Running a business in a high-risk industry will pretty much always result in issues with payment processing. The problems becomes even more complex if you are running a Shopify store and using Shopify Payments to process transactions. At some point Shopify may decide to shutdown Shopify Payments for the store. This is despite the fact that Shopify makes a list of what it considers to be high-risk available on its website and even if your business is not on the list of industries, merchants may continue to get shutdown. The main reason for this is falling under some definition of the platform’s understanding of ‘high risk’.
There are several factors which may land your business to be classified as ‘high risk’. For example, selling products with complicated regulatory schemes (cannabis), a high potential for lawsuits (nutritional supplements), or licensing requirements (gambling) come with potential payment processor liability attached and so are banned.
But even participating in a legal industry can still get you shutdown. Many merchants fail to realize that high levels of chargebacks or product returns will put you under a microscope. Despite often being the victim, a track record of chargebacks and returns makes a merchant look like they are selling fraudulent merchandise or using deceptive business practices. Too many indicators of eCommerce fraud and your Shopify Payments will be shutdown, or worse your store will get shut down.
Shopify Payments’ terms of service also keeps their policies vague and decision making process opaque, so you could also get shutdown for seemingly no reason whatsoever. This is not by accident but rather by design. It gives Shopify the power and flexibility to shut down any merchant that they deem to be high-risk in order to mitigate their own risk exposure.
What Will Cause a Shutdown?
To reiterate, running a business in any of the legally dubious industries mentioned above or in an industry known for high chargebacks is problematic. Individual stores with high fraud indicators can expect to get closed down, regardless of industry.
Anything commonly considered illegal or deceptive will get you shutdown immediately regardless. Get rich quick schemes, multi-level marketing schemes, ‘revenge’ sites, and anything blockchain/crypto are out. Anything in the financial and investing world like bill pay, debt reductions, and brokerages is also out. Stealing IP by creating merchandise for creators that didn’t give you permission or selling fake LVHM products that you imported from China — also out. And intuition tells you you can find on the dark web like drugs or drug paraphernalia will also get you banned. Explicit material is a grey area, but it’s far from clear what the criteria is for remaining open.
What you may not be aware of but some industries which may appear to be legitimate low-risk are in fact considered by Shopify to be High-risk. For example hair-extensions merchants and some digital goods merchants would not be able to get past Shopify’s risk assessment thresholds. This is typically due to the high rate of chargebacks these industries face.
How to Restart a Store After Shopify Payments Shutdown?
What you don’t want to do is quickly create a new Shopify store to keep doing the same thing. Algorithms are good and will catch you; you’ll get banned again and again. It’s not worth the hastle and stress of wondering when you are going to have to start over again.
Payment processors compete with one another but not on attracting the high-risk payments market. You can try moving to Paypal, but their Acceptable Use Policy is pretty similar to Shopify Payments’. Again, the threat of chargebacks looms. Preventing Paypal chargebacks is no different than on any other platform. Shopify charges you for using their store platform and a % of transactions if you use their payments service, if you use an external payment provider you’ll just end up paying both fees.
You may want to consider a different eCommerce platform. There are several self-managed solutions such as Magento and WooCommerce that do not have the strict regulation Shopify has. In addition you may also want to consider a ‘high-risk’ payment processor. Although the transaction fees are typically higher you don’t have to worry about having something as mission-critical as your payment provider shutting your store down with little to no warning.
High Risk Payment Processing
Working in a high risk industry requires specialized payments and fraud prevention knowledge. One thing to keep in mind is machine learning fraud prevention can do the job well but requires contracting with an additional vendor. Most take a percentage and will charge a premium for high-risk industries if they even take them at all. You can go it alone with a human fraud analyst, but it’s not advised in a high-risk industry.
High-risk payments specialists exist. First, you’ll need to pay a gateway to connect to Shopify or whatever other platform you want to use and transfer the payment data to a payment processor. The payment processor sends the data to your customers’ issuing and acquiring banks. Both charge percentage fees on transactions.
Payment processing is a challenge for all merchants. Mainstream payment providers like Shopify worry about protecting themselves by limiting their exposure to liabilities. High-risk industries require more patience and scrutiny to successfully sell.
Knowing the eCommerce fraud trends and staying within the platform rules will help avoid pitfalls. Closed stores can be reopened, but should be done so wisely. You may also want to examine your eCommerce stack and see if your store may be more suited for a different provider or a high-risk payment processor.