A major problem with these payment processors is how they operate. Firstly, while there are certain criteria hidden deep within their terms and conditions regarding high risk merchants and industries, the criteria are often vague and can change regularly. Secondly, these services only begin the process once your business starts accepting credit card payments. This means that they may agree to work with your dating membership service, for example, when you submit an application, but they will freeze or terminate your account and finances within six months of operation.
These services have earned a reputation as “easy come, easy go” due to the way they treat merchants who are high risk or do not meet their standards. Below we take a look at both PayPal and Stripe to see what their policies state and how it could affect your high risk business.
The world’s largest online payment processor, it is very likely you have come across PayPal either personally or professionally before. Finding detailed information about their exclusion policy is difficult, however, there is some guidelines outlined in the PayPal Acceptable Use Policy which was last updated on July 1, 2015.
Let's take a look at each player and their role in the transaction:
1. Transactions related to dangerous, illegal, violent, and fraudulent activities and items, which include:
- Illegal drugs and certain controlled substances
- Stolen Goods
- Items that infringe on copyright or trademarks
- Certain sexually orientated materials and services
- Knives, firearms, and ammunition
- Sale of products or services identified by government agencies to have a high likelihood of being fraudulent
2. Transactions related to high risk industries or scams, which include:
- Pyramid schemes and certain MLM businesses
- Lottery contracts, lay-away systems, and off-shore banking
- Items which the seller is not in possession of at the time of purchase
- Currency exchanges, traveler’s checks, credit repair, and debt settlement services
- Any transaction for the purpose of bribery or corruption
The policy also includes a list of businesses that require pre-approval, such as:
- Jewelers and precious metal businesses
- Investment services
- File-sharing services
- Gaming and gambling businesses
- E-cigarette and tobacco businesses
As you can see there is a wide range of services, products, and industries covered by the Acceptable Use Policy from PayPal. Any business that PayPal considers as high risk will encounter problems either during the application process or shortly afterward.
Stripe has become hugely popular in recent years, rising steadily to rival PayPal as an option for businesses who wish to process credit card transactions. Stripe hasn’t published an Acceptable Use Policy in the same way that PayPal has, however, they have a blog on their website titled “Why Some Businesses Aren’t Allowed”.
This blog doesn’t list all businesses that cannot open an account with Stripe, but does outline six types of businesses they won’t allow:
- Illegal Businesses. Here they include examples of illegal drugs, medicinal marijuana, pirated music, and counterfeit items, among other illegal products and services.
- Regulated Businesses Industries that fall under this category include alcohol sales, marketplaces, and online pharmacies, all of which are not allowed on Stripe.
- Shady Businesses. This broad heading covers MLM marketing and “get rich quick” e-books as examples on the Stripe blog, but also states that it assess criteria such as customer satisfaction for businesses in this category.
- Financially High Risk Businesses. Examples include airline tickets, concert pre-sales, pre-order campaigns, and other businesses that Stripe fears runs the risk of chargebacks.
- Businesses That Attract Money Laundering or Fraud. Stripe states that businesses that fall into this category are not inherently problematic but require additional scrutiny and include industries such as dropshipping, gift cards, and cell phones.
- Businesses That Pose A Brand Risk. This includes adult services, pornography, sex toy shops etc. Stripe admits this category is subjective, allowing them to reject almost any business on these ground.
These six categories provide a wide scope for Stripe to work within when rejecting applications for businesses, making it next to impossible for high risk merchants to open an account with them.
Whatever your high risk industry, it is improbable you will receive approval from either PayPal or Stripe. Even if you manage to set up credit card processing, you will likely run into problems later down the line. Even if your business is completely legitimate, if you are considered high risk, these services are not going to provide you with any help.
At EthosPay, we specialize in working with high risk merchants and understand the problems encountered when your business is considered high risk. Our merchant services are specifically tailored to meet your individual business requirements and we offer a wide range of services to help you process credit cards smoothly and without hassle. Apply Now and see how EthosPay can assist your high risk business.