Dropshipping Merchant Accounts – Which Is Best?

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Last Updated on July 7, 2023 by Corepay

Making money online has never been more prevalent than in the last few years. There are countless ways to do so, and one of the most popular ways is through dropshipping. While dropshipping can be highly profitable and convenient, accepting payments online is a must. This article will break down everything you need to know about dropshipping merchant accounts, including why we believe we are an excellent fit for your business.

Whether you are just starting or an established drop shipper, you have come to the right place.

At Corepay, we specialize in credit card processing for high-risk merchants who generally find it difficult to find payment processing. 

We can help your business whether you are looking for a general eCommerce merchant account or a more specific dropping merchant account.

Many eCommerce businesses can benefit from also using dropshipping as another method to bring in revenue rather than focusing on it as their primary source of income.

While many websites/companies may claim they can offer your business a dropshipping merchant account, very few can follow through and give you what you need.

The main reason for this is that while dropshipping has many perks, it also has some drawbacks. Unfortunately, one of those drawbacks is the high number of chargebacks typically found in the industry.

To properly operate and continue to grow as a merchant, you will need processing tailored to your needs as a business and ways to reduce your chargeback ratio.

Corepay can not only reduce your chargeback ratio, but we can also assist your business with high volume processing and low fees that will help grow your business to the next level.

dropshipping accounts

Applying For A Dropshipping Merchant Account

Having reliable credit card processing for your dropshipping business is the only way to make consistent sales, as all of your transactions will come online.

You will need the following when applying for your dropshipping payment processing:

  • EIN document
  • Operating address
  • Voided check to show proof of funds and account
  • Business plan – Although optional, provides processors with an understanding of your business
  • Principal’s driver’s license
  • Articles of incorporation
  • Financial statements – both business and personal

In order to have your account proved swiftly, be sure to provide us with as much information as you can.

Dropshipping Overview

When done right, dropshipping can be a great side hustle that scales into a full-blown business. Dropshipping is practical as a merchant because a merchant just has to make the sales. 

This can be done through an SEO campaign that targets specific searches such as “best drill for concrete.” The drop shipper ranks for that keyword and advertises products. Once the buyer chooses an item and orders, the merchant sends the order to the supplier, who then packs and ships the product.

Dropshipping is an innovative business model for those who understand SEO, but it can be difficult for those with no experience in SEO or paid ad campaigns.

Below is a list of 10 of the biggest drop shipping companies in the world today.

  1. Amazon
  2. Aliexpress
  3. Modalyst
  4. Salehoo
  5. Doba
  6. WholesaleB2B
  7. Mega Goods
  8. Spocket
  9. Worldwide 
  10. Inventory

Why Are Dropshipping Businesses Risky?

Dropshipping businesses are deemed risky for numerous reasons. While chargebacks are one of the significant concerns, dropshipping companies often face even more risk for chargebacks.

Most of the sales for dropshipping companies are card-not-present transactions, which have a higher chance for chargebacks.

Below you will find the reasons why processors and banks consider dropshipping businesses to be risky:

  • Chargebacks: Chargebacks are rampant in the dropshipping industry. 
  • Reputational risks: Banks and processors do not want to risk their good reputation on businesses that could be deemed as shady. Companies must do their part and maintain transparency and quality control with their dropshipping companies.
  • Fraud: Keeping fraud at a minimum is crucial, and one of the ways to do this is to make sure your website is fully secure and compliant. Implementing a secure payment gateway is also something that can help in this department.
  • Can be low-profit margins: Some dropshipping companies don’t offer processors and banks a big enough return to be considered for payment processing. 

Corepay For Your Dropshipping Payment Processing

Our goal at Corepay is to provide our clients with bespoke payment processing specifically tailored to your needs as a company.

