payment cloud high risk credit card processing

A Review of Payment Cloud High Risk Credit Card Processing

Payment Cloud is a payment processing company catering to numerous industries. The company particularly emphasizes its ability to process payments for high risk businesses. Established in 2015, the Woodland Hills, California merchant service provider says it serves thousands of businesses.

The company works as an intermediary between acquiring banks, payment processors, and payment gateway companies to help merchants accept omnichannel payments, including all major card networks, eChecks, ACH, cryptocurrencies, and mobile wallets. Businesses can set up virtual terminals, shopping carts, payment gateways, and both EMV and NFC-enabled point of sale terminals. PaymentCloud also has a mobile point of sale app called Paysley, which it acquired in 2020.

PaymentCloud’s merchant account services also let businesses set up a “zero-fee credit card processing.” This plan is touted to not charge the merchant any interchange fee for processing credit card payments. Such fee structures pass along the interchange fees onto the consumer using the credit cards. Such a program is often referred to as Cash Discounting or a Surcharge in industry jargon.

In this review of PaymentCloud, we explore who owns the company, how much does PaymentCloud charges for its services – its pricing structure, and whether there are any additional fees associated with these services. We’ll explain PaymentCloud’s main niche, how customers review this offering, and what, if any, lawsuits PaymentCloud has been involved in. We’ll also see how PaymentCloud compares to another popular payment processor, Host Merchant Services.

Who owns Payment Cloud?

PaymentCloud was founded in 2015 by Shawn Silver. Multiple sources list only his name as the founding member of the company. Shawn has a background in high risk merchant solutions while he was a VP of High Risk Services at iPayment, before founding PaymentCloud.

In June 2022 PaymentCloud announced that it had gone through a funding round. The company raised $35 million in the form of $10 million in equity and a $25 million credit facility from Electronic Merchant Services. Since the funding round included an equity stake, Electronic Merchant Services is a part-owner of PaymentCloud. It is unclear what are the specific details of the percent of equity ownership in that equity raise. Whether the credit facility has an equity conversion clause was also not disclosed.

A year before that, PaymentCloud secured a $10 million credit facility from Expresso Capital in June 2021. Although a credit facility would not constitute ownership, the announcement did not disclose if the debt financing had an equity conversion clause. As a result, it’s hard to know if there can be any future changes to ownership as a result of this funding round.

Finally, in October 2020, PaymentCloud acquired Paysley for an undisclosed amount. The announcement did not give any details on the deal structure of the acquisition; if it was for cash, equity, or a combination of both. As such, it is impossible to judge whether prior owners of Paysley may or may not have an ownership stake in the newly combined company.

How Much Does PaymentCloud charge

Charges and fees associated with the company’s services cannot easily be found on any public record. Furthermore, PaymentCloud does not make any transparent disclosure of pricing on its website. The company serves a wide variety of merchants and is mainly known for offering merchant accounts to high risk businesses.

It’s important to understand that not all acquiring banks are willing to serve all types of high risk businesses. Those that are willing to work with such merchants will demand higher rates, commensurate with the risk associated with such businesses. These risks are determined by evaluating how long the merchant has been operational, the merchant’s payment processing history, specifically, transactions’ size and volumes, as well as the chargeback ratio. As a result, pricing for Payment Cloud clients can range widely.

High risk merchants are classified as such based on the industry they operate in. Some industries pose a moral or social hazard, such as gambling sites, adult entertainment businesses, gun vendors, cannabis businesses, etc. As a result, those industries are often shunned and classified as high-risk.

Where merchants are located also plays a part; businesses outside of the US, UK, Europe, Australia, Canada, and Japan are considered high-risk given the lax financial controls in other jurisdictions.

How noncash transactions are conducted is also a determinant of risk; whether they are keyed in or generally processed as card not present (CNP), as is the case for eCommerce businesses, also a high risk business. For such transactions, there is always the possibility of error in keying the card data, or the card information being used that is stolen, which can be difficult to determine unless additional security measures (at additional costs) are implemented.

It is also unclear if Payment Cloud offers interchange Plus or tiered pricing. Interchange plus is simply the card networks’ published rates passed through to the merchant plus a markup for the merchant service provider. This is a more transparent pricing mechanism, and often the cheaper of the two.

The tiered pricing option includes all the different interchange rates bucketed into a few tiers. The payment processor only offers those three tiers of rates believed to be the best pricing option available given the merchants’ profile.

The problem with tiered pricing is that transactions that may only be charged a certain very low rate is bucketed into a specific tier. Even if that transaction category is included in the lowest priced tier, it is still almost always guaranteed that the rate is higher that it would be had it not been in a tiered pricing plan. Even if for a certain period the pricing is minimal, the tiers in which transactions are included today (or during an introductory period) can change on a whim, usually without notice.

Finally, there is never really a credible way to compare tiered pricing plans between merchant service providers as there is no way of knowing what is included in a certain tier, from one processor to another.

Does Payment Cloud charge a monthly fee?

There are no public disclosures of PaymentCloud pricing and any additional fees they charge. Our analysis did find from a few online reviews that the company charges $25 as a payments gateway fee, but given the costs associated with third-party payments gateway providers, this seems merely like a pass-through fee for that service.

