Merchant Account Considerations for Online Tech Support Businesses

Over the past six months or so at UniBul we’ve been getting an ever increasing number of inquiries from merchants providing online tech support services to U.S. consumers. In fact, at present such inquiries account for close to a quarter of all inquiries that are coming our way. Predominantly, these are merchants based in India, but not an insignificant number of the ones which reach out to us are domestic, although even then the call centers themselves are actually situated in India or elsewhere in Asia.

Now, I have to admit that I had not been familiar at all with the business model of online tech support providers when the stream of inquiries began — frankly, for whatever reason I’d never encountered them before. Moreover, at first I was quite skeptical about these merchants and simply ignored the first few inquiries, without as much as giving them a thought. However, as the inquiries kept coming and the stated volumes in some of them were quite respectable, I decided to investigate their potential. Well, it turned out that online tech support wasn’t all that different from most other high-risk industries — the majority of the inquiries were not worth following up on, the majority of those that remained ended up going nowhere, but those very few that made it through the process and ended up processing with us more than justified our effort. So I thought I’d share what I’ve learned and give tech support merchants an idea or two about how they can improve their chances of getting a merchant account.

How Online Tech Support Works

When I began my investigation of this industry, I contacted a number of people who I thought might have some experience in dealing with such merchants and what I heard from them didn’t exactly come as a surprise to me. Most of my colleagues warned me that such businesses were very difficult to work with — that their business practices were questionable, that they could rarely produce all of the required paperwork, that they were slow to follow up on information requests, that their chargeback ratios were sky-high, that customer complaint levels were off the chart and so on. “Where have I heard that before?”, I wondered. And my initial experience quickly confirmed the legitimacy of these warnings. However, I had the good fortune to quickly stumble upon a merchant which turned out to be solid, dependable and following a set of best practices, which ensured low levels of customer complaints and chargebacks. Equally as important, it also had grown to a respectable processing volume — about $500,000 a month and growing.

The merchant’s business model is quite simple. They advertise their services on Google and elsewhere and that’s how most of their customers find them, although their organic efforts have recently started to bear fruit. The customer explains the issue, the merchant’s representative diagnoses the problem and, if the issue is software-related, he or she offers a solution, and explains the cost of fixing it. If the problem is hardware-related, the customer may get a referral to a place best able to help her. Once the customer agrees to the terms of service, she makes a payment and the tech person fixes the issue using remote access to the customer’s computer. Once the service is performed, the customer is asked to verify that the problem is fixed and, if it is not, a full refund is issued immediately. If it is indeed fixed, the customer is asked to digitally sign the service contract. So far it is a fairly straightforward affair.

But there is a twist — there always is. In this case the twist takes the shape of a subscription plan, which the customer is asked to sign. The plan is not mandatory, but the merchant’s sales reps are paid to make sure that customers do sign up. This business model falls squarely into high-risk territory in its simplest, pay-as-you-go, form, but it is the subscriptions that make it particularly risky. The good thing about the merchant in question is that it is able to manage the risk quite successfully, but most others I’ve examined were not.

How to Get and — More Importantly — Keep a Merchant Account

This particular merchant is based in the U.S. and, by the time it contacted us, it had gone through several merchant accounts with some of the biggest U.S. processors, a couple of which were still active. Now, this is an error which you should not repeat — don’t open up many merchant accounts at once, unless you actually need and use them all. Otherwise, processors get nervous and understandably so — what is to say that the new merchant account you are applying for would not just lie dormant or be replaced in the near future? In the event, we asked our merchant to explain why it had gone through all these merchant accounts and received a satisfactory explanation. I should also add that the merchant had already received notices that its remaining two accounts would be closed within a month, which brings me to the next lesson — if you operate an online tech support business, the mainstream processors would not be a viable option — even if you do manage to get an account with them set-up and functioning, it is inevitable that it will be closed just as soon as their risk department takes a close look at it. What you need is a high-risk solution, although not necessarily an offshore one.

The thing about high-risk, though, is that we ask that you have grown to a substantial size, before you contact us — at least $100,000 in monthly processing volume for domestic merchants and more for international ones. ?áIf the volume is present, all the required paperwork is in order, all additionally requested documentation is supplied, your chargeback rate is kept in check and nothing unpleasant is uncovered during the underwriting process, you’ll get the type of merchant account you need. Now, there is another consideration that needs to be taken into account — if your business is based in India and your volume is in the hundreds of thousands, you should seriously consider setting up in the U.S. and not just on paper, as everyone does, but actually setting up a real office here. Doing so would make you look considerably better in the eyes of an underwriter.

Once you have your merchant account up and running, you shouldn’t rest on your laurels, but keep your guard high and, as always, work on reducing customer complaints and resulting chargebacks. Just because you’ve been issued a high-risk merchant account, it doesn’t mean that chargebacks are no longer an issue. Yes, our chargeback tolerance is higher than it is at your mainstream processor, but if we decide that you cannot keep them under control, we will take action and, if we are not satisfied with your corrective measures, we may decide that the risk is not worth the reward. More importantly, even leaving us out of the picture, doing your best to keep customer complaints and chargebacks as low as possible makes perfect business sense, so you should not need convincing in the first place.

The Takeaway

I’ve come to enjoy working with online tech support providers. They tend to be much more attentive to detail during the application process than most other high-risk types. I think the biggest reason by far must be that, prior to contacting us, most of these merchants have already gone through the initial approval and then the inevitable termination of a mainstream account and have finally appreciated the complexity and challenges that credit card acceptance presents to a business in their industry. The good news is that, as long as you keep your focus on meeting those challenges, there will always be a processor willing to offer you a reliable merchant account at fair terms.

Image credit: Time-sparebank.no.