High-Risk Merchant Accounts: How KORONA POS Helps

Businesses operating in regulated industries like liquor, vaping, and CBD often struggle to secure reliable payment processing.

Due to high chargeback rates, legal complexities, and financial risks, they require a high-risk merchant account—a specialized payment processing solution designed to mitigate these challenges.

In this guide, we’ll break down what a high-risk merchant account is, which industries need one, the challenges of securing approval, and how KORONA POS helps businesses navigate payment processing with flexibility and security.

What Is a High-Risk Merchant Account?

A high-risk merchant account is a payment processing account designed for businesses that are more likely to experience chargebacks, fraud, or regulatory scrutiny.

These accounts are offered by acquiring banks or payment processors that specialize in handling industries with higher financial risks.

Unlike standard merchant accounts, high-risk accounts often come with higher processing fees, rolling reserves, and stricter contract terms to offset the potential liabilities associated with the business.

Which Businesses Need a High-Risk Merchant Account?

Below is a breakdown of key industries classified as high-risk and why they fall into this category.

1. Liquor Stores

Liquor stores are considered high-risk due to age restrictions, regulatory compliance, and fraud concerns. 

Alcohol sales are tightly regulated, and businesses must comply with local, state, and federal laws, making payment processing more complex.

Additionally, liquor stores experience a high rate of fraudulent transactions and chargebacks, especially with online alcohol sales, where identity verification is challenging.

2. Vape and Smoke Shops

Vape and smoke shops face payment processing challenges due to legal uncertainties, age restrictions, and high chargeback risks. Additionally, vape products are often sold through eCommerce. This increases fraud risks and disputes from unauthorized purchases.

3. CBD and Hemp Retailers

Despite the 2018 Farm Bill legalizing hemp-derived CBD, many financial institutions still categorize CBD and hemp businesses as high-risk.

The lack of clear federal regulations, varying state laws, and frequent changes in compliance requirements make banks hesitant to process CBD payments.

4. Firearms and Ammunition Stores

Gun shops and ammunition retailers are considered high-risk due to strict government regulations, background check requirements, and potential liability issues.

Payment processors must ensure compliance with federal laws like the Gun Control Act and state-specific firearm regulations.

Plus, the political and legal scrutiny surrounding gun sales makes traditional banks wary of processing payments for these businesses, forcing many firearm dealers to seek high-risk merchant accounts.

5. Adult Entertainment

Businesses in the adult entertainment industry, including adult streaming sites, escort services, and online subscription platforms, face high chargeback rates, fraud risks, and legal concerns.

Regulatory issues such as age verification and explicit content compliance create added risks for processors.

Many mainstream payment providers refuse to work with adult businesses, requiring them to secure high-risk payment solutions.

Challenges of Getting Approved for a High-Risk Merchant Account

Getting approved for a high-risk merchant account comes with its unique set of challenges. Here’s a detailed breakdown:

1. Higher Processing Fees and Rolling Reserves

High-risk businesses, such as those in the adult entertainment, online gambling, and nutraceutical industries, often experience higher rates of chargebacks, fraud, and customer disputes. Due to this, payment processors impose additional fees to offset potential losses. These fees may include:

• Higher Transaction Fees:  Processors may charge transaction fees of 3-5%, or even higher, due to the increased likelihood of chargebacks and fraud.
• Rolling Reserves: Processors may hold a percentage of monthly transaction volume, ranging from 5% to 20%, for up to six months or longer.

2. Longer Approval Times and Extensive Documentation Requirements

• Longer Approval Times: Due to the extra scrutiny that comes with high-risk industries, approval processes can take longer, from weeks to months. This is because payment processors need to thoroughly assess your business model, history, and potential risk.
• Detailed Documentation: Be prepared to provide in-depth financial statements, business plans, chargeback records, product/service lists, customer refund policies, and other relevant data.
• Personal Guarantees: Business owners may be required to sign a personal guarantee, making them personally liable for business debts, especially those due to chargebacks.

3. Risk of Sudden Account Termination or Frozen Funds

Common reasons for account termination or frozen funds include:

• Chargebacks Beyond Limits: Processors usually impose strict thresholds on chargeback ratios (typically around 1% of total transactions). If you exceed this threshold, your account may be suspended or terminated without warning.
• Excessive Fraud or Disputes: Consistent fraud activity or disputes could still lead to account freezing even if you’re not exceeding the chargeback threshold. Processors may hold funds in an escrow-like account, freezing your cash flow while they investigate.

