When an Aggregate Payment Processor Turns the Lights Off


Those new to eCommerce and brick and mortar retailers may not be aware of the issues around using an aggregate payment processor like PayPal, Stripe, or Square to process electronic and credit card payments. These aggregators can work well if your business model or offerings do not fall into the high risk payments category. But, if you are one on the many vendors in an high risk industry, you will not know it until the aggregators freeze your merchant account and you can’t access the funds generated by credit card payments in them.

First, let’s explore how payment processing aggregators operate and why they don’t want high risk merchant accounts in their networks.

Aggregate Merchant Accounts vs. Dedicated Merchant Accounts

With an aggregate payment processors like PayPal, Stripe, or Square, merchants share joint merchant accounts amongst each other. These types of merchant accounts are quick and easy to set up (instantaneous in fact) and are at times build into an eCommerce platform. They have brand recognition in their favor as well. Talk about PayPal with the majority of consumers or merchants and you will find instant brand recognition. This is part of the reason why so many merchants—regardless of their payment risk profile—begin with a payment aggregator.

Aggregators typically have fixed payment processing rates, but will increase these rates based on your businesses’ payment processing volume. They also have complete control over funds within these accounts and withhold them if their underwriting process finds your business model as high risk.  

A dedicated merchant account is an account in which a merchant has its own merchant ID (aka MID) and is not sharing them with a number of merchants. Merchants are able to tailor their rates to their individual business; however, they take some effort to research, apply, and get approved for. The best thing for merchants, especially high risk merchants, is there is little to no interruptions in payment processing, and merchants can access their funds within 1 to 2 business days.

So You Got Dropped by an Aggregate, Now What?

As soon as an aggregate merchant account such as PayPal, Stripe, or Square kick you off their platform or freeze your merchant account, it can be confusing as to what to do next. First, you need to research payment processors who can offer dedicated high risk merchant account solutions. Make sure they are will meet the demands of your business, won’t shut you down to ridiculous reasons, and will provide you with a competitive rate.

These payment processing providers will work on your behalf and contact banks to establish a merchant account. This is why it’s ideal to seek out a merchant services provider that has great relationships with several banks. It is even better when that provider has an in-house underwriting team.

Once approved for your own dedicated high risk merchant account, you will not have to worry about your credit card payments being shut off. So, in closing, before you launch your eCommerce business, research your industry and research payment processing providers to see what the best option is for you.