Updated May 2024

Since its initial inception in 2011, Stripe has become one of the world’s leading payment processor solutions for web-based businesses. Currently, 3.1 million businesses use Stripe worldwide.

Although Stripe has become a go-to solution for businesses of all sizes, it has a couple of drawbacks. If your company falls under the list of Stripe-restricted businesses, you might be barred from creating a merchant account. Or worse, you could have your account (and the funds in it) frozen for multiple months.

This is a disaster for any business, especially during times of growth.

If you were wondering, are there Stripe restricted businesses, the answer is a resounding yes.

Are you worried that your business might be restricted by Stripe?

Keep reading to find out what might classify you as a restricted company, and what you can do.

Why Stripe Might Categorize Your Business Under Its List of Restricted Companies

Stripe prohibits businesses from using its services for various types of activities it deems illegal or high-risk. These restrictions are in place to protect Stripe from liability.

For instance, back in 2020 Stripe was found liable to the tune of $120,000 for processing payments in connection with a fraudulent ICO. Court processes deemed that Stripe’s risk monitoring and fraud prevention and mitigation practices violated consumer protection law.

To guard against these liabilities, Stripe forbids the use of its services for activities that could be high-risk.

Unfortunately, these restrictions can make it very difficult for certain types of legitimate businesses to safely process payments with Stripe. If something raises a red flag on your account, it could be suspended at a moment’s notice, and any funds frozen for at least 90 days.

To help you avoid this type of disaster here is a breakdown of some of the criteria around Stripe restricted businesses.

Your Business Falls Under Stripe's Jurisdiction Restrictions

If your business is located in a Stripe restricted jurisdiction you won’t be able to create a merchant account. These jurisdictions include:

You Have a High Chargeback History

If your business has suffered a number of chargebacks, this can also cause you to fall onto Stripe’s list of restricted companies. High chargeback frequencies can make payment processors see your business as a financial risk.

This is perhaps one of the most unfair reasons for which businesses get their accounts frozen.

It is true that fraudulent businesses may experience high numbers of chargebacks from unhappy customers. However, many entirely legitimate businesses also fall victim to chargebacks. Chargeback fraud has exploded over the last few years and has blossomed into a costly problem for eCommerce companies. This could put you at risk of being considered high-risk by Stripe.

Currently, it’s estimated that 60-76% of all disputes are cases of friendly fraud.

Unfortunately, although they are the victims, businesses get penalized for friendly fraud through account freezing, fees, and penalties from their payment processors.

Your Business Model Makes You a High-Risk Merchant

Stripe also restricts certain business models. For instance, if you run a subscription model or continuity program, Stripe might deem this as high-risk.

This is another area where a lot of large payment processors have fallen behind the times. Subscription models have boomed over the last few years, offering convenience for customers and predictable revenue for businesses.

Another common practice that could have your Stripe account frozen is the free trial model. Free trials can trigger a certain number of chargebacks, which in turn can place a red flag over your account.

Most of Your Payments Are Card-Not-Present Transactions

Do you run an eCommerce-only business model? If so, there’s a good chance that the majority of your revenue comes from card-not-present online payments where customers enter their card details to complete purchases.

Unfortunately, this is yet another thing that can place you into the “high-risk” merchant category for payment processors like Stripe.

You Have a High Refund Rate

Like chargebacks, high refund rates can indicate that a business isn’t acting ethically. However, in this day and age of online shopping, customers may purchase items online on a whim, and only make their final buying decision once they receive the item.

This means that certain eCommerce sellers typically experience high return rates, especially for items such as clothing or homeware.