4. Difficulty in Finding a Reliable Payment Processor

Not all payment processors are willing to work with high-risk merchants, which limits your options. You may end up paying higher fees to work with specialized high-risk providers, but even these processors may limit your access to features like fraud protection or advanced reporting, leaving you exposed to other risks.

Why Should Businesses Avoid Mainstream Processors Like Stripe, Square, PayPal, and Clover?

Many businesses, especially those in high-risk industries, should avoid mainstream payment processors like Stripe, Square, and PayPal due to their strict policies, account instability, and high chargeback penalties. Even though Square offers CBD Payment Processing, for example, your account can still be frozen.

While these platforms are convenient for low-risk merchants, they are often unsuitable for businesses dealing with regulatory scrutiny, subscription models, or high-ticket sales. Below are the key reasons why businesses should seek alternative payment solutions.

1. Strict Prohibited Business Policies

Payment processors like Stripe and PayPal restrict high-risk businesses, including vape shops and CBD retailers. These processors use internal risk assessments that can automatically shut down accounts processing restricted transactions.

Stripe explicitly prohibits processing payments for CBD and vape products, even in states where these products are legal.

Merchants often get approved initially, only to have their accounts closed after a few transactions when the system detects their industry.

2. High Risk of Account Freezes and Sudden Terminations

One of the biggest complaints about Stripe, Square, and PayPal is their tendency to freeze funds or terminate accounts without warning:

• If a business experiences a sudden increase in sales, the processor may flag it as potential fraud and hold payments for an extended period.
• If chargebacks exceed 1% of transactions, the account may be permanently shut down.
• In some cases, funds can be held for 90–180 days, leaving businesses without access to revenue.

3. No Chargeback Protection or Support for High-Risk Businesses

Mainstream processors are designed for low-risk, low-chargeback businesses like retail stores and service providers. High-risk businesses are at a major disadvantage because:

• Chargebacks lead to immediate penalties and potential account bans.
• There are no dedicated chargeback mitigation tools. Stripe and Square do not offer in-depth fraud prevention or dispute management services tailored for high-risk businesses.
• Lack of fraud prevention customization—Unlike high-risk merchant providers, these platforms do not allow merchants to customize fraud filters, which can lead to unnecessary declined transactions.

4. No Flexibility in Payment Processing for High-Risk Businesses

Mainstream processors force merchants to use their built-in payment gateways and do not allow third-party integrations with high-risk processors. This lack of flexibility means businesses that require dual processing (e.g., a high-risk and a standard processor) cannot split transactions or optimize processing costs. Businesses needing backup accounts cannot use multiple payment processors within Stripe or Square. PayPal, Stripe, and Square’s strict country restrictions limit payment acceptance for global businesses in certain regions.

5. Higher Fees Compared to High-Risk Merchant Processors

High-risk businesses often pay more due to extra fees, chargeback penalties, and payment holds. Some businesses flagged as “risky” are charged above-standard processing fees. PayPal may withhold 10–25% of a merchant’s revenue in a rolling reserve to cover potential disputes.

Chargeback fees are expensive; high-risk payment processors often include chargeback protection services to prevent disputes.

How to Choose the Right High-Risk Payment Processor

Selecting the right high-risk payment processor is critical for businesses in regulated industries like CBD. Here’s how to find the best fit for your business:

1. Industry Specialization & Approval Rate

Not all high-risk processors support every industry. Choose a processor with a high approval rate for businesses in your category.

🔹 Key Considerations:

• Does the processor serve your industry?
• What is their approval success rate for businesses like yours?
• Do they have existing merchants in your niche?

Example: A CBD retailer should choose a processor like Paybotic or Easy Pay Direct, which is known for its CBD-friendly banking relationships.

2. Competitive Pricing & Transparent Fees

High-risk processing fees are typically higher than standard rates but vary by provider. Avoid companies with hidden fees, excessive reserves, or unfair chargeback penalties.

🔹 Key Considerations:

• What are the transaction fees? (Expect 3.5%–7% per transaction)
• Are there monthly fees, setup fees, or rolling reserves?
• How much is the chargeback fee? (Standard: $25–$45 per dispute)
• Do they offer discounted rates for higher processing volumes?

3. Chargeback Protection & Fraud Prevention

The right processor should actively help reduce disputes by offering fraud prevention tools like 3D Secure, Address Verification (AVS), and automated dispute resolution.

