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Changing or adding products after establishing a merchant account

When establishing your merchant account the acquiring bank that is reviewing your application is assessing the risk associated with establishing your account. They factor in many variables including ones associated with the product(s) you are selling. Different products have different risks associated with them. Let’s compare two products:

  • Pencils
  • Selling pencils is a low risk product because not only will few people will attempt to commit fraud in an attempt to get their hands on pencils, but the customer’s expectations as to what the pencils are supposed to do a small in scope and easily met. As a result the potential for chargebacks is extremely small.

  • Electronics
  • On the opposite end of the spectrum would be electronic gadgets like cell phones and stereos. These are frequent targets of fraudsters who essentially are trying to steal these items from you in one form or another. They also have tendencies to not meet customer expectations as they may not function as well as expected. As a result the potential for chargebacks is much greater.

Because an acquirer (A.K.A. your processing bank) is exposed to potential for losses whenever a chargeback is filed the higher the chargeback potential for a product the more difficult it will be to establish a merchant account for selling that product. This means when your merchant account is approved it is based on the merit of the products you offered at the time of your application.

So what if you want to add more products to your store? Well, there are a couple different scenarios for this:

  1. The newer products are very similar to your current products
  2. In this case you shouldn’t have to notify your acquirer. Since they based their decision to approve your merchant account on the type of the product and not specific products then you are in effect not making a sigificant change to your product offering. They have already factored these product types into their decision and adding these pr0oducts won’t affect that decision.

  3. The products you are adding not related to the your current products
  4. In this case you should contact your acquirer to let them know you will be adding these different products to your website. How they handle it will vary but if the number of products are significant and/or the product line is significantly differently you can expect your acquirer to expect a new merchant account to be opened for the new products. This will also certainly mean having a new website as well. The reason for this is due to different products having different risks.

    It also has to do with how your business is presented. Usually a business name is modeled after the products it offers. If you are now offering different products for your business then when you established the business there is a good chance your current business name will not match the theme of your new products. This will cause confusion when your customers get their blling statements and result in an increase of chargebacks.

What it all boils down to is if you plan on adding products unrelated to the products your business currently offers then you will need to contact your acquirer and verify with them that it is okay to use your merchant account to accept payment for those products. If you think you can add them without your acquirer knowing think again. All it takes is one chargeback to get their attention. At that point instead of taking a customer friendly approach to the situation they may take a defensive approach and hold your funds while they get the matter squared away. If you don’t mind having a large sum of your money held for six months then this won’t be an issue. But if you want your money and don’t want your acquirer holding it back from you, always be proactive and let them know of a product change.

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