Posted by NationalACH on Mar 13, 2011
high risk processing, check 21, ACH payments, echecks, electronic checks

What You Need to Know about High Risk Processing

Benefits of High Risk Processing

High risk processing with electronic checks gives companies a competitive edge, expands market reach, reduces shopping cart abandonment and enhances customer satisfaction.

  • Alternative Payment Choice.  Electronic checks are the most popular alternative payment option for ecommerce merchants.   More than 20% of online businesses already offer echecks as a payment method.
  • Competitive Necessity.  If you don’t offer echecks you lose sales to competitors who do.
  • Rescue Sales. If a card is rejected, echecks lets you rescue sales that otherwise would be lost.
  • Decrease Payment Processing Expenses.  When buyers buy with echecks, merchants save money because processing fees are much lower than those charged for credit cards.
  • Get More Buyers.  Over 75 million Americans do not have credit cards. Yet 90% of Americans have a checking or savings accounts and can pay with echecks.

What Industries are High Risk Processing? Certain types of businesses are automatically classified as high risk accounts.   These  have little to do the specific information about a particular company.  Rather, the classification categories are associated with general industry types.

Examples of industry classifications which fall into high risk processing categories include:  adult entertainment, call centers, travel, nutritional supplements, and certain segments of internet ecommerce.

High risk processing accounts may or may not have a different pricing structure than non-high risk processing merchants.  The specific pricing structures is determined on an individual company basis.

In the broadest terms, non-high risk processing accounts generally pay a pay a flat rate per transaction whereas a high risk processing rates are assessed a discount rate in addition to a transaction fee.  But, high risk processing merchants can obtain flat rate pricing if the business model and company history supports this option.

High Risk ACH Processing with Check 21

High risk processing may bypass the ACH payments network altogether and use Check 21 technology instead.  Check 21 processing is often used for merchants that cannot comply with NACHA for chargebacks to remain under 1%.

Check 21 for high risk ACH processing gives merchants greater flexibility to relationship to consumer chargebacks or revokes.  Check 21 operates outside of the ACH network and is not subject to NACHA rules.

Many high risk processing merchants take advantage of both the ACH network and Check 21 technology and have more than one account, depending upon the needs their business operations.  For example, for a recurring billing model, first time transactions for can be processed using Check 21 technology and recurring payments through ACH processing.

High risk processing accounts are usually established through a 3rd party processor. The number of 3rd party high risk processors has declined significantly within the past few years but there are still some good options available.

High Risk Processing Increases Sales High risk processing with echecks is an easy way to capture additional sales from buyers that do not have credit cards or simply prefer to pay by electronic checks.    Echeck transactions debit funds from the buyer’s bank account and automatically credits the funds to the seller’s account.  Companies that add electronic checks experience sales “lifts” of 8-20%.

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