It appears that PaymentCloud may lock in customers into a two-year agreement, which may also include a termination fee. Based on a Google review, there is a one-star rating from a merchant who shared that a PaymentCloud sales agent did not sufficiently disclose that the contract stipulated a 2 year term agreement.

PaymentCloud did respond to the complaint stating that the salesperson “told you the details are in the contract, which you can read.” The company went on to state that to placate the complaint, the merchant was presented with an option to work with another acquirer that did not require an early termination fee, “Upon hearing you were dissatisfied, our sales rep offered to send you to another processor where he could waive the termination fees.” This suggests that early termination fees and long-term contractual agreements exist at PaymentCloud. There is the possibility that they may be waived on a case-by-case basis with sufficient wrangling and tough negotiation, or if the merchants can be successfully referred to another processor.

It is important to remember that PaymentCloud is an reseller of services. By its own admission, the company isn’t a payment processor itself but instead a go-between for merchants, payment processors, payment gateway companies, and acquiring banks. It works with countless such parties throughout the country to ensure that the company can place hard to place high risk merchants with a merchant service provider.

As a result of these dynamics and the multitude of different parties involved, it is impossible to say with any surety that PaymentCloud does not have any early termination fees, has no stipulations for long-term contracts, or whether the company charges additional fees of any kind. The simple answer: it depends, so read the fine print, and trust no one!

Does Payment Cloud have good reviews?

PaymentCloud does not have a profile with the Better Business Bureau. So we explored reviews or complaints left on numerous other online forums, including Google Reviews, to which the company often responds and guides merchants to rectify issues. Generally, the company has really great reviews from merchants who opine at great length about the company’s customer support, about the company’s efforts to place high risk merchants with a merchant account provider, and the open lines of communication between merchants and their onboarding specialists.

It is important to reiterate that Payment Cloud primarily serves high risk merchants, and no one merchant with that classification is alike. Some acquirers may be willing to work with a gun merchant, but it’s the adult industry they would shun. Similarly, some acquirers may have qualms about working with cannabis or marijuana businesses. PaymentCloud is at this intersection and has relations with numerous payment processors and acquirers, so even the hardest to place merchants can be placed by the company.

High risk merchants generally must deal with fund holds and reserves with their acquirer. All merchants are aware of this. This becomes obvious as one understands the dynamics of a payment being processed. Once a payment is initiated, the acquirer authenticates it with the issuer to ensure sufficient funds are available to cover the cost of the transaction. From the moment the issuer releases the payment until the chargeback period for a transaction lapse (six months), the acquirer has technically extended the merchant a line of credit. Reserves withheld from the merchant are the only recourse the acquirer has in the event of a successful chargeback to recover those costs. This is the risk an acquirer takes, and one that is even more pronounced with merchants classified as high risk.

There was one complaint from a client which describes what seems to be a simple breakdown of communication. This was disconcerting at multiple levels because it attested to ineffective communication on a topic as common as reserves for PaymentCloud.

Also, when you’re in the business of connecting a merchant with the best processor, there is bound to be an overlap where a certain number of processors start competing for the same merchant. Some merchants have complained about being inundated with multiple merchant account requests and then some simultaneously initiate the service and start charging fees.

There are a few complaints here and there that do not reflect the overall image and brand that the company has crafted and managed for itself. However, the few complaints that we were able to uncover point to some dark side of operating norms at the company.

What lawsuits have Payment Cloud been involved in?

In January 2020 PaymentCloud was involved in a civil lawsuit in which another payment processor, Merchant One, alleged Payment Cloud breached their agreement for monthly residual income from the clients that Merchant One would refer to PaymentCloud.

The complaint was initially dismissed by the court on the grounds that Merchant One’s claim was a “shotgun pleading,” a claim classified as too broad and one that does not clearly link to the remedy sought. Merchant One quickly filed an amended complaint, which the judge allowed to proceed. The matter was subsequently settled out of court between the two parties.

Payment Cloud vs Host Merchant Services

PaymentCloud is a reasonable high risk merchant account provider, however Host Merchant Services is a superior option that serves both high risk and low risk merchants. Often, for high risk merchants, options can be limited. Both companies have a direct number for their support team should merchants have any issues and wish to reach out to speak to an actual person.

However, there are a few differences between the two firms. Host Merchant Services is accredited with the Better Business Bureau since 2011 and has an A+ rating by the organization. HMS also has only 1 complaint over the last three years on the Bureau’s website.

Furthermore, HMS is founded on principles of customer service and outstanding merchant support. PaymentCloud cannot match the ratings or track record offered by Host Merchant Services. While PaymentCloud is not a bad company, why chose a B-rated option when an A+ option is available?

Similarly, HMS  clients have no long-term commitments they are locked into for the service. HMS is a customer-centric organization in which the strategy isn’t to contractually force loyalty but to do it by offering the best level of service possible.

There are no sign-up fees, no termination fees, or hidden fees of any kind by HMS. Whatever charges are applicable are disclosed transparently by the company.

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