
Processors might view high-risk sales and marketing strategies with skepticism. If your products straddle legal lines in some jurisdictions, for instance, the prevailing public perception of your industry can lead to assumptions of guilt by association.High-Risk Industries
Processors may be concerned about high-risk product categories. This is based on trends within the industry as a whole. They calculate factors like fraud instances, returns, debit card chargebacks, credit card chargebacks, and sales volume. This information is used when classifying business types. A merchant category code (or “MCC”) identifies the category your business falls under.
Some of the high-risk products and industries usually flagged by processors include (but are not limited to):
· Casinos or online gaming
· Prepaid debit cards
· Calling cards and PBX VoIP systems
· Pharmaceuticals and online drug providers
· Tobacco/E-cigarettes/cannabis products
· Telemarketing sales
· Adult entertainment and dating services
· Airlines, accommodations, and ticketing agents
· Subscription services (magazines, collectibles, etc.)
· Financial counseling/credit repair/debt reduction
· Recurring billing/subscriptions
· Timeshares
· Cryptocurrency
Industries with Most Risky Business Environments in the US in 2025
1.
Business Environment Risk for 2025: 7.16The Telecommunications Networking Equipment Manufacturing industry produces wired telecommunication equipment including network switches, routers, modems and gateways. This industry has experienced consistent declines in revenue over the years to 2023 despite an increasing number of broadband connections and a rising number of consumers that have acquired computers. Domestic demand for telecommunication network equipment products has greatly declined in the period, with a significant amount of demand satisfied by imports. The industry also experienced significant declines in revenue in 2020 because of volatility in the global economic environment brought on by the COVID-19 (coronavirus) pandemic. Revenue has plummeted, declining at a... Learn More
2.
Business Environment Risk for 2025: 7.15Printing is in the midst of a decline as digital products and services continue to displace printed materials. The two largest markets, advertising and publishing, have both accelerated their moves online, reducing demand for printing. Declining corporate profit amid widespread shutdowns due to COVID-19 has decreased overall advertising expenditure. These two trends have reduced print advertising expenditure, which has fallen at a CAGR of 10.7% through the end of 2023. Other products, such as retail catalogs and banking forms, have also experienced low demand due to the increased prevalence of e-commerce and online financial transactions. Printing revenue has fallen at... Learn More
3.
Business Environment Risk for 2025: 7.13
Casting agencies play an intermediary role between producers and talent agencies. When the producer of a film, TV series, advertisement or other media project requires an actor with specific physical characteristics or acting skills, they reach out to a casting agency to provide candidates. Casting directors then send out requests to talent agencies for actors with matching traits. Talent agents submit available matching candidates to casting directors for an audition, in which the director evaluates the skills of the actor. Casting directors' expertise lies in their ability to spot strong candidates that also match the specific requests of the project's... Learn More4.
Business Environment Risk for 2025: 7.06
Positive trends in demand variables and near constant demand from poultry processors along with a recovery in the price of poultry meat in 2021 have led to rising industry revenue over the five years to 2023. Additionally, increased demand for chicken as a substitute for other meats, particularly red meat, helped limit revenue declines amid the COVID-19 pandemic. In addition, increasing health consciousness among US consumers has boosted consumption of white meat in general. A rising price of feed from a low prior to the period has also driven growth. As feed is the largest input cost for meat producers,... Learn More5.
Business Environment Risk for 2025: 6.93
Revenue for the corn farming industry has been volatile over the past five years as corn prices and demand have fluctuated dramatically. The outbreak of the COVID-19 pandemic caused a downturn in revenue as the supply chain backed up products were left unsold, but massive increases in exports and boosted oil production caused revenue to skyrocket in 2021 and 2022. As a result of these outliers, revenue has risen an annualized 10.1% to $94.7 billion over the five years to 2023, including an increase of 0.3% in 2023 alone.
Domestic supply remained consistent through COVID-19 as a reduction in production from... Learn More6.
Business Environment Risk for 2025: 6.88
The industry produces newsprint, a type of paper packaged in long rolls for use in printing presses. Newspapers and advertisements are most commonly printed on newsprint paper, which is primarily composed of wood pulp. The shift to digital platforms has significantly affected the newsprint industry, with demand for traditional print media plummeting and COVID-19 accelerating the push toward digitalization. Trade tensions and tariffs, notably between the US and Canada, have impacted the industry, increasing costs and affecting imported newsprint availability, causing uncertainty for future operations. Alongside these challenges, companies have had to navigate supply chain disruptions and form flexible strategies... Learn More7.
Business Environment Risk for 2025: 6.88
Regional banks are composed of commercial banks that have between $50.0 billion and $500.0 billion in domestic asset under management (AUM) and operations are not limited to one state. Banks that fall into this threshold provide the same services that the commercial banking industry provides. Also, regional banks have a significantly smaller scope of operations compared with large commercial banks that operate across the country.
Through the end of 2023, operators in regional banks have benefited due to increased consumer confidence and consumer debt levels. This coincided with the Federal Reserve raising the Federal Funds Rate (FFR) during the early portion... Learn More8.
Business Environment Risk for 2025: 6.88
Corn, wheat and soybean wholesalers distribute grains, such as corn, rice, wheat, dry beans and soybeans, which are essentials in most Americans' diets. Due to their necessary nature and the fact that households are typically unable to dramatically change their food preferences in the short run, the COVID-19 recession didn't drastically reduce revenue for wholesalers. Many companies endured some decline in sales because of falling demand from retail and manufacturing markets, so they still decided to reduce their capacity. As spending surged during the pandemic recovery, wholesalers, farmers and other industry operators couldn't increase their supply to match demand. Prices... Learn More9.
Business Environment Risk for 2025: 6.86
The Soybean Farming industry is historically volatile. Before the COVID-19 pandemic, industry revenue had declined because of falling exports to China. In 2018, the US and China entered a trade war brought on by the US imposing tariffs on Chinese steel. The Chinese government responded by placing significant tariffs on US soybeans. China has historically been a major importer of soybeans, so these tariffs resulted in revenue declines for industry growers. However, in 2020, exports of soybeans surged as global supply chain disruptions increased demand for soybeans in other countries. Meanwhile, as the US economy moved beyond the pandemic in... Learn More10.
Business Environment Risk for 2025: 6.77
The Commercial Banking industry is composed of banks regulated by the Office of the Comptroller of the Currency, the Federal Reserve Board of Governors (Fed) and the Federal Deposit Insurance Corporation (FDIC). Banks generate most of their revenue through loans they originate to customers and businesses. Loans are made at various interest rates that are influenced by different factors, including the federal funds rate (FFR), the prime rate, debtors' creditworthiness and macroeconomic performance.
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