Customer service has never been a “nice-to-have” in the business world. It’s an integral part of a successful strategy, particularly for high risk merchant account. Operating as a high-risk merchant comes with unique challenges, including higher fees, stringent regulatory scrutiny, and an increased likelihood of disputes or chargebacks.
Amid these difficulties, exceptional customer service plays a key role in mitigating risks, building trust, and fostering customer loyalty. But why exactly does customer service matter so much in these situations? Let’s break it down, supported by data and industry insights, to show how customer service can be a game-changer for businesses classified as high-risk merchants.
High-Risk Merchants and the Challenges They Face
High-risk merchants—businesses operating in sectors like travel, adult entertainment, gaming, and nutritional supplements—are flagged as high risk by banks and payment processors. This categorization often results from their susceptibility to chargebacks, fraud risks, or regulatory hurdles.
What Defines High-Risk Businesses?
According to statistics from Markets Insider, online industries most commonly flagged as high risk are in sectors where fraud and chargebacks are especially prevalent. For example, studies show that travel agencies experience chargebacks up to 2%-3% more than the average transaction rates in other industries. Similarly, online gambling merchants are reported to handle fraud attempts with double the frequency of standard online retailers.
Banks and payment processors heavily scrutinize these categories and impose higher processing rates and reserve requirements. This means high-risk merchants often face increased costs and reduced profit margins.
Additionally, a Global Risk Commerce study highlights that the global average payment success rate for high-risk industries is only at 78%, compared to the 87% success rate for regular businesses. Merchants in this category must stay agile and proactive to avoid financial pitfalls.
This is where customer service is not just important—it’s essential. Without it, the costs of disputes, chargebacks, and reputational damage can spiral out of control.
The Role of Customer Service in Enhancing Reputation
High-risk merchants often face trust issues, amplified by their high chargeback rates or the precarious nature of their business category. Investing in outstanding customer service can help improve trust and build long-term relationships with customers.
Resolving Disputes and Losing Fewer Customers
A 2023 report by Zendesk revealed that 78% of customers expect to have their issues resolved on their first interaction with customer support. For high-risk merchants, failing to resolve disputes promptly can mean the difference between a chargeback and a continued business relationship.
Direct customer interactions through live chat, email, or phone support provide opportunities to handle disputes quickly, presenting your side of the story to customers, and saving a potentially lost relationship. Every chargeback avoided contributes to lowering risk profiles and reducing transaction fees.
Interesting Stat: The cost of resolving a single chargeback can range from $15 to $100, depending on the processing service. Imagine the cumulative costs your business avoids by resolving disputes on the front lines of customer service.
Building Credibility in Volatile Industries
High-risk businesses often struggle to build credibility due to wider market stigma. But with consistent and empathetic customer service, you can differentiate yourself from competitors. For example, online reviews and word-of-mouth recommendations have been found to influence 93% of consumer purchasing decisions. Excellent customer service plays a pivotal role in ensuring that positive reviews pile up, while negative ones are minimized.
How Customer Service Helps Win Chargeback Disputes
Chargebacks are a constant headache for high-risk merchants, especially when disputing fraudulent claims. However, data shows that having a transparent and accessible customer service system in place significantly improves the odds of winning chargeback fights.
Ticketing and Tracking Systems
Using robust customer service ticketing tools can help businesses maintain an organized record of customer interactions, which can then be used as evidence to fight chargebacks. Merchants backed by accurate, chronological communication logs have been reported as 54% more likely to win a dispute.
Solutions-Oriented Support
When customers know that they can contact you easily to resolve issues, it often prevents disputes from escalating into chargebacks altogether. For example, DirectPayGlobal noted that merchants with 24/7 live customer chats see 30% fewer disputes filed compared to those who rely solely on automated FAQs.
Fraud Mitigation Through Enhanced Communication
Fraud is another major risk for high-risk businesses. Proactive communication via customer service channels reduces fraudulent claims. Reaching out to confirm transactions and address payment issues with flagged users demonstrates to payment processors that you’re a responsible merchant who’s taking fraud detection seriously.
Competitive Advantage Through Brand Loyalty
Despite the challenges faced by high-risk merchants, investing in top-tier customer service can be leveraged as one of their biggest advantages. Subscription-based services, for example, can struggle less with churn when their customer experience is exceptional.
Increasing Retention
Data shows that a 5% increase in customer retention can boost profits by 25%-95%, according to research by Harvard Business Review. High-risk merchants often struggle to retain customers due to negative perceptions tied to their classification. But creating a seamless, personalized customer experience can reverse this trend.
For instance, subscription gambling platforms that offer straightforward account management services (like pausing and restarting subscriptions or transparent billing) often report higher retention rates.
Technology to Support Customer Service in High-Risk Sectors
Advances in customer service technology make it easier than ever for high-risk merchants to meet customer expectations, manage disputes, and mitigate risks. AI-powered chatbots, automated ticketing systems, and analytics tools now empower businesses to respond promptly and accurately to customer needs.
AI Chatbots for High-Risk Support
AI-enhanced chatbots are now capable of managing 70%-80% of repetitive queries, according to a report by Gartner. For high-risk merchants, chatbots not only reduce overhead costs but also provide real-time support to customers at any hour—critical in an era of global commerce.
For example, chatbots working in high-risk e-commerce can handle initial refund requests, helping to de-escalate disputes before they turn into chargebacks. The more disputes nipped in the bud at this stage, the lesser the risk of incurring processing penalties.
Analytics Driving Smarter Customer Experiences
Customer service teams powered by analytics tools can derive actionable insights to improve workflows and anticipate problems. Predictive analytics can also help flag “serial refunders” or customers at a high risk of filing disputes—enabling a proactive reach-out.
The Hidden ROI of Customer Service in High-Risk Industries
On the surface, customer service may appear as a cost-associated overhead for high-risk merchants. But the hidden return on investment (ROI) makes the effort well worth it.
- Dispute Resolution ROI: Resolving disputes early can save businesses thousands annually.
- Retention ROI: A loyal customer base becomes an asset, reducing the need to acquire new customers constantly.
- Reputation ROI: Positive brand reputation translates into better partnerships with banks and lower processing fees.
Final Thoughts on Customer Service & Risk Management
For high-risk merchants, customer service stands as an invaluable pillar of business success. Beyond resolving disputes and reducing costs, it enhances credibility and builds retention in industries synonymous with high churn rates.
With innovative tools at their disposal, businesses willing to invest in exceptional customer service will escape the pitfalls of the high-risk merchant label and emerge more competitive, more effective, and ready to meet customer needs head-on.
