A "high-risk merchant" is a business that a payment provider considers more likely than average to cause losses, usually through chargebacks, fraud or regulatory problems. Stripe's explainer describes a high-risk merchant account as one for businesses considered to be at a higher risk of issues such as chargebacks and fraud.
The label is a judgment by the provider. Stripe's merchant risk guide describes high-risk status as a judgment processors and acquiring banks make based on the financial exposure a business represents.
Why providers classify some businesses as higher risk
Stripe's resources describe several kinds of factors:
- Industry. Some sectors carry more chargebacks, more regulatory scrutiny or more exposure to fraud.
- Regulation. Businesses in heavily regulated or changing areas of law are treated as higher risk.
- Disputes and refunds. Frequent disputes or refunds raise risk.
- Fraud exposure. For example, a high share of international transactions or a business type that attracts fraud.
- Business model. Card-not-present sales, high-ticket orders and payment taken well before delivery can all increase exposure.
- Track record. New businesses without a history, and businesses with weak credit or financial stability, can be classed as higher risk.
Depending on its products and buyers, a research supply business may meet several of these, so careful review is to be expected. See how payment processors review a merchant.
What usually comes with the label
Stripe's explainer says high-risk accounts typically carry higher fees and stricter terms, because the provider takes on more risk. It and Stripe's merchant risk guide describe other measures providers may use:
- Higher setup, monthly or transaction fees.
- Reserves, where part of each transaction is held for a period to cover chargebacks. See reserves and payout holds, explained.
- Longer settlement periods.
- Stricter contracts and more penalties for not following them.
- Extra authentication requirements, or a decision not to onboard the business at all.
Stripe's merchant risk guide also notes that high-risk status can change, and that a clean track record can lead to a lower-risk category over time.
What does not help
Some advice online treats high-risk status as a problem to hide. It is not. Stripe's explainer warns that misrepresenting any aspect of your business can lead to account termination. Describe your products, buyers and business model accurately. If a processor decides it will not support your business, accept that decision rather than looking for a way around it.
What does help
What you control is the quality and consistency of your business: accurate product pages, clear policies, careful buyer checks, prompt support and low dispute levels. Our explainer on what a dispute rate is and the guide to preparing your storefront for a processor review are good places to start.
Claddr is compliance software for research-use-only merchants who take payments through their own Stripe account. It records buyer checks, signed statements and order holds against each order. It does not change how any processor classifies your business, and it does not guarantee approval or continued service.