Empowering High-Risk Startups with Smarter Payment Solutions

Starting a business in a high-risk industry is always challenging. Not only are there multiple reasons why some industries are rightfully labeled as “high-risk” (risk of fraud, chargebacks, unstable business models, and more), but the mere fact that you are labeled as such usually leads to additional issues. Stringent regulations, more unfavorable contract terms, higher processing fees, limited options, and other problems usually follow the “high-risk” label and make such businesses even more difficult to lift off the ground.

All this means that if you’re a high-risk startup, you have a lot of challenges in front of you. All is not lost, of course, as there are smart payment solutions out there that are specifically designed to work in high-risk industries and help empower startups and businesses in those niches to succeed.

5 Key Challenges High-Risk Startups Face And How Smarter Payment Solutions Can Help

As this article by Paycompass details, high-risk businesses face a lot of barriers to success, and working with some payment processors isn’t always easy either. However, high-risk payment solutions have developed processes for helping businesses overcome such challenges and empower them to a mutually beneficial success.

1. Limited Payment Solution Choices and Strict Contracts

The first big hurdle before a high-risk startup is that many prominent payment solutions just outright refuse to work with businesses in high-risk areas. And of the ones that don’t, many offer incredibly strict contract terms to mitigate the risks for themselves.

This can be a problem for a high-risk startup as it greatly limits their options. Fortunately, there are payment processors that specialize in working with startups in high-risk industries and don’t handicap them with overly harsh contract terms.

2. Overly High Processing Fees and Rolling Reserves

Because many payment solutions are hesitant to work with high-risk startups, they tend to hedge their bets by giving such businesses exorbitantly high processing fees and rolling reserves. Needless to say, this usually only makes things worse for such high-risk startups and further contributes to their high failure rate.

However, picking a payment processor that specializes in working with businesses in high-risk industries usually involves much more moderate and manageable processing fees and rolling reserves, empowering high-risk startups to succeed.

3. Payout Delays and Issues

A sub-par payment processor in any niche will often experience payment delays or other processing issues. These are sometimes caused by sudden traffic spikes but are often unprovoked and stem from simple technical processing errors in the software itself. This is annoying for large and established businesses but can be outright detrimental for high-risk startups as they can lose what little brand trust and loyalty they have managed to build so far. A smart payment processor works daily to upgrade their software and processing to make sure this never happens.

4. Chargebacks and Fraud

The most notable issues high-risk businesses have to deal with are fraud, cyber-attacks, data theft, and simple chargebacks (both fraudulent and not). All of these can rapidly eat up a business’ revenue and render its profit margins nonexistent. What’s more, data theft can very quickly erode people’s trust in your startup and render it dead on arrival.

That’s why proper payment processors in high-risk industries focus a lot of their attention on fraud detection and prevention, as well as on limiting and resolving chargebacks in the most efficient way possible. This not only limits the direct financial problems that can befall your startup but helps build brand trust and establish your startup as a business that customers can rely upon.

5. Business Scaling and Growth

Startups need to grow by definition. However, many payment processors aren’t really designed to promote growth as rapid traffic spikes often lead to slower payout times or even crashes. This limits a business’s ability to promote itself through promotions, holiday discounts, and other basic marketing strategies, and it often forces businesses to switch to different payment solutions at inopportune times.

Pick a flexible and scalable payment solution is a good way to avoid all these headaches from the get-go and empower your startup for success.

Even with the right payment solutions, growing a startup in a high-risk industry is obviously still difficult and risky. Picking Paycompass or another suitable payment processor isn’t going to instantly and magically solve all the difficulties faced by a risky startup. However, picking the right processor for your needs is one of the most crucial and impactful first steps a high-risk startup can make.