Being paid for your goods and services should be as easy as A,B,C. Well, in theory, that’s the idea. Yet, in reality, many businesses face payment processing issues that cause delays, blocks, and restrictions, adding extra complexity to a process that should be relatively simple.
The reason? The high-risk label.
If you’re a high-risk business, you’ll certainly be aware of the problems that seem to follow you everywhere. This means that many payment platforms, such as Square, won’t allow your transactions to be processed, requiring you to look for alternatives. In the meantime, your payments are stuck, causing loss of revenue, customer frustration, and a range of consequences that you really don’t need.
The answer? Dedicated high risk merchant services that take away all the challenges currently causing you a headache. In this guide, we’ll explore the large number of Square restricted businesses and highlight why PayCompass is the answer to all your problems.
TL;DR
- Square is a payment platform that restricts transactions from high-risk businesses.
- Businesses operating within the financial services industry, such as loan companies, investment brokers, and money transfer companies, face strict restrictions.
- Industries connected to adult entertainment are also restricted from the Square platform due to concerns over age verification and legal issues.
- Many high-risk retail and service businesses, such as gambling, gaming, firearm merchants, and tobacco sellers face strong restrictions on Square due to concerns over fraud, legal problems, and illegal distribution.
- The travel industry also faces restrictions on the Square platform, due to high-value transactions and the risk of chargebacks and fraud.
- Health and pharmaceutical businesses must comply with key regulations in order to use the Square platform.
- PayCompass offers an alternative to Square with specialized high-risk merchant accounts.
Financial Services
The first industry we’ll talk about is the financial services sector. This is a large area and covers many specific business types. It’s also one of the most popular, which gives some indication of how troublesome Stripe’s restrictions can be.
In effect, the financial sector is subject to many strict regulations and these can change very frequently. Businesses need to stay up-to-date and comply with all relevant regulations, while also dealing with high-value transactions and sensitive information. All of this makes Square concerned about the potential for fraud, and requires businesses to look for alternatives.
PayCompass offers high-risk merchant accounts designed to deal with the challenges that plague these businesses daily. With our chargeback protection, real-time transaction monitoring, and multi-currency support, you won’t have to worry about restrictions.
Before we delve into the specific financial companies on the Square prohibited businesses list, the table below sums up their common challenges.
Financial Service | Key Regulations | Common Processing Challenges |
Debt Collection | FDCPA | High chargeback rates |
Credit Repair | CROA | Upfront fee restrictions |
Payday Lending | State usury laws | Transaction amount limits |
Crypto Exchanges | KYC/AML | High-volume transactions |
Investment Advisory | SEC, FINRA | Recurring billing needs |
1. Debt Collection Agencies
First, let’s talk about debt collection agencies, which have many regulations to comply with, including the Fair Debt Collection Practices Act, or FDCPA.
These businesses face large hurdles in terms of payment processing. This is mostly down to the high potential for disputes, along with high chargeback rates. In many cases, processors ask debt collection agencies to maintain a reserve account which covers any disputes and chargebacks, however this is often significant.
Yet, it’s not all negative news. PayCompass’ collection agency merchant account overcomes these challenges. It comes with built-in chargeback prevention as well as robust fraud protection through real-time transaction monitoring.
2. Credit Repair Services
Another Square restricted business type relates to credit repair services. These are services that help people improve their credit scores so they can seek better credit options. However, these are deemed high-risk by Square and other processors, leading to severe restrictions.
In this case, the reason is because of the industry’s general reputation for increased fraud, along with strict regulatory scrutiny. Businesses face either total bans on specific platforms or heavy restrictions and high fees.
3. Payday Lenders
Payday lenders are a Square restricted business with a need for specialist payment processing solutions.
Source: Pexels
Square also restricts payday lenders. These are businesses that offer short-term loans that come with very high interest rates compared to regular lenders. Many payment processors, including Square, believe these types of companies use predatory tactics, which leads to restrictions. As a result, they face high hurdles when it comes to payment processing.
