Stripe Has Terminated My Account and Labeled Me a High-Risk Merchant. What Now?
If you are running an online business that accepts online payments, you must have stumbled upon various payment processors like PayPal, Square, or Stripe. These three are probably the most popular online payment brands in the world and the first choice for most startups and new merchants.
Just to get everyone on the same page, Stripe is one of the most popular PSP (Payment Service Providers) in the world offering online payments to merchants worldwide. For years, it has built its reputation as a super friendly and innovative PSP, especially for small merchants and startups. But as Stripe’s base of merchants grew bigger, so did the number of incidents. An increasing number of merchants started receiving emails saying that their accounts and funds have been terminated or frozen without prior warning or an explanation.
The main reason behind it is that many merchants do not realize the hidden costs and risks of using a PSP vs an independent merchant account.
Why is Stripe terminating and freezing merchant accounts?
If you are a Stripe merchant with a terminated or frozen account, you have most likely been labeled a “high risk merchant” at some point. PSPs like Stripe use three labels to categorize new merchants during onboarding.
The first one is pretty obvious and applies to all unauthorized businesses that are refused any processing by default, i.e. adult content and gambling providers.
The second category is e-commerce merchants which sell physical goods for which delivery verification is possible using various tracking systems.
The third category is high-risk merchants. The problem with this category is that the rules for labeling merchants as high risk are very vague and in many cases debatable. For example, you may start processing payments with Stripe as a regular merchant and still end up labeled high risk at some point. The probability of being labeled a high-risk industry merchant is much higher when:
What are the key reasons for payment processors like Stripe and PayPal to drop a merchant?
There are usually two main reasons why payment service providers suspend a merchant.
Naturally, they want to keep the chargeback level as low as possible to stay on good terms with credit card companies and banks. If a business is known to notoriously generate chargebacks or disputes, it’s a red flag. The PSPs have much to lose, as their relationships with financial institutions are the cornerstone of their business. With this much at stake they’d rather sacrifice their merchants for the greater good.
Financial damage and bad reputation
Chargebacks can escalate into major problems leading to financial damage and bad reputation for the payment provider. Fraudulent merchants, when faced with a large amount of chargebacks, may decide to close their Stripe account and disappear, leaving the PSP to cover the damages. This is one of the reasons why PayPal requires a bank account as a precaution – it’s a way to recover the cost when a merchant closes and the money vanishes into thin air.
What Stripe account termination or freeze looks like from the merchant’s perspective
Let’s take the merchant’s perspective for a while. What exactly is it that has given Stripe its bad reputation among high-risk businesses? For starters, this is how Stripe informs their merchants that there is an issue and account shutdown:
Thanks for signing up with Stripe!
Unfortunately at this time we will need to stop offering service for yourbusiness.com. Currently Stripe can only support users with a low risk of customer disputes. After reviewing your submitted information and website it does seem like your site presents a higher level of risk than we can currently support. Unfortunately we will be unable to accept any additional payments on your behalf.”
It’s an automated message, the same for all terminated merchants. There is no customization, personalization, nor anything that would pinpoint a specific cause of the account freeze. Needless to say, such a message leaves merchants puzzled and wondering what has actually happened. How to fix it and get the system up and running again? On most community forums people will quote high chargeback rates as the main reason, but this is true only for a small percentage of cases. But on the same community forums, merchants report accounts being shut down with zero chargebacks or following only a single fraudulent transaction.
Stripe’s BBB (Better Business Bureau) reviews confirm the growing frustration of their former merchants. At the time of writing this article there were more than 90 negative reviews with a 1-star rating at BBB.
Many merchants also reported that when trying to receive additional explanation and perhaps bring the account back to life, Stripe’s support remained unresponsive. Although it seems that this might be the case in the past as there is a reaction to every complaint filed on BBB’s site.
Another group of issues raised by former Stripe merchants is:
By the number of ongoing online complaints against Stripe practices, it is hard not to notice the scale of the problem.
(Image Source: https://uk.trustpilot.com/review/stripe.com)
What do you do when your account gets terminated and funds frozen? How to get your business up and running and start accepting online payments as soon as possible?
How to start accepting payments after Stripe terminates or freezes the account?
Firstly, remember that there are plenty of other payment processors that will gladly accept your business. There are many payment service providers other than PayPal or Stripe. To make sure you never have to go through similar situations again, we recommend that you look for:
To quickly get your payments up and running after your Stripe account is terminated it’s best to turn to a merchant account provider that works directly with an acquiring bank. This arrangement offers a couple of benefits: banks are more secure in terms of risk and offer more lenient chargeback policies.
So why don’t all merchants go with a bank processor? The primary reason is convenience. Stripe and PayPal are easier and faster to set up, especially for teams not specialized in payment platform integrations. But the effort pays off, especially if you want to minimize the risk for your business and ensure continuity of your payment processing.
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