An Overview of High Risk Transactions & Risks Associated With Them

Tech Qiah

E-commerce businesses that conduct their sales online open more ways to growth opportunities but are associated with threats as well, including high risk transactions. In today’s fast-paced world, businesses must keep an eye on their revenue generation and the types of customers they are dealing with. 

High Risk Transactions

What are High Risk Transactions?

Transactions that involve credit card payment processes are known as high risk transactions due to the possibility of financial losses. Since it can occur in various forms, it is challenging to identify the high risk transactions for businesses. However, sometimes even low-risk industries are at the risk of high risk transactions. 

It is crucial to determine for any business whether it should accept high risk transactions or not. This guide addresses the high risk transaction categories and how to protect businesses from them.

● First-Time Users

New customers pose a more significant threat to e-commerce businesses than repetitive clients. Companies establish a relationship of trust and confidence with the old customers who keep coming back. However, businesses are more suspicious of new clients, whether they use legitimate payment methods.

● International Transaction Activities

Businesses and financial companies are often at risk from international transactions. Since security measures, banking regulations, and rules for fraud prevention vary from country to country, malicious actors may easily get past security measures to execute fraudulent activities. Similarly, it is a challenging task to combat disputes in case of overseas payments.

● CNP Transactions

CNP (Card-Not-Present) Transactions are payments where the cardholder doesn’t present the credit card physically while making a payment. Online payment methods, phone payments, or email payments are examples of CNP transactions. Such payments are considered high risk transactions since the customers don’t have to show their physical cards, and fraudsters can conveniently use stolen credit cards.

● High-Ticket Buyings

Regardless of the business industry, high-ticket purchases can cause significant financial losses to payment processors and merchants both. If a business is selling an expensive product or service, it reduces the risk of fraudulent transactions. Otherwise, one high risk transaction can cost a business a lot. Similarly, high-volume transactions are more likely to be the high risk ones.

● High Risk Transaction Industries

Some businesses and industries are more prone to fraudulent activities and regulatory issues depending upon the service or product they are selling. Some of the high risk businesses are as follows:


● Travel

● Credit Repair

● Drop Shipping

● Tech Support

Ways to Protect Businesses from High Risk Transaction Frauds

It is critical for business owners and financial companies to safeguard their businesses from high risk transactions. However, the strategies to prevent fraud differ from business to business depending upon the payment method it utilizes. Below are the ways to protect businesses from fraud and challenges associated with high risk transactions:

Safe CNP Transactions

Businesses allowing CNP transactions should take further security measures to fight the challenges of financial fraud. Some common tools to meet the challenge of high risk transactions and ensure safe CNP transactions are as follows:

● Address Verification

Businesses can utilize an address verification process that requires a cardholder to input authentic zip codes as well as address details. Such verification systems only allow customers with authentic addresses to use the credit card successfully, eventually making it challenging for fraudsters to the stolen credit cards.

● CVV Verification

Credit cards possess a card verification value (CVV) printed on their backs. Utilization of a payment method that requires this KYC verification number other than the credit card number can help to prevent fraud associated with high risk transactions.

● Tools for Card Association

Card networks, for instance, Mastercard, Visa, or American Express, offer various tools to fight the use of credit cards for illegal activities. Implementation of these tools can help businesses and financial companies to stay in touch with updated technologies and ensure risk based transaction monitoring, hence mitigating the risk associated with CNP transactions.

● Two-Factor Authentication System

Two-factor authentication is another advanced system that requires credit cardholders to confirm their validity through a code received via SMS or email. With such security measures for suspicious transaction monitoring, clients receive verification codes on their registered phone numbers. Once the user correctly enters the received code into the payment gateway, the payment method is finalized.

The Bottom Line

Accepting high risk transactions should not be a risk for any business, given that it possesses authentic aml transaction monitoring systems. Utilization of prevention tools and effective fraud transaction monitoring can help in mitigating the risk of financial losses. Moreover, high-risk merchant services providers help companies to prevent financial losses through credit card payments.

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