4. Cryptocurrency Exchanges
Cryptocurrency is known for its volatility and that’s one of the biggest reasons why it’s one of the Square restricted businesses. These companies allow individuals to buy, sell, and trade different cryptocurrencies, yet they face troublesome regulations alongside their volatility. All of this causes an issue when seeking a reliable payment processor without the risk of uncertainty.
5. Investment and Financial Advisory Services
It may be surprising to learn that investment companies and financial advisors also face problems with payment processing, especially with Square. All of this comes down to the heavy regulations these companies face, which leads to many challenges in terms of processing payments.
Adult-oriented Industries
It probably doesn’t raise many eyebrows to know that adult-orientated industries are placed on the restricted or Square prohibited businesses list. In fact, many businesses under this category face some of the harshest restrictions of them. All this is down to the high-risk nature of the industry but also its controversial nature, which causes Square to distance itself from providing services.
6. Adult Entertainment Websites
The first type of business under this umbrella is adult entertainment websites. These provide adult content online and they face challenges because of potential legal problems and their general high-risk nature.
These websites must comply with a range of different regulations, with 18 U.S.C. 2257 the most complex and requires complex record-keeping. The other complication is that many of these businesses work on a continuity subscription model, requiring specialized support.
7. Escort Services
Stripe also places heavy restrictions on escort services, which provide companionship services between individuals. However, due to the high possibility of adult arrangements and fraud, payment processing can be difficult. Additionally, regulations vary between jurisdictions, making the picture even more complicated.
8. Adult Novelty Stores
Whereas many other adult orientated services are Square prohibited businesses, adult novelty stores face less issues. However, that doesn’t mean they don’t face any, as they’re still restricted by the platform to some degree. Ultimately, the main reason is the high number of chargebacks and disputes.
To overcome challenges, adult novelty stores must ensure they comply with state and local regulations while implementing robust fraud detection systems. Despite that, they will still face some restrictions from platforms such as Square.
9. Massage Parlors
Massage parlors sit in a gray area. While many parlors simply provide massage services, some are associated with illicit activities or move specifically toward adult services. Of course, there is a certain perception about massage parlors from the get-go, which is what causes the challenges with payment processing.
10. Dating Services
The final business type in this category is dating services. The main issue is a high chance of chargebacks and the potential for fraud. While not totally prohibited by Square, these types of businesses still face potential blocks and account freezes due to higher levels of scrutiny.
High-risk Retail and Services
While ecommerce and retail in general don’t always fall into the high-risk category, there are certain types that do. This includes things like tobacco and vape products, weapons sales, and CBD items.
The table below gives a brief overview, and then we’ll look at these types of businesses in more detail.
High-risk Industry | Key Challenges | Specialized Processing Needs |
Firearms Dealers | Strict regulations | Age verification integration |
Tobacco/E-cig Shops | Age restrictions | Product-specific coding |
Cannabis Dispensaries | Federal regulations | Cash management solutions |
Timeshare Companies | High chargebacks | Large transaction support |
Pyramid Schemes | Illegal operations | N/A (prohibited) |
11. Firearms and Ammunition Dealers
Companies that deal with firearms and ammunition have their business operations made more complex by significant restrictions from platforms like Stripe. In addition, federal regulations must be adhered to and even the slightest deviation can result in severe consequences.
Of course, these products are quite controversial, and that’s one reason why Stripe likes to distance themselves.
12. Sports Betting Platforms
We can also talk about sports betting platforms, which have also become extremely popular. In this case, PayPal identifies the different legal statues across various regions, along with concerns about potential match-fixing. Of course, there is also a need to verify age, as with all gambling and gaming businesses. All of this makes it necessary to identify sports betting payment solutions that don’t interfere with daily practices.
PayCompass’ merchant accounts are designed to help ensure smooth payment processing during high-stakes, busy sporting events, and our fraud prevention helps to overcome any extra concerns.