Stripe Doesn't Support Your Industry

Besides these general reasons for denying the use of their service, Stripe also has a list of restricted industries. If your business operates in any of the following industries, you are on their list of prohibited businesses and won't be able to use Stripe:

• Any illegal products or services
• Adult entertainment and services
• Content creation: Any transaction that compensates a creator without a specific piece of digital content attached. For example, a subscription to free public content or a tip button.
• Debt relief
• Gambling, games of chance, and fantasy sports with a material or monetary prize
• Government services
• Identity services
• Any product or service that infringes on intellectual property rights
• Specific legal services, including:
  • Bankruptcy attorneys
  • Bail bonds
  • Law firms that collect funds outside of legal service fees
• Lending and credit
• Marijuana, Cannabis, and extra-legal CBD products
• Nutraceuticals or pseudo pharmaceuticals
• Non-fiat currency
• Travel
  • Cruises
  • Commercial airlines
  • Timeshare services
• Pyramid schemes, Multi-level marketing, door-to-door sales, and other similar products or services
• Weapons, firearms, explosives, and other dangerous materials including USPS unmailable goods.

Stripe also has a list of additional jurisdiction-specific prohibitions. For instance, if your business is based in Thailand, you aren’t allowed to use Stripe to accept payments for vitamin products, psychic services, alcohol sales, and more.

What Stripe Restricted Businesses Can Do

Does your business fall under any of the above categories? If yes, you need to find a payment processor that supports your business needs and won’t freeze your account for erroneous reasons.

The good news is that there are many alternatives out there that will accommodate high-risk merchants. The bad news is that not all these options are created equal.

Some merchant processing services charge exorbitant rates because they know merchants are desperate for a solution. Others might have poor support levels or lengthy turnaround times for deposits.

Sifting through your options can be incredibly time-consuming and frustrating. Fortunately, you don’t have to undertake this on your own.

Here at Zen Payments, we take all of the stress out of picking a payment processor for your business. We work with a network of over 15 of the best high-risk payment processors and banks. Our job is to help high-risk businesses find the best merchant account for their needs.

We will work with you directly to find someone who is willing to support you for the long term and guide you through the entire process.

Do you have a poor credit score? No problem. We regularly secure approvals on scores as low as 500.

Best Practices For a Stripe High-Risk Business

High-risk merchants may feel hesitant about using Stripe, but it can be an option if they work with your industry. If you do choose to work with Stripe, it's important to understand that they see you as an elevated risk and you should be a clear communicator and vigilant in checking for fraudulent transactions. Here are a few tips to stay in compliance with Stripe's policies.

1. Always verify your customer's information: Check to make sure you've got the important things, like name, email, address, and phone number correct.
2. Use fraud detection software: Ensure you're always monitoring for fraudulent transactions to prevent any illegal activity.
3. Set up your account using the right business model: Stripe has different terms and policies for each business type. Make sure you're set up correctly, have given the correct business information to Stripe, and understand those policies and Terms of Service clearly.
4. Keep track of charges and chargebacks: Certain industries are more likely to experience excessive chargebacks, so Stripe is on the lookout for those. Keep good records and record why chargebacks occurred.
5. Ensure you offer clear return policies and have well-trained customer service agents: In many cases, excessive chargebacks can be prevented with clear return policies and good customer service. Make sure your agents know exactly how to handle every situation when a customer decides to contact customer service. Having these in place will serve as a preventative measure and mitigate the risk of disputes with Stripe.

Are You a Stripe Restricted Business? We Can Help

As you can see, the list of Stripe-restricted businesses is long. Even if you are not on their restricted list of high-risk merchants, every high-risk merchant will be on the Stripe radar. All it can take is implementing a subscription model, getting a bevy of chargebacks, or selling some CBD soap and you could wind up with a frozen account, or be unable to create a Stripe account in the first place.

Fortunately, Stripe isn’t the only option.

No matter your situation, we can help you find a solution. Whether you’re confronting industry-related challenges, or prior business or personal financial history issues, there is a payment processing solution for you.

For the last 15 years, Zen Payments has been helping businesses flourish.

Contact us today to discuss your needs and get help finding a high-risk payment processor that won’t let you down.