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.
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.
If your business is located in a Stripe restricted jurisdiction you won’t be able to create a merchant account. These jurisdictions include:
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.
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.
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.
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” category for payment processors like Stripe.
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.
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 won’t be able to use Stripe:
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.
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.
As you can see, the list of Stripe restricted businesses is long. 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.