High-Risk Merchant Account Instant Approval: Myth vs Reality

If you’re considered a high-risk merchant, getting a merchant account set up can take time. It can take anywhere between a few days and a few weeks to set up your account. While there are many ads boasting high-risk merchant account instant approval, the reality is that this just isn’t possible. 

Instead, most of these companies are providing instant pre-approval to get you to sign up. Once the pre-approval happens, you still have to wait days or weeks for the actual approval to occur. 

Because of this, it pays to do your due diligence before signing up for a merchant account. With the help of an experienced payment processor, you can go through the vetting process, set up your account, and start processing payments.

TL;DR

• True instant approval doesn’t really exist for high-risk merchant accounts. Instead, most ads are actually offering instant pre-approval instead.
• Depending on the risk involved, industry, paperwork accuracy, credit score, and other factors, the approval process can take between three and seven days.
• Certain industries have a higher risk of chargebacks and fraud, which makes them automatically classified as high-risk merchant accounts.
• There are money-laundering and financial regulations that payment processors are required to follow. These regulations make it legally impossible to provide instant approval.

Preparing your documents, anticipating underwriter questions, and working with the right payment processor can help you speed up the process.

Is High-Risk Merchant Account Instant Approval Possible? 

No, it is not. As a high-risk merchant, it takes longer to complete the approval process. Besides your business risk level, your business history, credit score, and relationship to the acquiring bank can all impact how long your approval process takes.

You can be considered high risk for a variety of reasons. Some industries, such as the gambling, adult entertainment, travel, subscription services, and CBD industries, have higher rates of chargebacks and fraud. As a result, they are considered a higher risk for the processor. 

In other cases, merchants are considered high risk because they have a short history in business or bad credit scores. International sales, a history of excessive chargebacks, or high transaction volumes can all increase the risk profile of a specific business. 
Because of the higher risk, payment processors have to be especially cautious. This cautiousness is reflected in a longer approval process. Even when someone advertises high-risk merchant account instant approval, the reality is that this is simply a fast pre-approval. The real approval takes much longer because the processor has to mitigate their risks and perform their due diligence.

Why Instant Approval Isn’t an Option for High-Risk Merchant Accounts

When a payment processor works with a new merchant, they have to take on added risks. If you go out of business or have a high rate of chargebacks, the payment processor may end up on the hook for those chargebacks. To balance out that risk, payment processors may charge higher fees or require a rolling reserve. In some cases, they may even terminate the account if the risks involved are too high. 

For the average payment processor, there are a few major reasons why instant approval just isn’t possible.

High Chargeback and Fraud Risk

One of the biggest reasons why high-risk merchant accounts aren’t approved right away is due to the chargeback and fraud risk. If the merchant receives many chargebacks and doesn’t have the funds to return the payment, the payment processor is responsible. 

Enhanced Financial Regulations

Many of the industries that are considered high risk also entail added financial regulations. For example, gambling, cannabis, CBD, cryptocurrency exchanges, tobacco, supplements, and adult entertainment all have added regulations involved in their operations. Additionally, payment processors have existing Know Your Client (KYC) and Anti-Money Laundering (AML) regulations that they must fulfill as well. Meeting these obligations takes time, so high-risk accounts can’t be approved overnight.

Complicated Business Structures

Before a payment processor can approve a high-risk merchant account, they have to verify the business. If the business has offshore entities, multiple stakeholders, and complicated business structures, it can slow down the verification process.

Increased Financial Issues

A short financial history, bad credit history, poor financial documentation, and other financial problems can draw out the approval process. Underwriters will likely ask for supporting evidence and more information, which can take time. Even after the merchant is approved, they may still have added requirements, such as a rolling reserve.

How the High-Risk Merchant Account Approval Process Works

Whether you are a small or large merchant, you’ll have to go through a standardized process before you can be approved for a merchant account. While each payment process is a little different, you can generally expect to go through the following steps.

• Application: The process begins when you submit your application. By making sure your application is complete and accurate, you can speed up the entire process.
• Underwriting: Once your application is submitted, it is sent to the underwriters for review. They will check your credit history, verify your information, and analyze your chargeback history.
• Risk Analysis: Then, your application will be analyzed to determine its risk level. 
• Legal Compliance: At this stage, KYC and AML procedures are carried out to ensure the payment processor follows all applicable financial regulations.
• Final Approval: At this stage, the merchant can decide to approve or deny your application. In some cases, an application may be approved with special conditions, such as account limits or rolling reserve requirements.

Tips for Getting High-Risk Merchant Accounts Approved Faster

While high-risk merchant account instant approval isn’t possible, there are steps you can take to speed up your overall approval process. At PayCompass, we will walk you through each step and make sure you’re fully prepared.

Get Your Documents Ready

The underwriter will need to see your tax returns, bank statements, business license, and financial documents. You can speed up this process by making sure all of these documents are ready in advance.

Boost Your Credit Score

If your personal and business credit scores go up, the approval process can go faster. Paying debts on time, carrying a low debt-to-income ratio, and being cautious about taking on new debts can help you increase your credit score.

Prevent Chargebacks

One of the major reasons why high-risk merchants have a longer approval time is the chargeback and fraud risk involved. By adopting chargeback prevention measures, you can decrease your chargeback rate and have an easier time getting approved. At PayCompass, we have specialized tools for preventing chargebacks.

Work With a High-Risk Merchant Account Provider

To speed up your processing timeline, find a merchant account provider that specializes in high-risk accounts. Because they have more experience with this type of account, they know what type of documents to request and how to avoid common problems. In particular, you should try looking for a high-risk merchant account provider that specializes in your specific industry.

How PayCompass Can Accelerate the Approval Process

While no one can offer instant approvals, PayCompass will do everything possible to ensure a fast, efficient merchant account setup process. We have years of experience working with high-risk merchant accounts, so we understand common underwriter concerns and the type of documentation required. PayCompass offers a structured, realistic path to getting your merchant account set up as quickly as possible. 

We can help speed up the process in a few key ways.

• Anticipating underwriting concerns
• Expertise in the needs of different industries
• Guidance on documentation requirements
• Top-rated customer support

Our work doesn’t stop once the approval has been processed. We’re committed to optimizing your payments through superior fraud prevention, chargeback support, and a transparent fee structure.

Final Thoughts

When it comes to high-risk merchant account instant approval, there is no such thing as an immediate approval process. While this process can take between a few days and several weeks, it generally takes just three to seven days. By having your documentation in order and finding a payment processor that specializes in your industry, you can speed up this process. 
To learn more about merchant accounts, reach out to our team of payment processing experts today.