13. Cannabis Dispensaries
Companies selling CBD products are Square restricted businesses, creating unique payment processing challenges.
Source: Pexels
Another high-risk retail service that is a Square prohibited business is cannabis and CBD products. These have gained popularity over the last decade but their regulations vary across regions. As a result, this type of business has many challenges, not least in terms of payment processing.
In that case, a dedicated PayCompass cannabis merchant account gives peace of mind and facilitates the smooth processing of transactions without any worries about chargebacks. As a CBD payment processor, our service takes the worry out of whether a transaction will be refused in the first place.
14. Pyramid Marketing Schemes
Pyramid marketing schemes face many challenges throughout the entire nature of their business dealings, and payment processing is just one of them. These businesses recruit new members to their scheme rather than by selling products. In these cases, there is a high risk of fraud, and Square distances themselves due to concerns over illegal practices. Therefore, pyramid marketing schemes appear on the Square prohibited businesses list.
15. Timeshare Companies
Within this industry we can also highlight timeshare companies as another option restricted by Square. Timeshare companies sell shared ownership of properties designed for vacation purposes. However, they often face payment processing issues because of the complexity of the contracts, along with high instances of chargebacks due to buyer’s remorse. Of course, this means the need for robust dispute resolution processes, leading to a complex picture overall.
Travel and Transportation
The travel industry deals with high-value transactions on a regular basis and also encounters many chargebacks. These are two of the main reasons why Square restricts payment processing services within this industry. In addition, there is a high risk of fraud, which simply adds to the complex picture.
Of course, the solution is to look for travel payment solutions, and our accounts are ideal for this industry. Not only does our chargeback protection give peace of mind but our accounts are designed to handle multiple currencies, while real-time monitoring is a route to fraud identification. It goes further: our payment processing can easily be integrated into booking software, making the whole process much smoother.
16. Airlines
Airlines deal with a seasonal demand, which creates periods of time when sales are lower than others. While flights take off all year around, there are certainly far more during the summer months. In addition, transactions are high-value, and these are two reasons why Square gives these businesses a high-risk classification.
17. Cruise Lines
The issue with cruise lines is regular changes in itineraries which can lead to cancellations and chargebacks. Again, this also relates to high-value transactions and the possibility of fraud. Square restricts transactions from cruise lines, creating uncertainty and difficulties in payment processing.
18. Travel Agencies
While in-person travel agencies are few and far between these days, online travel agencies are booming. These are ideal for individuals who don’t feel comfortable booking their whole vacation separately or simply want the comfort of an agent’s services. However, these companies need flexible paying processing solutions because these types of travel bookings are complex and don’t follow a straight route.
While Square doesn’t completely prohibit travel agencies, it does restrict them heavily and this still leads to uncertainty and worries over whether a payment will be blocked.
19. Car Rental Companies
One surprising addition to the list is car rental companies. These are commonplace, so it may come as a shock to realize that they’re heavily restricted by platforms like Square. In this case, it’s a similar situation to travel agencies; car rental companies have complex billing requirements. In many cases, payments are made via a deposit due to potential damage to the vehicle, and there are also extended rental periods to take into account.
All of this creates a complex picture that Square restricts.
20. Vacation Rentals
Alongside car rentals, vacation rentals also face payment challenges, and a lot of it comes down to high-value transactions. Future-dated bookings also enter the picture, along with the high potential for disputes. While many of these businesses identify solutions to some of these problems, such as utilizing technology to identify transactions that may lead to disputes, they are still listed as Square restricted businesses.
Of course, this leads vacation rental businesses to look for Square Alternatives, such as PayCompass. Our merchant accounts help such businesses receive payments without concerns, bypassing challenges that have plagued them for so long.