We are proud to offer the following:

  • Swift account approvals – 24-72 hours on average
  • Risk mitigation through Order Insight by Verifi and our partner product, CB-ALERT
  • Chargeback alerts
  • Cost-effect rates, as low as a blended 2.95% for high-risk

Dropshipping Merchant Account Fees

Below are some of the fees you can expect:

  • Payment gateway monthly/transactional fees
  • Merchant account monthly fees
  • Chargeback fees
  • Potential rolling reserve fees

Pros Of Dropshipping

pros and cons

Let’s take a look at some of the pros of a dropshipping business:

  • Low startup costs
  • Low overhead costs
  • Ability to work remotely
  • You don’t have to store your products

Cons Of Dropshipping

There are several drawbacks when it comes to dropshipping. Below you can get a better understanding of these.

  • Lack Of Quality Control: It’s hard to be sure if the customer likes the product they were sent. 
  • Margin Of Error:  Dropshippers have to rely on others to fulfill orders.
  • Customer Service: Customer service for dropshipping businesses is tricky since customers typically deal with the company they ordered the product through.
  • Returns Are Complicated: 
  • Payment Disputes: It’s hard for merchants to prove that a customer is lying. If a customer claims they never received an item, a chargeback often hits the dropshipping company and the banks.
  • Fraud: Since many transactions occur online, there is a much higher chance of fraud.

Paypal For Dropshipping Merchant Accounts

Surprisingly, Paypal is an option for your dropshipping merchant account. With this being said, you won’t be met with the anti-chargeback tools that other high-risk processors will be able to suit you with.

At Corepay, we are confident that we can reduce your chargeback ratio through our partner product, CB-ALERT

While Paypal offers payment processing for dropshipping, that doesn’t mean you aren’t in danger of having your funds held or your account terminated. A simple search on Google shows that even though dropshipping isn’t against Paypal’s contract, they still have terminated many dropshipping companies.

Since dropshipping is a unique and different business model, there are many things that can discourage low-risk payment processors such as Paypal.

Let’s look at what you need to do to keep your account in good standing.

Quality Of Products

Many dropshipping businesses will sell products that they haven’t tested, leading to significant quality control issues. If your company has many customers unhappy with it, they could file a case with Paypal, getting your account in trouble.

You will need to have everything current and up to date on your company website to remain compliant with Paypal and most credit card processors. The information must also be valid and not false.

  • Lack Of Inventory: Dropshipping companies are notorious for running out of products, not directly creating the goods. Maintaining proper inventory is key to keeping your account in good standing.
  • Quality Control: Quality control is complex with many dropshipping companies. Again, the issue here is that the drop shipper typically doesn’t own the product they are vouching for on their website. We recommend that you do your research and try to recommend quality products as poor quality will only hurt your processing fees in the long run.
  • No tracking Info: A lack of tracking info is devastating when it comes to chargebacks. Customers need to be provided with as much tracking and shipping info as possible to avoid getting upset when trying to figure out where their order is.
  • Lack Of Documentation: Legal documentation has to be 100% accurate. Many dropshipping merchants get their accounts terminated by providing fake names or addresses on their websites. Everything has to be factual, or your account will be terminated—merchants also need to provide proof of bank accounts related to their business. 
  • Identity: If your name is incorrect or doesn’t match your records, your account will be frozen or terminated immediately.
  • Disputes: Keeping disputes and chargebacks at a minimum is critical with any business, especially dropshipping. We are confident that we can provide you with solutions to lower your disputes, but ultimately, drop shippers have to ensure they take all the steps to remain compliant.

Dropshipping Legality

One of the big flaws in dropshipping is the legality. Should a dropshipping company be completing transactions for a previously trademarked product, not only can the drop shipper get into legal issues, but it can also affect the bank and the processor.

In efforts to reduce the chances of this, product quality control is an absolute must in this industry. This should be done frequently to avoid any surprises that could come your way in this industry.

Stripe For Dropshipping Payment Processing

Dropshipping is against Stripe’s terms of the contract and will result in a terminated merchant account. Since dropshipping companies typically have higher chargebacks, traditional banks and processors don’t like to take the risk of additional fees.

Wrapping Up

Dropshipping payment processing can come in different many different forms. At Corepay, we are committed to making sure all of our dropshipping clients succeed and grow their business to its full potential.

You can apply quickly at the link below and find out what we can do for your business today.

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