For high risk payment processing merchants, selecting the right payment processing solution is a critical decision. Whether operating in industries with higher chargeback rates or adhering to evolving regulations, finding a reliable partner to manage payments can make or break a business. Two primary options typically arise in this context: using payment aggregators or obtaining a dedicated merchant account. This article explores the key differences, benefits, and factors to consider when choosing between these solutions.
Understanding Payment Aggregators
Payment aggregators provide a solution that enables businesses to process transactions under a shared merchant account. Essentially, multiple merchants are grouped together under a single account owned by the aggregator, simplifying the setup process.
Benefits of Payment Aggregators
- Faster Setup
Aggregators require minimal documentation, making them an appealing choice for new businesses or those needing a quick setup. Approval processes are streamlined and significantly faster compared to traditional dedicated merchant accounts.
- Lower Initial Costs
Aggregators typically do not require upfront fees or lengthy contractual obligations. They may charge per transaction, making this choice ideal for merchants testing the waters or operating at smaller scales.
- Ease of Use
Aggregators often provide an all-in-one infrastructure that includes gateways, analytics tools, and fraud detection, removing additional technical hurdles for merchants.
Things to Watch Out For
While the benefits are noteworthy, payment aggregators are not without limitations. Shared accounts mean merchants are subject to standardized rates and less control over operational specifics. Notably, high-risk merchants may face penalties, freezes, or even termination if their operations don’t align with aggregator policies.
The Case for Dedicated Merchant Accounts
Dedicated merchant accounts are customized solutions where an acquiring bank establishes an individual payment account exclusively for the merchant. Unlike aggregators, this setup offers more tailored services for businesses with unique payment needs.
Advantages of Dedicated Merchant Accounts
- Tailored Risk Management
High-risk merchants often benefit from solutions designed to mitigate their transaction profiles effectively. Dedicated accounts give visibility and control, allowing merchants to address chargeback risks and fraud proactively.
- Custom Pricing
Instead of standardized rates, merchants often negotiate pricing based on their business type, volume, and risk level. This flexibility can lead to better transaction rates and cost savings over time.
- Stability and Trust
Dedicated accounts present a professional image for businesses, as the account is solely under their name. This stability is crucial for long-term growth and offers higher operational continuity in comparison to shared accounts.
Considerations to Evaluate
While dedicated merchant accounts offer distinct benefits, they frequently involve longer approval processes and require extensive underwriting. Additionally, initial costs may be higher, potentially posing risks for cash-strapped startups.
Factors to Consider When Deciding
Business Needs and Scale
For smaller businesses or those just starting, aggregators may provide the flexibility and speed required to process payments without heavy commitments. Conversely, larger operations or those with long-term growth plans may benefit from the personalization and scalability of dedicated accounts.
Risk Management
Review your chargeback ratios and exposure to fraud. High-risk merchants with higher than average risks often fare better with dedicated accounts designed specifically to manage these factors.
Budget and Revenue Forecasts
Aggregators may be ideal for managing upfront costs, whereas dedicated accounts can lead to better long-term savings based on negotiated terms. Evaluate your anticipated transaction volumes before deciding.
Industry Requirements
Certain industries with complex regulations or higher operational risks may find aggregators limiting in the flexibility required. Dedicated accounts offer customizable solutions ideal for these scenarios.
Strike the Right Balance
Both payment aggregators and dedicated merchant accounts come with distinct advantages. High-risk merchants must evaluate their business needs and long-term goals to make an informed choice. Payment processing is not a one-size-fits-all solution; finding the right partner ensures you can process payments efficiently while minimizing risks.
