Merchant Processing: What Are Fast Approval Options?

When you’re first setting up a business, you’re probably going about it slowly and deliberately. You take your time registering your business and developing your assets, you set up and extensively test your website, you make sure your storefront works.

One area that often stalls out new business owners is figuring out which merchant payment processor you want to use. There are dozens of companies you can pick from, with their own terms of use, pros and perks, drawbacks, and considerations. Picking the right one can take ages.

When you do finally choose, the act of registering an account and getting it underwritten can take 2-3 weeks on average. That’s fine when you’re still in the process of setting up your business.

What happens if your merchant account is closed without warning?

Sudden Account Closure

It happens all the time. Payment processors are constantly monitoring the companies they do business with, and when rates of fraud, chargebacks, and other sketchy transactions get too high, they’ll close your account.

While you normally have some warning, most business owners don’t think of the worst-case scenario. They see “you’re on notice, fix this in the next month” and take action using fraud prevention tools and the like.

So, they’re often unprepared when their numbers don’t actually improve the next month, and they get the email telling them that their account has been closed.

Obviously, you don’t want to just let your business fail. After all, even though your account can be closed for having a 1%+ chargeback ratio, that still means 99% of your transactions were legitimate.

But now you’re in a pinch. You know from past experience that setting up and underwriting a new merchant account takes weeks. Even worse, you need to disclose that your previous account was closed (and even if you don’t, they’ll find out anyway), you might need to aim for a high-risk merchant account, and you risk being denied or having your new account closed right away for the same reasons.

Business is ongoing, and losing the ability to process payments is a huge hit. Very few businesses can absorb several weeks of inability to do business. So, you need to get a new merchant account spun up, fast. What are your options?

Step 1: Be Prepared for the Transition

Yes, you’re on a time crunch. The moment your account is closed, you have a ticking clock pressed to your ear while you panic and flail and try to get something, anything, set up.

Deep breaths. Being desperate isn’t going to help.

One of the biggest challenges you’ll likely face as you transition to another merchant account is the setup on your website. Depending on how you’ve been processing payments, you may end up needing to revamp your entire check-out process. Some of these payment processors are different enough from one another that you effectively have to spin up an entirely new payment system.

If you’re lucky, you can plug-and-play, or do something as simple as swap a WordPress/WooCommerce plugin. If you’re not lucky, you’ll have to do a lot of re-coding, testing, re-integration, API activation, and other tech stuff.

If you aren’t comfortable or don’t know what you’re doing, you may need to get someone who does to handle it for you. It’s certainly better to pay someone to do it right than to risk losing even more business to trouble-shooting.

You’ll also want to get your documentation in order ASAP. You’ll need documents like:

• Financial statements including balance sheets and P&L statements
• Bank records for 3-6 months
• Chargeback history showing volume, resolution, and dispute reasons
• Risk management steps including anti-fraud and other measures
• Proof of compliance with regulations like KYC, AML, and PCI DSS.

The more you need to stop and gather during the application process, the slower the process will be, so be proactive and gather your documents ahead of time.

Step 2: Sign Up for an Instant Approval Account

While the traditional underwriting process for merchant accounts takes an average of 2-3 weeks, there are many payment processors out there who specialize in instant-approval (or nearly-instant, anyway) and can have you up and running in a matter of 1-2 days.

Before you breathe a sigh of relief and just pick one of those, know that there are some drawbacks and hurdles.

Why Instant Approval Accounts Might Not Do the Job

First of all, almost all of these instant-approval accounts will be month-to-month contracts. You lose a lot of reliability and stability when you’re worrying that you can be shut down again with even less warning this time around.

A lot of this has to do with how these businesses are able to offer instant approvals. With traditional underwriting, the payment processor does their due diligence in investigating you and makes their risk-based determination, a process that takes a lot of time. With instant approval processors, they grant permission first and ask questions later.

Since that puts the processor in a very risky position, these processors have several ways they insulate themselves from risk.

• They might require you to establish a rolling reserve, so they hold onto your money in case of fraud or chargebacks, and it takes a long time before you see any of it.
• They might have strict terms for chargebacks and a zero-tolerance contract that can drop you nearly immediately if you hit that 1% chargeback ratio again.
• They generally have higher fees, including monthly fees and processing fees, that cut into your profits significantly.

It’s also fairly common that “instant approval” isn’t actually instant. It’s often much faster, but it can still be 3-7 days before you’re up and running again.

Beyond that, many of the better instant approval payment processors won’t do business with a merchant that has had their account closed for chargebacks or fraud before. It’s not quite as serious as being placed on the MATCH list, but it’s close. Instead, you’ll usually have to look for specific high-risk payment processors.

If high-risk merchants are rarely eligible for instant approval accounts, is it worth applying?  Yes. Some instant-approval payment processors do allow high-risk merchants, though the terms certainly won’t be favorable for you. Beyond that, though, even getting one of these accounts for 1-2 months with the full expectation that it’ll be closed can be enough to bridge the gap while you get a true high-risk merchant account underwritten and set up. More on that in the next section.

What Are the Best Instant-Approval Merchant Processor Options?

Disclaimer: I haven’t done all the digging into every one of these companies. I haven’t examined their contracts, talked to their customers, or validated their viability for every situation. I’m providing many options, not necessarily the best options.

