The world of startups and side hustles gets talked about a lot, but there’s one thing that doesn’t get nearly enough attention – the payment system. It’s how you keep your cash flow running and, if you get it right, everything’s peachy.
If you don’t, you land in a world of trouble.
And if you’re running a business in an even slightly unconventional space, you know everything about that trouble. You see your perfectly legit transactions get flagged for no reason, and your account gets frozen here and there. Or you’ve just been rejected time and time again by all the mainstream payment processors.
This isn’t a problem with your business but with the way traditional banks and payment processors work. They’re built for traditional businesses, and if you don’t fit into that category, well… It’s an issue.
Could it be that your business model is simply too risky for traditional payments?
Why Traditional Payment Systems Don’t Work for Every Business
Your trusty old payment system is the cause of all your headaches.
So what now?
When we talk about ‘traditional’ payment systems, we’re talking about your standard credit card processors, everyday bank transfers, well-known online payment gateways, and such. If you own a bookstore or a coffee shop, they work perfectly.
These systems are all about predictability.
They love a straightforward business that has repeatable transactions with low or zero risk. If your business model steps out of that even a little, things get tricky. One of the biggest red flags for them is the potential for high chargeback rates.
If your business is in an industry where you see customers disputing charges on a regular basis (e.g., travel, hospitality, e-commerce, subscription services, etc.), then you know how much of a financial risk it is for handle all those transactions.And it doesn’t really matter whether these disputes are even legitimate or not; they’re still considered ‘risk’.
And, as you can imagine, from their perspective, it’s better not to venture into those types of businesses.
Another thing that we must mention is compliance.
First, it’s complicated.
Some industries (CBD, tech support, travel, etc.) have their own rules and regulations.
And again, as you can imagine, for providers, that’s a massive headache which they’d rather avoid.
This all ties into the fear of fraud and financial risk. If you have a niche business model or one that has a subscription element, that’s unpredictable as far as the traditional systems are concerned.
So what’s the answer to all this, you ask? How do you proceed if the mainstream payment providers show you the door?
The best way to go would be to find a high risk merchant account provider. They already know everything about the issues/challenges in your industry and, to them, your business isn’t a problem they’ll want to avoid – they specialize in it.
To them, these ‘problematic’ businesses are actually an opportunity.
Tips on Handling the Risk When Using Unconventional Payment Methods
Standard payment options just don’t cut it sometimes, so what do you do?
Easy; you research alternatives.
Some of these unconventional methods can be the answer to all your problems, but it’s important to know how to stay safe while using them.
Choose the Right Payment Provider
Goes without saying, right? This is your first and, by far, the most important step.
You need to be prepared and ask the right questions, like how much they actually charge. Do yourself a favor and look at what’s behind that shiny advertised rate, because you want to get familiar with any hidden fees.
Does this provider actually get your industry, or will they go into full-blown panic at the first unusual transaction? And more importantly, what do they do to keep you protected?
Take your time here, don’t rush.
Risk Reduction Tips
If you look at some common pitfalls, you’ll notice that you can handle a lot of them if you have some clear ground rules. Chargebacks are a huge issue, and they cost businesses a lot of money.
Naturally, you want to cut down on them as much as possible, and one way to do that is to make your refund policy not only crystal clear but also super easy to find. Some customers will dispute charges simply because they couldn’t find your refund information or the way to contact you.
In addition to this, you can also use simple (and sometimes free) tools your payment system offers, like address verification. This’ll make sure that the buyer is actually who they say they are.
For bigger purchases, you’ll find that a quick confirmation email or text can work wonders.
Conclusion
No, your business isn’t too risky, it’s just different.
And this is precisely why you stand out, which is a good thing! With that being said, this also means that traditional payment methods might not be the best choice for you, so don’t waste your energy trying to get a yes from them.
The world of payments is so big and so flexible that there’s really no reason to fight the windmills.
There’s a solution that will fit you perfectly; all you need to do is research a little.
