Why High-Risk Stripe Merchants are Being Shut Down
Be prepared when golden handcuffs turn into shackles.
Higher-than-anticipated chargeback rates, concerns about suspicious activity, or even the perception of operating in a high-risk industry can get a Stripe merchant placed on a restricted list.
Comments on LinkedIn show that Stripe merchants have a nearly impossible time transacting once they have even the slightest connection to a restricted business or industry list. With that, the full-service payment processor strategy can turn into a nightmare.
Why are Stripe merchants being shut down?
There are different stages at which a Stripe merchant can be shut down. Some industries are simply not supported and are listed in the restricted business list. In addition to this list, Stripe’s financial institution partners have internal restrictions that can vary from region to region. Some of these industries include firearms, drugs, gambling, and travel.
After the initial sign-up and onboarding, a Stripe merchant can be flagged for generating too many chargebacks or even being falsely identified as operating in a restricted industry. A cocktail packaging company, for instance, was flagged and rejected even after proving it wasn’t operating in a prohibited industry by selling actual alcohol.
Stages of a Shutdown
When a Stripe merchant is placed on a restricted list and triggered for review, three real scenarios can play out.
- The business relationship is completely shut down.
- Transactions are paused while Stripe’s support team reviews.
- The business is shut down and payments are refunded.
Once a rejection occurs and transaction activity is paused, if the underwriting team can immediately review, there’s a chance the flag will be removed. But this is by no means a guarantee. Worse, perhaps than pausing the ability to make new sales, is Stripe may withhold a fraction of the funds from a merchant until the review is completed.
It is safe to expect that throughout this review period, a merchant will be unable to process any new payments.
Getting Support During a Shutdown
Sections 6.1 and 6.2 of the Stripe Services Agreement state that any merchant’s account can be shut down without warning for any of the reasons we have listed above.
And trying to speak with a member of the support team is nearly impossible, as the risk and compliance team primarily communicates through email.
“Getting someone to make a decision over the phone requires some live escalation,” says a former merchant. “Support leads to a lot of dead ends.”
For smaller SMBs, migrating away from Stripe to another PSP is difficult given the platform's many offerings.
Thankfully, instead of overhauling infrastructure, many merchants today opt to simply replace the full-service PSP’s iFrame with Basis Theory Elements so that a copy of the card data is vaulted, the merchant receives a token, and can now choose to submit the transaction to any PSP they prefer. Capturing and tokenizing the card data right away opens the possibility of working with a broad range of payment partners and allows the merchant to realize higher success rates and lower processing fees.
This also means a merchant cannot be left high and dry by a single PSP opting to pause or close their account. Transactions are just routed to the other PSP.
Stripe merchants looking to protect against a shutdown should be aware of the real-life stories of others who were deemed (incorrectly) “high risk” but restored their ability to transact by rapidly pivoting to our programmable payments vault and a stable of trusted PSP partners.
