Bail Bond Industry Payment Processing
An increase in property crimes and declines in individual personal savings will contribute to the growth of bail bond businesses. The bail bond industry has been growing at an average rate of 1.8 percent from 2015 – 2020, generating more than $2.3 billion for businesses. While the development of technologies like bail bond software has somewhat simplified daily operations, competing against 13,068 other small businesses can be very challenging.
The challenge of operating a bail bond business is further compounded by banks and payment processors that refuse to provide financial services to these merchants. Most banks and financial institutions refuse to work with bail bondsmen because of the risks associated with this industry. The bail bond industry is perceived to be high-risk. The high-risk label makes it very difficult for bail bondsmen to acquire a merchant account and process credit card payments.
Why is the Bail Bond Industry Considered High-Risk?
Bail bond businesses are labeled as high-risk due to the nature of their clientele and industry. An individual accused of committing a crime is obligated to post bail by the court so they can get released from jail while awaiting trial. If the defendant can’t pay the full sum to the court, they will seek the services of bail bondsmen. These service providers will post the defendant’s bail in exchange for partial payment and some collateral.
The biggest reason the bail bond industry is labeled as high-risk is because many defendants disappear after getting released from jail and do not show up for their court hearings. Sometimes the best bail bond software and bounty hunters can’t locate these fugitives, making bail bond merchants responsible for making payments to the court. Fugitives cause a lot of financial damage to bail bondsmen, leading to cash flow issues in these businesses.
Besides cash flow inconsistencies, the factors below also contribute to the bail bond industry’s designation as high-risk:
- Fraud – With a clientele composed of suspected criminals, bail bond businesses face an increased risk of fraud. Many defendants do not intend to appear in their court hearings or fulfill payments to the bail bondsman, putting these businesses at greater risk of financial loss.
- Reputational risk – Bail bondsmen are perceived by some as people who exploit the poor and undermine the justice system. As a result, the bail bond industry does not have a stellar reputation. This reputational risk is another reason banks don’t want to do business with these merchants.
- Chargebacks – Many defendants or their friends and family use credit cards to pay bail bondsmen for their services. When these suspected criminals are released from jail, the individual who made the payment initiates a chargeback with their credit card company to get their money back.