Over the past year or so here at UniBul we’ve been receiving an ever increasing number of inquiries from merchants providing web-based tech support services to U.S. consumers. In fact, right now such inquiries account for close to a quarter of all service inquiries that are coming our way. Mostly, these are merchants based in India, but not a small number of the ones that reach out to us are U.S.-based, although even then the call centers themselves are actually located in India or elsewhere in Asia.
Now, we should note that we had not been familiar at all with the business model of web-based tech support providers when the stream of inquiries began — in fact, for whatever reason we’d never encountered them before. Furthermore, at the beginning we were quite skeptical about these merchants and mostly ignored the first few inquiries, without as much as looking at them. However, as the inquiries just kept coming and coming and the stated volumes in some of them were quite respectable, we decided to look into their their potential.
Well, it turned out that web-based tech support wasn’t all that different from most other high risk industries — most of the inquiries were not really worth following up on, the majority of those that remained ended up going nowhere, but the very few that made it through the review process and ended up processing with us more than justified our effort. So we thought we’d share what we’ve learned and give tech support merchants an idea or two about what they can do to improve their chances of getting a merchant account.
How Web-Based Tech Support Works
When we began our investigation of this industry, we contacted a number of people who we thought might have some experience in processing for such merchants and what we heard from them didn’t exactly surprise us. Most of our colleagues warned us that such businesses were very difficult to work with — that their business practices were questionable, that they could seldom produce all of the required paperwork, that they were slow to follow up on information requests, that their chargeback ratios were excessively high, that customer complaint ratios were off the chart and so on.
“Where have we heard that before?”, we wondered. And our initial experience promptly confirmed the legitimacy of these warnings. However, we had the good fortune to quickly come across a merchant which turned out to be solid, reliable and following a set of best practices, which ensured low ratios of both customer complaints and chargebacks. Just as importantly, it also had grown to a respectable processing volume — $500,000 or so a month, and growing.
That merchant’s business model is really quite simple. They advertise their services on Google and elsewhere, which is how most of their customers find them, although their organic efforts have recently started to produce results. The customer then explains the issue, the merchant’s representative diagnoses the problem and, if it is software-related, she offers a solution, and explains the cost of fixing it. If the issue is hardware-related, the customer may get a referral to a place that is better able to help her.
Once the customer agrees to the proposed terms of service, she makes a payment and the tech person fixes the issue using remote access to the customer’s computer. Once the issue is resolved, the customer is asked to verify that the problem is fixed and, if it is not, a full refund is issued right away. If the issue is indeed fixed, the customer is asked to digitally sign the service contract. So far it is a fairly straightforward process.
But there is a twist to it — there always is. In this case the twist takes the form of a subscription plan, to which the customer is asked to subscribe. The plan is not obligatory, but the merchant’s sales reps are instructed 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 subscription feature that makes it especially risky. The good thing about our merchant is that it is able to manage the risk quite well, however most others we’ve looked at were not.
How to Get and Keep a Merchant Account
This particular merchant is U.S.-based and, by the time it reached out to us, it had gone through several merchant accounts with some of the largest U.S. processors, a couple of which were still active. Now, this is an error which you must not repeat — don’t open up several merchant accounts at once, unless you really need and use them all. Otherwise, processors get nervous and rightly so — what is to say that the new merchant account you are applying for would not just lie dormant or be substituted in the very near future?
In the event, we asked our merchant to explain why it had opened up all these merchant accounts and received a satisfactory explanation. We should also point out that the merchant had already received notices that its remaining two accounts would be closed within a month, which takes us to the next lesson — if you manage an online tech support business, the traditional processors would not be a viable option — even if you do manage to somehow get an account with one of them set-up and functioning, it is certain that it will be shut down just as soon as their risk department takes a close look at it (which will happen soon enough). What you need is a high risk solution, although not necessarily an offshore one.
The thing about high-risk, however, is that we ask that you have grown to a sufficient size, before you contact us — at least $100,000 in monthly processing volume for international merchants. If the volume is there, all the required documentation is in order, all additionally requested paperwork is supplied and nothing unpleasant is uncovered during the underwriting review, you will get the type of merchant account you need. But there is another consideration that needs to be made — if your business is based in India and your processing volume is in the hundreds of thousands, you should definitely consider setting up a U.S. business, and not just on paper, as everyone else does, but actually setting up a real office here. Doing so would make you look much better in the eyes of an underwriter and you would get much more favorable terms.
Once you have your merchant account all set-up and running, you shouldn’t rest on your laurels, but you should keep your guard high and, as ever, work on minimizing customer complaints and resulting chargebacks. Just because you’ve just got a high risk merchant account, it doesn’t mean that chargebacks will no longer be an issue. Yes, our chargeback tolerance is much higher than it is at your mainstream processor, but if we see that you cannot deal with them, we will take action and will revise the terms. More importantly, even leaving us out of the picture, doing your best to keep customer complaints and chargebacks at a minimum makes perfect business sense, so you should not need convincing in the first place.
We’ve come to enjoy working with web-based tech support businesses. They tend to be much more detail-oriented during the application process than most other high risk merchants. The biggest reason for that must be that, before contacting us, most of these merchants have already gone through the initial approval and then the inevitable shutdown of a traditional merchant account and have finally understood the complexity and challenges that credit card processing presents to a business in their industry. But the good news is that, so long as you keep your focus on facing those challenges, there will always be a payment processor willing to offer you a solid merchant account at fair terms.
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UniBul enables American and international businesses to accept payments for the things they sell on their websites.
