Get a Merchant Account for Your Drop-Shipping Business
Thanks to dropshipping, anyone with a website can start a retail business. Quick, easy, and low-cost to set up, the dropshipping business model is enjoying explosive growth. The US dropshipping market was worth $44.1 billion in 2021. With the right marketing savvy, you can generate plenty of revenue in America’s $500 billion ecommerce industry.
Dropshipping requires little capital and no inventory, making it the ideal low-risk business. Banks, however, think otherwise. Most traditional banks don’t offer merchant accounts for drop-shipping businesses because they consider this industry to be high-risk. Without a merchant account, you will struggle to sell online and run a viable ecommerce business.
With extensive expertise in high-risk industries, SeamlessChex can help you get a merchant account within days. Check out our range of high-risk payment gateways for drop-shipping businesses to find the best solution for your needs:
Why are Drop-Shipping Businesses Considered High-Risk?
From budding entrepreneurs to retail giants, everyone is adopting drop-shipping to generate a new revenue stream. While this supply chain model provides many benefits to businesses, the industry is not without its problems. Several factors make this industry high-risk to banks. Here are some reasons why you can’t get a merchant account for your drop-shipping business:
The same low barrier to entry that makes dropshipping attractive is also what makes it highly competitive. For every product you offer, there are zillions of other businesses that sell the same exact item. And worst of all, the industry is dominated by giants like Amazon. This makes it very difficult to run a successful dropshipping business.
High Rates of Fraud
A high-risk payment gateway for drop-shipping is necessary to combat excessive fraud in this industry. Because you don’t own any stock, drop-shipping only works as an online business. And to run an online business, you must process card-not-present (CNP) transactions. Fraud is 81% more likely with CNP transactions compared to in-person payments.
Another reason why banks don’t provide merchant accounts for drop-shipping businesses is the high rates of customer dissatisfaction in the industry. With no inventory and fulfillment services, drop-shippers have no control over the supply chain. Selling out-of-stock items, uncertain delivery times, and returns problems lead to plenty of unhappy customers and chargebacks.
Yes ⏤ you don’t buy any inventory and the supplier takes care of fulfillment. Since you’re outsourcing most of the business, you won’t generate much profit. If your business goes bust, your bank or processor is responsible for paying off chargebacks. This is why financial institutions shun the dropshipping industry.