As a payment gateway, Stripe is a popular way to process credit and debit card transactions.
The money flows from the cardholder through the gateway and into your bank account.
Unless you’re a high-risk business.
Merchant accounts deemed high-risk by Stripe can be banned.
Then the gate slams shut, and you’re given the boot.
That’s very bad for your business.
Let’s examine what this means to you, a merchant.
Then, we’ll look at how best to avoid getting banned.
There’s a lot to talk about.
What Happens If I’m Banned?
Stripe reserves the right to ban or close merchant accounts for cause. Your business must abide by Stripe’s policies, terms of service, and regulatory requirements.
Closing your account is the most common way to be banned. But it’s not the end of your merchant misery. The repercussions of being banned are many.
When your account is closed:
- You cannot process transactions.
- You cannot accept payments.
- You cannot access the funds in your account.
- You are reported to high-risk merchant databases like MATCH.
- You are subject to additional fees and penalties.
- You may or may not get a reason for the ban.
You can’t bring in money if you can’t process transactions or accept payments.
Losing access to the funds in your account could kill your business. While the hold on your funds may be temporary, it could last for weeks or months.
Any potential chargebacks will be deducted from these funds. Disbursements to those cardholders who purchased something but didn’t receive their purchase will be settled by Stripe. These funds will also come from your account.
Reporting high-risk, cancelled merchant accounts to MATCH is mandatory. So is checking MATCH before another provider issues you a new merchant account.
Once you are reported to a database like MATCH, you may not be able to get another merchant account. If you can find a provider who will assign you another account, the rates will be higher, and your ability to do business will be limited.
Stripe cannot process transactions for merchants listed on MATCH. Few exceptions exist.
Being identified as high-risk can affect your ability to do business for years.
How Does Stripe Define High Risk?
Defining a merchant or business as high-risk is a bit complicated. Many criteria are assessed.
These include:
Industry type: Certain industries are prone to high chargeback rates, fraud, and regulatory scrutiny—examples are adult entertainment, gambling, tobacco, and pharmaceuticals.
Business model: Subscription models offering free trials or recurring billing are deemed high-risk.
Financial history: If you have a history of excessive chargebacks, fraud, or financial instability, you may be flagged as high-risk.
Product or service delivery time: Businesses with a long delay between purchase and delivery are ranked as high-risk due to high rates of chargebacks and cancellations.
Country of operation: Certain countries are rife with fraud or may have embargos on doing business with payment gateways.
Transaction size and volume: High transaction rates attract fraud and may result in significant financial exposure to chargebacks.
It’s time to move on to what you can do to avoid being banned.
Best Practices To Avoid Bans
These best practices affect your entire business. Each is an essential part of a cohesive overall anti-ban plan.
Transparent Business Practices
Clearly describe your products and services. Make this information easy to find on all documents and customer correspondence regarding purchases.
Ensure your website content (terms of service, privacy policy) complies with Stripe's requirements.
Maintain Accurate Account Information
Keep business information, including contact details and bank account information, up to date. Also, make this information readily available.
Implement Fraud Prevention Measures
Utilise tools like Stripe Radar and ChargebackStop.com to detect and prevent fraudulent transactions.
Adopt additional verification methods for high-value transactions.
- Two-factor authentication (2FA)
- Manual review
- Customer verification calls
- Advanced fraud detection tools
- Payment method verification
- Transaction limits and alerts
Manage Chargebacks Effectively
Respond to chargebacks promptly to avoid penalties from Stripe.
Understand and Comply with Regulatory Requirements
Stay informed about the legal and regulatory landscape of your industry.
Maintain compliance with laws in your jurisdictions, including data protection and financial regulations.
Regular Financial Reviews
Monitor transaction patterns and volumes to identify anomalies.
Keep financial records to provide evidence of compliance and legitimate business operations.
Engage with Stripe's Support Proactively
Communicate openly with Stripe about changes in your business model or operations.
Seek guidance from Stripe when expanding into new products or markets.
Avoiding Fraud and Chargebacks Before They Happen
Our service, ChargebackStop.com, provides a complete automated platform to reduce fraud and chargebacks by 99%.
With a low chargeback rate of 1%, you are unlikely to get banned.
Identifying and stopping fraudulent activities as they occur can mitigate falling victim to bad actors.
Having a real-time, automated chargeback prevention platform gives you control you don’t have when handling chargebacks after they are enacted.
Stopping chargebacks and fraud in their tracks is the key.
Looking Forward
Visit ChargebackStop.com/contact-us to ask your questions about Stripe, chargebacks, fraud, or prevention platforms like ours.
We’ll also fix you up with a free demo of our platform.
Give ChargebackStop.com a free try today.
FAQ: Stripe High-Risk Business
How can I find out if my business is considered high-risk by Stripe?
Stripe may notify you directly if your business is categorised as high-risk. However, you can also review Stripe's terms of service and prohibited businesses list or contact Stripe support to clarify your business's status.
What are the common reasons for a Stripe account ban?
Common reasons include violating Stripe’s terms of service, engaging in prohibited business activities, experiencing excessive chargebacks, or failing to comply with legal and regulatory requirements.
Can I appeal a ban decision made by Stripe?
Yes, Stripe provides a process for appealing bans. You should respond promptly to any communication from Stripe regarding your account status and follow their instructions for submitting an appeal.
What are some best practices for avoiding chargebacks?
To minimise chargebacks, clearly describe your products and services, communicate shipping times and return policies clearly, and use fraud and chargeback detection tools like Stripe Radar and ChargebackStop.com. Provide excellent customer service to resolve disputes before they escalate.
Why is maintaining accurate account information important for avoiding a ban?
Accurate account information ensures Stripe can contact you about any issues and verify your business’s legitimacy. It also helps in compliance checks and reduces the risk of your account being flagged for suspicious activity.