Truthfully, though, you should be wary of any list claiming to offer the best options. Often, those recommendations are powered by affiliate connections or marketing sponsorships more than independent results. On top of that, your situation is going to be relatively unique to you, so what fits as a “perfect” option for someone else might not give you the time of day.

So, explore this list, consider their pros and cons, and apply to the ones that seem most useful to you in your business. There’s also no rule that says you can only apply to one at a time, so feel free to go through and apply to several if you want to have the broadest set of options.

• Payouts. A fairly new processor that focuses on certain kinds of agile businesses, such as influencers, affiliates, and content creators.
• Soar Pay. A variable-risk processor that is known for working with high-risk businesses, especially in the firearms space.
• EMB. A mid-tier processor with fairly good chargeback protection built-in.
• WebPays. A merchant processor that specializes in gaming and gambling, off-shore, and other high-risk accounts.
• Payline. Another instant-approvals processor that works with high-risk accounts.

This is far from a representative list. Other options to consider include:

• Wave Payments
• Stax
• Helcim
• Zen Payments
• Payment Cloud
• Easy Pay Direct
• FastoPayments

Pretty much all of these will have some kind of drawback, but that’s the nature of doing business, right? For example, Soar Payments has very high documentation requirements and isn’t great for small businesses, WebPays only works in specific industries, Zen Payments has a fast but not immediate underwriting process, and Stax has fees that are structured in a way that makes them expensive for low-volume businesses.

Step 3: Explore High-Risk Account Options

I’ve already mentioned working with merchant processors who deal with high-risk accounts and high-risk industries, so let’s talk a little more about that.

First of all, those two things are not necessarily the same.

A business that is high-risk means that business has a 1% or higher chargeback ratio. This can happen to any business in any industry, and usually means there’s some kind of problem. You need good customer verification and transaction validation, anti-fraud tools, and other detection measures to keep this number low.

When your business is deemed high-risk, you’re going to have a hard time finding a payment processor willing to work with you. Worse, if you’ve been dropped by several different payment processors, you can get added to the MATCH list and essentially denylisted across the board.

In contrast, a business operating in a high-risk industry is not necessarily high-risk themselves. There are many categories of business, including digital goods in general, which are considered high-risk. You can be labeled high-risk even if you have a years-long track record of zero chargebacks.

The common scenario here is that you’ll have a business and you initially used a basic payment processor, one of the big names like Stripe, PayPal, or Square. You operate for a while, but something happens, you get a string of bad transactions or you’re targeted by organized fraud, and your account is closed.

Bad news: you can’t just go to one of those other options. If you were closed due to chargebacks by Stripe, Square doesn’t want to work with you either. You need to go specifically for a high-risk payment processor.

The problem, of course, is that you need extensive underwriting, which takes time. That’s why using an instant-approval account as a stopgap is a good idea.

Just like instant-approval payment processors, there are a lot of processors that work with high-risk merchants. I recommend looking for one that is familiar with your industry, rather than just generically working with “high-risk businesses” without specifics. The more familiar they are with the challenges you face, the more likely they are to have tools to help, or to extend you leeway facing those challenges.

Some options to consider include:

• net. They’re flexible, they’re huge and work with every industry, and they work with high-risk businesses.
• Durango Merchant Services. They’re old hats and are experienced with many industries, including supplements, travel, international businesses, alcohol, and more.
• High Risk Pay. A larger company that handles many industries, including adult, CBD, digital and subscription services, gaming, tobacco, and betting.
•  A high-approval company that works with many different high-risk industries and has a relatively fast approvals process.

You can also look for narrower, industry-specific options. For example, FlowHub is a payment processor that works specifically with dispensaries and THC/CBD businesses. If that’s your niche, they’re a good option. If it’s not, you won’t get far.

Step 4: Implement Better Practices

Ideally, when your account is shut down, your process looks like this:

• You apply for instant-approval payment processing accounts until you have 2-3 accounts available to use.
• You work on implementing payments through one of these accounts so you can keep your business in operation while you do everything else.
• You go through whatever processes you need to do to appeal the closure of your original account.
• You apply for high-risk merchant accounts until you have 1-2 such accounts ready to go. At this point, you can either drop the less-favorable instant-approval accounts, or keep them around. I recommend dropping accounts if they’re just going to charge you fees while you aren’t using them.

There’s one more big step to take before you can settle down, though. It is: fixing the problem that brought you here in the first place.

Was it a high level of chargebacks? Was it intentional fraud, friendly fraud, or something more benign?

There are a wealth of tools available, both within your payment processor and that you can implement store-side, to try to catch and stop potentially fraudulent transactions before they result in chargebacks. The more you can cut these off at the pass, the lower the risk your business has, and the more favorable terms you can get out of payment processors moving forward.

I also highly recommend giving Fight Disputes a look. I built this platform using direct connections to the major credit card companies, so when a dispute is filed, you’re alerted immediately. You can then reach out to the customer and figure out resolution, whether it’s reminding them that they made a purchase, clarifying what the charge was for, or even just offering a refund right away.

When successful, the dispute can be closed before it even goes to the point of investigation, and you never see a chargeback. It’s fast, it’s effective, and it can save your account. So, why not read more about it, and drop me a line to get started?