🔹 Key Considerations:

• Do they offer chargeback prevention services?
• Can they help with dispute mediation?
• Do they have fraud filters and risk management tools?

4. Payment Processing Flexibility

A good high-risk processor should support multiple payment options and integrate with your existing business tools.

🔹 Key Considerations:

• Do they support credit/debit cards, ACH, eChecks, and crypto payments?
• Can you integrate their gateway with your website, POS, or mobile app?
• Do they offer multiple payment accounts for backup processing?

5. Contract Terms & Payout Speed

Look for a provider with fast payouts and reasonable reserve requirements.

🔹 Key Considerations:

• What is the contract length? (Avoid processors with multi-year lock-in periods)
• Are there early termination fees?
• How fast do they deposit funds? (1–3 days is ideal)
• Do they require a rolling reserve? (Standard: 5–10% held for 6 months)

6. Customer Support & Reputation

Since high-risk payment processing involves compliance risks and banking restrictions, you need a provider with 24/7 support and a strong reputation in your industry.

🔹 Key Considerations:

• Do they offer 24/7 customer service?
• Are they well-reviewed by businesses in your niche?
• Do they provide a dedicated account manager?

How KORONA POS Supports High-Risk Businesses

KORONA POS provides high-risk businesses, such as liquor stores, vape and smoke shops, and CBD retailers, with a processing-agnostic point of sale system that integrates seamlessly with multiple payment processors.

1. Payment Processing Flexibility

KORONA POS is processing-agnostic, meaning merchants can integrate with any high-risk payment processor. It’s one of the best pos systems you can use without changing your processor. This is particularly beneficial for industries like vape and smoke shops, which often require secondary processors for products like kratom and CBD. The system’s flexibility allows businesses to work with high-risk-friendly merchant accounts. 

2. Advanced Inventory Management

High-risk industries often deal with compliance-heavy inventory tracking. KORONA POS provides:

• Age verification prompts 
• Automated inventory tracking
• Case-break functionality 
• Product scanning and label printing

For example, liquor stores can track bottle deposits, while CBD retailers can log batch numbers for compliance with local laws.

3. Fraud Prevention & Security Features

High-risk businesses face higher chargeback rates and fraud risks. KORONA POS integrates with payment processors that offer:

• EMV chip reader compatibility 
• End-to-end encryption 
• Employee access controls 

For vape and smoke shops, this reduces risks associated with age-restricted sales and fraud-related chargebacks.

4. Customizable Reporting & Compliance Support

Regulatory compliance is crucial for high-risk businesses. KORONA POS provides:

• Real-time reporting 
• Automated tax calculations for alcohol and tobacco products.
• Integration with accounting software 

For example, liquor stores must comply with strict tax reporting, and KORONA POS simplifies this process with customized tax settings and sales audits.

5. Scalability for Multi-Store & Franchise Operations

Many high-risk businesses operate in multiple locations or franchises. KORONA POS offers:

• Cloud-based data syncing 
• Multi-location inventory tracking
• Loyalty programs

For a growing CBD chain, this means seamless inventory tracking across multiple stores, ensuring legal compliance and operational efficiency.

Steps to Getting a High-Risk Merchant Account with KORONA POS

Confirm Your Business Industry

KORONA POS supports high-risk businesses, including liquor stores, vape and smoke shops, CBD retailers, convenience stores, dispensaries, wineries, and wine shops.

If your business falls into one of these categories, you’re eligible to integrate with a high-risk-friendly payment processor through KORONA POS.

Schedule a Demo

Book a free demo with KORONA POS to see how the system works and integrates with high-risk payment processors.

Work with a Product Specialist

One of KORONA POS’s product specialists will guide you through selecting the right high-risk payment processor, ensuring seamless integration and compliance with industry regulations.

Frequently Asked Questions: High-Risk Merchant Account

High-Risk Merchant Account: Wrapping Up

Securing a high-risk merchant account is essential for businesses in regulated industries, but finding the right payment processor can be challenging. 

Since KORONA POS is not a payment processor but a processing-agnostic point of sale system, we give retailers the flexibility to integrate with the payment provider of their choice. 

Whether you’re a retailer needing a high-risk-friendly processor or an ISO/agent looking for a POS that works with multiple processors, KORONA POS is the solution.

Book a free demo today to see how KORONA POS can support your business with seamless payment processing and advanced retail management tools.