Accepting payments should be easy – and it is… at least in the beginning.
You setup a Stripe account, or a PayPal account, or some random merchant account… and Boom! You can accept credit cards the same day…
But then you learn the difference between Stripe, PayPal and Traditional Merchant accounts… and you start to understand why there are literally Millions of business owners posting articles about how “PayPal froze my funds” or “Stripe closed my account” – or complaining because they got an email saying “Your Shopify Payments Account is on Hold” (which is powered by Stripe).
Hopefully, you find out about these things before you have an issue – but SO often, entrepreneurs operate for a year, or two, or more… and assume that because they’ve never had an issue, they never will… and then it happens… they can’t accept credit cards… and it’s suddenly the single most important thing to their business.
I’ve never had water damage in my house… but I definitely have insurance on the house. It’s CRAZY how many entrepreneurs don’t take the simple steps necessary to protect their own business and their precious cash flow.
Some of my close friends sell information, provide coaching services and do live events. They’re some of the most genuine people I know. Sadly, they’re also the highest risk of having problems when accepting payments.
What’s worse, the fact that they’re considered “high risk” doesn’t even have anything to do with them, or their individual businesses.
They’re all great people, have very happy clients and have nearly no chargebacks. It’s just the nature of the speaker / coach / thought leader business model.
There are two major contributing factors to this; both of which revolve around their customers potentially disputing charges.
1) Product Quality is Subjective
If Elon Musk created an online course about building electric cars, or Warren Buffet did a live seminar to teach investing; they’d both be considered “high risk” by merchant account providers.
Why? Because the level of knowledge of the customer varies wildly.
If I personally took Elon Musk’s course on how to build electric cars, I’d probably be thrilled with the information. If the head engineer from the Chevy Volt team (another electric car) took the course, she may have a different assessment. Or she may not.
Regardless, the fact is: there’s no way to ensure that the consumer’s expectations will be met. Across the entire information product industry, this results in higher chargebacks.
Conversely, McDonald’s is very low risk. Every consumer is crystal clear on exactly what they’re buying. This isn’t to say that McDonald’s offers a quality product, it’s only to say that there’s a low likelihood of a consumer going home and disputing the quality of their Big Mac. Why? Well, a lot of reasons, but one of them being: it’s easy to ensure that the consumer’s expectations are being met. It’s not about the actual quality of the product – it’s about the buyer’s expectation of the quality. For McDonald’s – quality is the same at every location.
For coaches and speakers whose products aren’t as well knows as McDonald’s, there are a few things you can do to effectively establish expectations (and reduce the risk of chargebacks). For example, a real estate investment coach who claims their course will “double your net worth” is setting REALLY high expectation for their clients. If their clients do not double their net worth – that coach can expect the chargebacks to start rolling in.
While it’s a sexy pitch that definitely gets consumers to click the buy button, “excessive claims” (as merchant account underwriters call it) lead to high chargebacks and merchant account closures.
The key to selling products that are subjective in quality: make sure the buyer’s expectations are in line with the product being delivered.
Great marketers often have the ability to “over sell”. While that produces sales… all of your marketing and sales are in vain if your merchant account is closed and you can’t accept credit cards.
2) High Dollar Amounts (High Ticket Merchant Accounts)
Is buyer’s remorse more common with a $10 purchase or a $1,000 purchase? Or a $10,000 purchase?
Easy answer: The higher the dollar amount, the more likely someone will second guess that purchase.
Also, if a consumer runs into financial challenges, recent high dollar purchases are the first thing they’ll try to refund to solve their problems.
As far as merchant account providers are concerned, any product that sells for more than $1,000 fall into the “high risk” category. As a general rule, the higher the price point, the more likely a consumer will dispute a product, the more “risk” there is for the merchant account provider.
That brings up a good question: Why do I keep talking about risk? What IS the risk for a provider?
The card brands (Visa, Mastercard, Discover, Amex) give consumers 6 months to dispute any purchase.
That means that after your customer buys your product – at any point during the next SIX MONTHS, they could call their credit card company and ask for their money back. Now, they may or may not win the chargeback, but they can dispute it – which is a liability for you (and your provider).
If they win the dispute, the money from their original sale will be automatically ripped out of your business bank account and given back to the consumer.
Now here’s the risk to the provider: What happens if your business doesn’t exist?
If your business isn’t around any more, your merchant account provider has to reimburse any consumer that disputes a charge. The money is then ripped out of their bank account and given to the consumer.
The more expensive your product is, the more risky the proposition for your merchant account provider (because only a few disputes will then represent a lot of money).
“But Brad, I’ve been in business for 10 years. We’re not going anywhere…”
Right. I get it – your business WILL be here 6 months from now… but banks/merchant account providers are looking at industry averages and historical data – and statistically, companies in your industry go under more often than other industries.
It’s also important to recognize that the higher your product’s price, the fewer chargebacks it takes to really hurt your cashflow or sink your business.
To be direct, your merchant account provider is looking at the worst case scenario – and even super successful companies go under – every day.
The bottom line: If you’re a speaker, a coach or you’re selling information or any kind; you have a higher risk of your merchant account provider holding your money or closing your account.
That’s a brutal reality.
In addition, even if you’ve owned ten different companies and “handled” these situations in the past – the world of online payments is changing rapidly with new legislation and technology. It’s a full time job to stay on top of it.
Now here’s the good news:
There are Certified Payment Specialist that have worked with thousands of Speakers, Coaches, Authors and Thought leaders. They’ve seen it all. They know the nuances of accepting payments online, at live events, during product launches.
Now if only I knew a way to get you in touch with those professionals… 😉
Because Easy Pay Direct isn’t tied to one single bank, our Certified Payments Specialist are always able to give an unbiased opinion on what’s best for your business. They’ve seen it all. Day in, day out, the EPD staff works with “high risk” merchant accounts.
Pick the brain of Certified Payment Specialist in the Merchant Account Experts facebook group.
Schedule a free 15 minute consultation with an expert TODAY.
More about Brad Weimert
Brad Weimert is the founder of Easy Pay Direct; one of the foremost “High Risk” merchant account providers in the world.
Equal parts entrepreneur and adventurer, Brad is just as likely to be found climbing a mountain as building a company or speaking to entrepreneurs.
Follow his exploits at www.BradWeimert.com or Set up a consultation with Easy Pay Direct.