How ISO 20022 Will Benefit High-Risk Merchants

Apr 9, 2025

In the ever-evolving world of payments, high-risk merchants often face unique challenges—from increased fraud exposure to excessive chargebacks and compliance scrutiny. With the upcoming implementation of ISO 20022, a global financial messaging standard, high-risk merchants can expect significant improvements in payment processing, fraud prevention, and dispute resolution. But what does ISO 20022 mean for your business, and how can it help protect your bottom line? Let’s break it down.

What is ISO 20022?

ISO 20022 is a standardized, structured messaging format designed to enhance the way financial institutions exchange payment data. Unlike legacy formats, ISO 20022 enables more detailed, transparent, and standardized transaction messaging, helping banks, payment processors, and businesses improve efficiency, security, and compliance.

For high-risk merchants—such as those in nutraceuticals, online coaching, credit repair, and subscription-based services—ISO 20022 brings powerful benefits that can help reduce operational headaches and increase transaction success rates.

How ISO 20022 Benefits High-Risk Merchants

1. Enhanced Fraud Detection and Prevention

Fraud is one of the biggest concerns for high-risk businesses. Many fraudulent transactions occur due to insufficient transaction data, making it difficult for payment processors to flag suspicious activity in real time.

With ISO 20022’s structured messaging, transactions will carry detailed, standardized data, making it easier to detect and prevent fraudulent behavior. Banks and payment processors will be able to:

Analyze risk indicators more effectively using structured data fields.
Identify transaction patterns associated with fraud and take proactive measures.
Reduce false positives that unnecessarily block legitimate transactions.

Impact: High-risk merchants will see fewer fraudulent transactions slipping through while minimizing legitimate transactions being wrongly flagged.

2. Lower Chargeback Ratios Through Richer Transaction Data

One of the leading causes of chargebacks is customers not recognizing transactions on their bank statements or disputing purchases due to unclear terms.

ISO 20022 enables high-risk merchants to include structured transaction details, such as:

Invoice number & order details
Subscription terms & cancellation policies
Refund policies & dispute resolution options

When a chargeback is filed, issuing banks can access this structured payment data, making it easier to verify whether the charge was legitimate. This reduces the chances of chargebacks being automatically ruled in favor of the cardholder.

Impact: High-risk merchants can better defend against chargebacks and reduce friendly fraud cases.

3. Improved Compliance & Merchant Account Stability

High-risk businesses often struggle with payment processors shutting down accounts due to unclear risk exposure. Banks and acquirers currently lack detailed insight into many high-risk transactions, which can lead to account terminations.

ISO 20022 provides greater transparency in payment data, allowing banks to:

Clearly categorize and assess transactions.
Reduce unnecessary merchant account closures.
Improve risk monitoring and compliance tracking.

Impact: High-risk merchants may experience fewer sudden account shutdowns and better long-term relationships with payment providers.

4. Faster & More Transparent Payment Settlements

Many high-risk merchants face delayed settlements due to transaction reviews and risk assessments. With ISO 20022, payments will carry more structured data, allowing banks to automate verification processes and reduce manual reviews.

For example:

Payment processors can instantly verify legitimate transactions instead of placing unnecessary holds on funds.
High-risk merchants receiving international payments will benefit from faster cross-border transactions.

Impact: Merchants will receive their funds faster and experience fewer payment delays due to risk concerns.

5. Improved Cross-Border Payments

For high-risk merchants operating internationally, cross-border payment friction can be a major issue. Many international payments are flagged or delayed due to inconsistent transaction messaging standards across different banking systems.

With ISO 20022:

Payments across different countries will adhere to a universal standard, reducing rejection rates.
Enhanced transaction data will make it easier for banks to verify and process high-risk transactions.

Impact: High-risk merchants will experience fewer declined international transactions and better transparency in foreign payments.

Preparing for ISO 20022 as a High-Risk Merchant

With the Fedwire Funds Service transitioning to ISO 20022 in July 2025, now is the time for high-risk merchants to prepare. Here’s what you can do:

Work with your payment processor to understand how they are implementing ISO 20022 and how it will impact your transactions.
Ensure your payment gateway supports enhanced transaction fields to take full advantage of ISO 20022’s structured data.
Optimize your chargeback management strategy by leveraging the richer transaction data available under ISO 20022.

Final Thoughts: A Game Changer for High-Risk Merchants

ISO 20022 represents a major shift in payment processing, and for high-risk merchants, this shift offers more protection, efficiency, and financial stability. From fraud reduction and lower chargeback ratios to faster payments and improved compliance, the benefits are undeniable.

By embracing ISO 20022 now, high-risk businesses can stay ahead of the curve and create a safer, more reliable payment environment—leading to stronger banking relationships and sustainable growth.

Need Help Navigating Payment Processing?

If you’re a high-risk merchant looking for better payment solutions and expert guidance, PayDiverse can help! Email us at [email protected] for a free consultation today.