Financial Institutions Should Prioritize Fair Treatment for High-Risk Merchants

credit card processing

The surge in demand for products like Kratom, CBD, and Cannabis during the pandemic highlighted the potential for growth in high-risk industries. Despite their popularity and profitability, many merchants in these sectors face significant hurdles when it comes to securing essential financial services. Banking institutions and credit card processors often classify businesses in these industries as high-risk, imposing stringent eligibility criteria and exorbitant fees. This discriminatory treatment stifles innovation, limits consumer choice, and hampers economic growth.

The Pandemic’s Impact on High-Risk Industries

As the pandemic unfolded, many Americans turned to natural stress relievers like Kratom, CBD, and Cannabis to cope with the uncertainties and challenges of lockdowns and social distancing measures. These products, once niche, saw a surge in demand across demographics. However, despite their newfound mainstream acceptance, businesses in these industries still grapple with the stigma associated with their products’ legality and safety.

Financial Challenges for High-Risk Merchants

One of the most significant challenges faced by high-risk merchants is obtaining reliable payment processing services. Traditional financial institutions are often reluctant to work with businesses in industries perceived as high-risk due to regulatory concerns and fear of reputational damage. Even when approved, merchants may be subjected to exorbitant processing fees. This cuts into their profits and makes it difficult to sustain their operations.

The Volatility of Financial Services for High-Risk Merchants

The unpredictable nature of financial services for high-risk merchants was evident across major processing companies. For example, Elavon, a significant credit card processor for CBD firms, abruptly terminated its services. Due to this abrupt decision, many retailers had to rush to locate other payment processing options. This greatly disrupted their business and eroded customer confidence. These kinds of occurrences highlight how vulnerable high-risk businesses are when they depend on conventional banking arrangements. 

The Burden of High Payment Processing Fees

High-risk merchants often find themselves burdened with excessively high payment processing fees. This strains their financial viability and limits their ability to reinvest in their own business. Banks and credit card companies justify these fees by citing the perceived risk associated with these businesses. However, these fees can significantly reduce  merchants’ profit margins, making it challenging to remain competitive in the market.

Promoting Fairness and Inclusivity in Financial Services

Financial institutions should strive to provide equal treatment to high-risk merchants. Their focus needs to encourage inclusivity and promote fairness in the financial ecosystem. Discriminatory practices not only hinder the growth and innovation of high-risk industries but also limit consumers’ access to diverse products and services. They could, instead, offer tailored financial solutions and affordable payment processing services to high-risk merchants. Banks can tap into new revenue streams and contribute to economic development.

Unlocking Opportunities for High-Risk Industries

Embracing high-risk merchants can unlock lucrative business opportunities for financial institutions. Niche markets and emerging industries, such as CBD and cryptocurrency, offer substantial growth potential for forward-thinking banks and payment processors. They should provide high-risk merchants with reliable and cost-effective payment processing solutions. Doing this can help financial institutions gain a competitive edge and attract a loyal customer base.

Providing Alternative Payment Processing Solutions

woman paying bills onlinePayment processors like eDebit Direct specialize in providing alternative payment processing solutions tailored to the needs of high-risk merchants. By offering non-traditional merchant accounts and competitive rates, eDebit Direct empowers high-risk businesses to accept online payments securely and efficiently. With a focus on customer service and reliability, eDebit Direct ensures that high-risk merchants receive the support they need to thrive in a competitive market.

Financial institutions must prioritize fairness and inclusivity when serving high-risk merchants. By offering affordable and reliable payment processing services, banks can support the growth and sustainability of high-risk industries. This will also allow them to expand their own business opportunities. Let’s work together to create a more equitable financial landscape for all businesses, regardless of their risk profile.

Financial institutions can cater to high-risk businesses in several ways:

Tailored Financial Solutions

Financial institutions can develop specialized financial products and services tailored to the unique needs and challenges of high-risk businesses. This may include customized merchant accounts, payment processing solutions, and lending options designed to mitigate risks and support the growth of these enterprises.

Risk Mitigation Strategies

Banks and financial institutions can implement intuitive risk management strategies to assess and reduce the potential risks associated with high-risk businesses. This may involve conducting thorough due diligence, implementing enhanced monitoring and compliance measures, and providing guidance on regulatory compliance. This will all aim to help businesses navigate complex legal frameworks.

Transparent Fee Structures

Financial institutions can offer transparent fee structures with reasonable rates for high-risk merchants. By providing clear and predictable pricing, banks can help businesses better manage their financial resources. This will also help high risk merchants avoid unexpected costs that can negatively impact their revenue.

Alternative Payment Processing Options

They can recognize that traditional payment processing may not always be feasible for high-risk businesses. Financial institutions can offer alternative payment processing options. This may include ACH payments, e-wallets, e-checks, and other innovative solutions that provide flexibility and security for merchants and their customers. eDebit Direct offers RapidACH and Bank Drafts for the convenience of high-risk industry merchants. This allows them to securely and efficiently transfer funds without expensive fees. 

Education and Support

Financial institutions can provide educational resources, training programs, and ongoing support to help high-risk businesses. This will help merchants navigate the financial landscape more effectively. Doing this can involve offering workshops on financial management, compliance requirements, and best practices for risk mitigation. This course of action could empower businesses to make informed decisions.

Collaboration with Industry Experts

Credit cardPartnering with industry experts and third-party service providers specializing in high-risk industries can help financial institutions better understand the unique needs and challenges of these businesses. By leveraging external expertise, banks can develop more effective strategies and solutions to support high-risk merchants.

By adopting a proactive and collaborative approach, financial institutions can play a crucial role in supporting the growth and sustainability of high-risk businesses. Instead of creating a difficult financial environment for high-risk merchants, they could foster innovation and promote economic diversity.

Work With High-Risk Merchant Payment Processors Affordably

Find out about eDebit Direct’s fast and secure RapidACH and Direct Draft solutions to help you get funds transferred with ease. With simplicity of use and reliable technology, you can expand your high-risk business with no fear of being dropped on a whim. Our fees are competitive and will make a significant difference in your revenue. We charge far less than credit card processing companies, allowing you to save more for every customer payment. 

Speak to an industry experts today about your current situation. Find out how you can get started and what services would work best for you.

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