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5 Common Risks Internet Merchants Can Face

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Starting your own business has undeniable advantages, but this process is also fraught with certain risks. You should familiarize yourself with them in advance, take preventive measures, and develop a phased action plan for potential emergencies. This article summarizes five common risks e-commerce businesses face.

1. Falling Into High-Risk Category

Depending on the area of activity, banks and other financial institutions divide companies into low-risk and high-risk. It is safer to cooperate with the former since they deal with less payment risks. The latter is considered money-wise risky since there can potentially be more negative aspects in collaboration with them. Fortunately, there are merchant account service providers that specifically work with high-risk companies.

Banks consider the following areas of activity as high-risk:

  • CBD and its derivatives
  • Online dating
  • Alcohol and tobacco products
  • Goods and content for adults
  • Sports betting and gambling
  • Medicines and vitamins

Being on the list of high-risk businesses does not mean you do something illegal. It is just that you are more likely to face scammers and dissatisfied customers. To protect themselves from possible negative consequences, banks set higher rates and complicate the working process for such companies.

2. Competition

With the e-commerce industry development and the constant emergence of new brands, it can be difficult for aspiring merchants to differentiate themselves from the crowd. You have to come up with not only new products but also create unique, memorable marketing campaigns and keep the service at its best. Regardless of what kind of goods you provide, it is important to arrange timely delivery of orders, offer the most convenient payment methods for buyers, and provide quality customer support.

3. Fraudsters

Fraud is one of the biggest risks associated with Internet merchants and e-payments. Almost any business can suffer from scammers. They can steal your data, money, goods, find out your customers’ financial information, and ruin your reputation. Now there are a huge number of different frauds, and new ways of deceiving business owners are regularly invented, but among the main ones are the following:

  • Chargeback fraud
  • CNP fraud
  • Synthetic identity theft
  • Account takeovers
  • Affiliate fraud
  • Phishing

Fortunately, many services offer reliable security technologies and work exclusively in the interests of high-risk companies.

4. Chargebacks

Chargebacks are a convenient consumer protection tool. However, too many of them can negatively impact your business. As a rule, financial institutions set a limit on the number of chargebacks (about 1% of all payments), and if it is exceeded, your merchant account may be blocked or frozen. To prevent it, make complete and understandable descriptions of your products, explain in detail the exchange and return policies, use chargeback alerts, and apply machine learning solutions to identify unreliable customers in advance.

5. Poor Support Service

While you should help your customers solve problems arising while ordering and paying for goods, you too may need help in emergencies. That is why your merchant account provider should offer uninterrupted and fast support for their clients. Thanks to it, you will be able to quickly cope with the issue, reducing the downtime of your website and payment system and not affecting your income.

Knowledge Is Power

When you know what difficulties you may face in the work process, you can get ready for them in advance. No matter what category your business falls into and what level of risk it carries, you can always find the right solution to help you reduce the threat level. By choosing a quality provider, you will get protection from fraudsters, dissatisfied customers and ensure the safety of all sensitive information.

About the author


Dave Jonson