What Industries Are Considered High Risk — and Why It Matters for Merchants

Introduction

Not all businesses are treated equally in the payments world. Some industries are labeled “high risk” by payment processors and acquiring banks. For merchants, this classification impacts everything from approval odds and processing fees to reserve requirements and even account stability.

But what exactly makes an industry high risk? And why are some sectors flagged while others are not?

In this article, we’ll break down the industries commonly considered high risk, the factors that trigger this classification, and what ecommerce merchants need to know when navigating the payments landscape.

What Does “High Risk” Mean in Payments?

In payments, a high-risk industry refers to a sector where acquirers, processors, and card networks see greater potential for disputes, chargebacks, fraud, or regulatory scrutiny.

Being classified as high risk does not mean your business is illegitimate. Instead, it signals to financial institutions that there is an elevated likelihood of financial exposure or compliance challenges.

As a result, high-risk merchants often face:

• Higher processing fees

• Rolling reserves or holdbacks

• Stricter underwriting

• Shorter account review timelines

• Sudden account freezes if risk metrics spike

  
  

Common High-Risk Industries

1. Nutraceuticals and Supplements

Why high risk: High chargeback rates due to subscription billing models, trial offers, and consumer skepticism about product claims.

2. CBD and Cannabis-Related Products

Why high risk: Complex and evolving regulations, patchwork legality across states/countries, and association with restricted substances.

3. Adult Entertainment and Products

Why high risk: Content sensitivity, higher fraud exposure, recurring subscription models, and reputational risk for acquirers.

4. Travel and Ticketing

Why high risk: Advance payments and long delivery cycles increase the chance of cancellations, refunds, or disputes.

5. Coaching, Education, and Online Courses

Why high risk: Intangible products, high refund rates, and skepticism about program value drive chargeback potential.

6. Gaming, Gambling, and Betting

Why high risk: Strict legal frameworks, potential for problem gambling, and cross-border regulatory challenges.

7. Firearms, Weapons, and Ammunition

Why high risk: Heavily regulated, legal limitations in some jurisdictions, and high reputational risk for banks.

8. Subscription Box and Continuity Billing Businesses

Why high risk: Recurring billing can lead to high disputes if customers forget subscriptions or struggle to cancel.

9. Credit Repair, Debt Collection, and Financial Services

Why high risk: Regulatory oversight, consumer complaints, and high dispute ratios.

10. High-Ticket Items (Electronics, Luxury Goods, Jewelry)

Why high risk: Fraud potential is high, and disputes over large-dollar transactions are more costly for acquirers.

11. Online Pharmacies and Telemedicine

Why high risk: Regulatory hurdles, potential for counterfeit or unapproved products, and legal restrictions.

12. Forex, Cryptocurrency, and Investment Services

Why high risk: Volatile markets, heavy regulation, and high fraud exposure.

Why These Industries Are Labeled High Risk

1. Chargeback Ratios

If an industry historically produces chargeback rates above 1% (Visa/Mastercard thresholds), acquirers classify it as high risk.

2. Regulatory Uncertainty

Industries with shifting legal landscapes (CBD, crypto, telehealth) expose processors to compliance risks.

3. Fraud Vulnerability

High-ticket items, cross-border sales, and digital goods all attract fraudsters, raising processor liability.

4. Long Fulfillment Cycles

Industries like travel or preorders carry risk because customers pay long before receiving value.

5. Reputational Concerns

Acquirers may avoid certain industries (adult, firearms) due to public perception and partner bank policies.

6. Recurring Billing Models

Subscriptions and continuity billing lead to more disputes when customers forget charges or struggle to cancel.

Implications for High-Risk Merchants

Merchants operating in these industries face unique challenges:

• Higher Processing Costs: Rates may be 4–6% compared to 2–3% for standard businesses.

• Rolling Reserves: Acquirers may withhold 5–20% of sales for 90–180 days.

• Strict Underwriting: Merchants must provide extensive documentation (financials, processing history, compliance policies).

• Greater Scrutiny: Even after approval, accounts are subject to monitoring and sudden terminations if risk thresholds are exceeded.

How High-Risk Merchants Can Succeed

1. Partner With a Specialized ISO

Independent Sales Organizations (ISOs) like Tailored Commerce Group connect merchants with acquirers experienced in high-risk verticals. This reduces the chance of shutdowns and improves terms.

2. Implement Chargeback Management

Use alerts, fraud filters, and clear refund policies to keep ratios below 1%.

3. Leverage Multi-MID Strategies

Distribute volume across multiple merchant accounts to reduce exposure and maintain continuity.

4. Adopt Payment Orchestration

Orchestration platforms route transactions to the best-suited acquirer, reduce false declines, and create redundancy.

5. Maintain Transparent Practices

Avoid misleading offers, disclose terms clearly, and prioritize customer service to reduce disputes.

Real-World Example

A subscription-based wellness brand labeled “high risk” due to supplements and continuity billing faced:

• 10% rolling reserves

• 4.5% processing fees

• Chargebacks at 1.5%

• Frequent payout holds

  
  

By partnering with an ISO, the brand secured additional MIDs, implemented orchestration, and reduced chargeback ratios below 1%. Within 6 months, reserves were lowered to 5% and fees dropped closer to 3%.

Conclusion

Being classified as high risk isn’t a death sentence for ecommerce brands. It simply means processors see elevated exposure — whether from chargebacks, regulation, fraud, or reputation.

For merchants in industries like supplements, CBD, travel, or high-ticket items, the key to success is preparation: work with the right acquirers, implement chargeback controls, and build redundancy into your payment strategy.

At Tailored Commerce Group, we specialize in helping high-risk merchants turn payments from a liability into a growth engine — ensuring continuity, compliance, and confidence.