High-Risk Industries and the Payment Processing Hurdles They Face
Ready to start accepting payments for your CBD business, but worried about getting approved?
Nutraceuticals are exploding right now. The industry was worth over $591 billion in 2024 and continues to grow every year. The issue is…
They’re considered “high-risk” by most payment processors.
CBD, nutraceuticals, supplements, tobacco; dozens of industries are automatically tagged as risky by banks and legacy processors. They charge outrageous fees, give you a laundry list of hoops to jump through, and sometimes deny you outright.
Luckily, there’s a workaround.
Getting approved for a payment processor is completely possible when you know what you’re doing. This guide will show you exactly why high-risk businesses have a hard time getting processed, and how to get set up correctly from day one.
By the end you’ll learn:
- Why Some Industries Are Considered High-Risk
- Common Payment Processing Challenges
- How To Get Approved For High-Risk Business
- Ways To Avoid Account Disruption
Why Some Industries Are Considered High-Risk
Every business isn’t treated the same when working with payment processors.
Payment processing is a risk-based business. If a particular industry has high chargeback rates, heavy regulations, or just a bad reputation… banks take notice.
Certain industries are consistently flagged as high-risk.
These include:
- Nutraceuticals & supplements
- CBD & cannabis-related products
- Online gambling/gaming
- Travel
- Subscription services
- Adult industries
Nutraceutical businesses are particularly affected. Free trial scams, sketchy ads, and misleading product claims have made banks gun-shy of any company selling vitamins online.
Couple that with subscription models that are nearly unavoidable in this industry, and you’ve got yourself a high-risk industry through and through.
When your chargebacks exceed 1% of total transactions (industry average), you’re considered high-risk to your processor.
Many start to get worried at greater than 3%.
For this reason (and many others) learning How to Get Approved for a Nutraceutical Merchant Account is so critical before you launch.
Common Payment Processing Challenges
Running a high-risk business comes with its own set of challenges that regular old square merchants will never have to deal with. Here are the most common obstacles:
High Fees
This one is a given. The average online business pays 2.4% per transaction. High-risk merchants pay significantly more than that.
Every processor has a base rate they charge for payment processing. Most high-risk processors tack on additional percentages in “feature fees” just for accepting your payments.
You’ll pay more to get processed as a high-risk merchant. Simple as that.
Rolling Reserves
Rolling reserves are the trick banks/processors pull to protect themselves from high-risk businesses.
Essentially, they’ll place a percentage of your business’s revenues into a reserve account that they control. If your chargebacks suddenly spike, they can take money from that account to cover losses.
Rolling reserves vary from processor to processor but typically sit at around 5-10% of monthly volumes and can be held for 6 months or more. It’s tough on cash flow, but that’s banking for you.
Lengthy Approval Times
Getting approved for a high-risk merchant account is not like signing up with Stripe or PayPal.
You’ll be asked to provide your full business history, processing history if available, current chargeback ratios, refund percentages, etc. Don’t even think about applying until you have a solid business plan written up.
It can take weeks to get approved this way. Not months, but weeks.
Account Instability
Due to the uncertain nature of high-risk businesses, your account will always be on edge.
Late charges, high chargebacks, and dramatic swings in sales volumes can cause your processing account to be placed on hold. Contacting your processor and sorting things out is always an option, but that takes time.
You don’t want to be in a position where your processing account is frozen.
How High-Risk Businesses Can Get Approved
Don’t let the challenges fool you. It’s still very possible to be approved as a high-risk merchant!
Just know that it’s much more difficult, and you have to go into it prepared.
Partner With A High-Risk Processor
Trying to get approved with a merchant account that doesn’t specialise in high-risk industries is pointless.
Visa and Mastercard have strict rules around processing certain types of businesses. Your regular Stripe or PayPal account will be cancelled immediately if they detect high chargebacks.
Find a processor that ONLY works with high-risk merchants.
Documentation, documentation, documentation
Gather all of your business documents PRIOR to applying. Including but not limited to:
- Business licence
- Processing history from prior businesses
- Information about the products you’re selling
- Financial records
Having a strong credit line doesn’t hurt either, but good history with payments can suffice.
The more information you can provide your processor upfront, the better chance you have of getting approved.
Chargebacks
Chargebacks are your biggest nemesis as a high-risk merchant.
Keeping your chargeback percentage under 1% is ideal. Anything over 3% and most processors won’t touch you with a 10 foot pole.
Obvious tips: have a clear refund policy, make your billing descriptors straightforward, and provide amazing customer service.
Have A Professional Web Presence
Yes, they will Google your brand. Yes, they will look at your website.
Make sure everything is legitimate. SSL certificate installed, runs on PCI compliant hosting, have straightforward terms of service, privacy policy, and contact information visible on every page.
Processors are starting to crack down harder than ever on fraud. The Federal Trade Commission reported that consumer fraud losses hit $12.5 billion in 2024, a 25% increase over the prior year.
Show them you’re serious about fraud prevention.
Tips To Keep Your Merchant Account In Good Standing
As you can imagine, staying in good standing is equally as important as getting approved. Here are some best practices every high-risk merchant should follow.
Keep An Eye On Your Chargebacks
This cannot be stressed enough. Monitor your chargebacks closely. Look at every. Single. One.
Prevention is always better than the cure. If you can spot a dispute as soon as it happens you have a much better chance of fighting it.
Be Transparent
Let your customers know exactly what they’re getting into.
The majority of chargebacks in the nutraceutical space come from failed products. Customers aren’t aware of the billing period, get confused about subscriptions, or thought the product was “free”.
Leave nothing up to interpretation when selling your products.
Use Multiple Processors
Don’t put all of your proverbial eggs in one basket.
While it’s ideal to find a processor that you know and trust, high-risk businesses should consider working with multiple payment processors to spread risk.
The more accounts you have lined up, the less you have to worry about account holds and interruptions.
Invest In Fraud Prevention
Address verification? Check.
CVV matching? Check.
3D Secure authentication? Check.
If your processor offers fraud prevention tools, use them. Tools like this help minimise fraudulent transactions which can be a huge cause for account disruption.
They also help to keep your chargebacks low which is always a bonus.
Stay On Top Of Industry Compliance
Remember the point about having a legit website?
SEO practices, manufacturing regulations, labelling requirements, advertising standards; these are all things that can change for your industry at the drop of a hat.
Make sure you’re following the latest compliance standards. Being flagged by Google or the FTC is only going to lead to more scrutiny on your payments processor.
Wrapping Up
Processing high-risk payments is not easy.
You will get higher rates than your ecommerce store down the street. You’ll jump through hoops that other merchants never know exist. And you’ll spend a lot of time worrying about your chargeback ratio.
But it’s not impossible.
Thousands of nutraceutical brands, CBD companies, and high-risk internet marketers process payments every single day without issue.
What sets them apart from the businesses who get shut down? Preparation. Doing your research, staying on top of your game, and knowing what to expect.
Nutraceutical sales aren’t going anywhere. Prepare yourself to process those sales accordingly.
