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Why is Technical Support Business Considered High Risk?

New technology, new applications of technology, and new versions of technology are announced every day by companies, academic institutions, and research organizations. Experienced specialists themselves can find it difficult to keep up with new developments, so it would be unreasonable to expect the general public to have more than a superficial understanding of the technology used in the products and services they use. The demand for technical support is unlikely to decrease much any time soon. It can be a lucrative, consistent market, with little impact from daily economic fluctuation. If that’s the case, why is technical support business considered high risk?

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What is a High-risk Technical Support Business?

When we say “high-risk” in this discussion, we’re not necessarily talking about a store located in a high-crime neighborhood or an area prone to natural disasters. We’re talking more specifically about businesses that traditional banks and other financial institutions, as well as typical payment processing firms, judge to pose a high risk of financial loss to the bank, etc.

 

There are two general categories, or classifications, for high-risk businesses, namely “Red Zone” businesses and “Grey Zone” businesses. The “Red Zone” refers to businesses that are considered risky independently of their business history. Some of the factors that can put a business in the “Red Zone” are being in an industry that has a high risk of chargebacks, deals only with services or intangible products, deals in high-volume sales, fails frequently to comply with safety/security standards and regulations, or operates “adult-oriented” services (e.g., pornography, gambling, tobacco, weapons, alcohol).

 

The “Grey Zone” refers to businesses that are considered risky because of their actual business history. Factors that can put a business in the “Grey Zone” include having a bad business credit score or none at all, having a high rate of chargeback regardless of the industry, being an international merchant, and accepting/dealing with foreign currency. Businesses that are in both the “Red Zone” and the “Grey Zone” are considered to pose the highest risk.

 

Being a high-risk business does not necessarily mean that the business has less potential for success or that it’s impossible for the business to be stable and secure. There are, however, certain challenges faced by high-risk businesses that are not faced by other businesses, at least not to the same degree. In addition, a significant factor in one industry or type of business may be a minor factor in others. Let’s look at some of the main factors that make tech support business high risk.

Why is it a Problem to be a High-risk Business?

The first major drawback to being a high-risk business is that you may have difficulty getting a merchant account at a traditional bank. Banks are typically reluctant to provide merchant accounts and payment processing services to high-risk businesses. The factors that make a business high risk can result in significant loss to the business. In many cases that means loss to the bank as well. If the business fails, the bank could be left with an enormous financial obligation. It makes sense that banks would be cautious about taking on such risks.

 

The second major drawback is that even if you are able to convince a bank to provide your business with a merchant account, the conditions to keep the account are likely to be strict. They may include a low chargeback threshold, higher fees, and no “second chances.” Exceeding the bank’s set chargeback limit could result in your account being terminated without warning, leaving you without a way to accept credit card payments.

High Risk Tech Support Merchant Account with Zen Payments

Chargebacks for Technical Support

Chargebacks are one of the most common factors that make a business high risk, regardless of the industry. Practically speaking, it’s not possible to eliminate chargebacks completely if you regularly accept credit card payments. Banks understand that, of course. The problem is when the chargeback rate (the ratio of chargebacks compared to the number of transactions) is high. Because technical support usually involves services rather than a product, there is no way for the customer to return the purchase even if you provide a refund.

 

It’s also more difficult to prove that a service lived up to the promises your business made than to prove that a product functions properly. In addition, tech support often involves ambiguity and the unknown. The customer is having a technological problem, and the cause may not be clear. There is often an element of trial and error. Sometimes there is a problem with hardware, but often the problem is with the user. Just about every person working in IT support has asked the question “Is the cable connected?” at least once.

 

This ambiguity of expected and promised outcomes makes more room for a customer to be dissatisfied or to use dissatisfaction as a convenient excuse for demanding a refund. If the customer chooses to go directly to the bank instead of contacting the merchant to resolve the issue, the likely result will be a chargeback.

Fraud

Another factor is fraud. Chargebacks themselves can be fraudulent, or at least questionable. As mentioned above, when no tangible products are involved, it is difficult to dispute the customer’s claim that the purchase was not as promised. There are also cases of “family fraud” and other types of “friendly fraud.”

 

Tech support is often provided remotely, and there is little face-to-face interaction. Scammers thrive on anonymity, so it’s not surprising that the tech support industry would be one of their targets. Countermeasures specific to electronic and remote transactions can be implemented, of course, but the fact remains that certain risks and vulnerabilities are more prevalent in such remote interaction than in direct, face-to-face transactions.

 

As with computer viruses, malware, and other cyberthreats, there is an ongoing battle between scammers/hackers and the developers and implementers of countermeasures. Unfortunately, not every company has the expertise and resources to stay on top of this ever-changing situation. This is particularly true of new startups and smaller companies. Whether it’s a “customer” using a stolen credit card number or a scammer using a hastily formed “tech support business” as a front, the potential from fraud comes from every angle.

Mitigating Tech Support Risks

In addition to conventional cybersecurity measures, there are a number of things that your business can do to mitigate risks and minimize the loss to your company. One is to avoid the additional fees and wasted time created by chargebacks by providing the customer with a refund before the chargeback is completed. Businesses typically have 72 hours from the time a chargeback is initiated to provide the customer with a refund to prevent the chargeback. Businesses are ordinarily not notified of the initiation of a dispute, so it may be necessary to subscribe to a chargeback protection service or contact a payment processor for alerts when a dispute is filed.

 

Another measure that can help reduce chargebacks is to divide charges for services into smaller units, such as charging for installation of software separately from the cost of the software itself. Customers are less likely to dispute a charge of ten or twenty dollars than a charge of one hundred or two hundred dollars. Be sure to give your customers a clear explanation so they know that charging in smaller units is not costing them more money. You may want to promote the flexibility of having smaller units and the resulting greater ability to customize services.

Reliable Payment Processing for Your Tech Support Business

Using a high-risk payment processor may be the only way for your business to get a merchant account. However, a capable high-risk payment processor such as Zen Payments specializes in high-risk industries, and have the expertise, experience, and infrastructure to provide attentive, consistent service and smooth, reliable, and easy-to-understand payment processing. This means that your business may benefit greatly from using a high-risk payment processor, even if you don’t “have” to.

 

The ideal is to find a payment processor that already services your industry, but either way, be sure to find a payment processor that has a wide range of technological tools (software, etc.), a solid commitment to thorough compliance with laws, regulations, and industry standards, and a secure payment system and gateway. This can alleviate your customers’ concerns about the security of financial transactions and may also help mitigate concerns about the security of the services themselves. Your payment process will be more efficient and problem-free, which makes it easier for your customers to make a purchase.

 

A high-risk payment processor such as Zen Payments specializes in payment processing for high-risk industries and understands the payment processing needs and challenges of the tech support industry. We have the experience and expertise necessary not only to get you a merchant account, but also to make the payment process easier for your customers and for you.

 

When choosing a high-risk payment processor, be sure to ask as many questions as necessary until you’re satisfied with the responses and clear on what you can expect and what will be expected of you. Our team at Zen Payments would be happy to speak with you and find ways to help your business prosper, so please don’t hesitate to contact us.

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