Specialized and Regulated Industries
The final industry we need to talk about is a varied one. We will call this our specialized and regulated industry. These businesses encounter unique payment processing challenges, explored in the table below:
Specialized Industry | Key Regulations | Unique Processing Requirements |
Pharmaceutical Sales | FDA, DEA | Prescription verification integration |
Telemedicine | HIPAA | Secure patient data handling |
Bail Bond Providers | State laws | 24/7 large transaction support |
Political Campaigns | FEC regulations | Donor verification systems |
Gambling Services | State gaming laws | Geolocation integration |
21. Pharmaceutical Sales
Pharmaceutical companies are Square restricted businesses due to robust regulatory requirements.
Source: Pexels
Detailed regulatory requirements paint a difficult picture for pharmaceutical businesses looking for streamlined payment processing. In this case, a dedicated pharmacy merchant account is the answer.
As we’ve explored so far, our accounts are designed to address specific problems faced by certain industries. In this case, PayCompass can help businesses comply with regulations through real-time monitoring and fraud detection measures.
22. Telemedicine Services
Telemedicine services also create a range of unique challenges, not least ensuring that sensitive information related to health is handled correctly. It is for this reason that such companies are Square restricted businesses.
In addition to data protection, there are ever-evolving regulations that need to be taken into account and complied with. Such problems create payment processing challenges that often require specialized solutions.
23. Bail Bond Providers
Due to their complex operations, bail bond services face many obstacles in terms of their payment processing. Much of this is down to legal complications and the fact that their entire business is deemed high-risk. As you’ve probably noticed by this point, Square distances itself from any potential legal complexity.
24. Political Organizations
Most payment platforms want to appear neutral in any political situation and Square is no different. For that reason, political campaigns often face difficult challenges in finding a payment processor. A lot of this relates to regulations around campaign fundraising, along with the high potential for fraudulent contributions. Of course, in some cases there will also be high volume of small donations, and these can be tricky to handle.
All of this means that political campaigns appear on the Square prohibited businesses list.
25. Gambling and Betting Services
The final type of Square restricted business relates to gambling and betting. These are heavily restricted businesses that also face many legal complexities. Unsurprisingly, this contributes to their high-risk label. PayCompass’ specialized accounts handle these challenges with ease, taking away the hurdles that businesses have to face, streamlining regulatory reporting and compliance.
Why PayCompass is the Best Alternative
We’ve talked about the businesses that face restrictions or even total bans on Square. So, what is the answer? We believe that PayCompass is.
We offer specialized solutions for high-risk businesses, the very ones that Square does not accept. Our accounts have built-in chargeback prevention, something which many high-risk businesses struggle with. We also personalize our accounts to your specific needs, giving you answers to the problems that have seemed insurmountable before now. We can also talk about our unique global market access, thanks to multi-currency processing. So, if you’re an international business, you’ll find our accounts solve many challenges, while also giving you opportunities to grow.
Our platform also has many other innovative features, such as virtual card issuing and real-time transaction monitoring. This means you have extra control over your transactions, helping you spot any potential fraud before it becomes a major issue, allowing you to take proactive steps.
Yet, let’s simplify it to its most basic form – PayCompass facilitates your payment processing when Square and others don’t.
Learnings Recap
Throughout this guide we’ve covered a lot of ground, and it’s clear that high-risk businesses face many more challenges than those without this label. Yet, that doesn’t mean that these challenges can’t be overcome.
Each of the industries we’ve talked about so far have their own unique hurdles and a need for specialized solutions. Square’s restricted businesses list is long and it’s clear that many mainstream platforms such as this simply won’t accommodate businesses with complex needs. For instance, the travel industry has many high-value bookings and a high risk of cancellations and chargebacks. The adult entertainment industry faces many restrictions due to difficulties verifying age and potential legal issues, while financial services are heavily regulated and payment processors feel the general risk is too high.
All of this creates the need for specialized payment solutions, such as PayCompass. To us, high-risk simply means we need to help, and that’s why we have developed a range of personalized accounts with features as unique as your business. If you’re ready to revolutionize your payment processing and wave goodbye to constant restrictions, contact us today.
