Why More Startups Are Facing Payment Barriers From Day One

There has been an increase in payment barriers for startup founders since the UK has made it easier to create a company. For some startup founders, getting access to payment services has become problematic due to increased fraud prevention measures and the increased scrutiny of payment services. Payment services are being forced to increase fraud prevention measures due to payment fraud, which reached £1.28 billion in the UK in 2025, which is likely to result in an increased risk for payment services. Being prepared and understanding these barriers will allow your startup to grow sustainably.

Starting a business is often a series of small, manageable tasks. You incorporate, you get a business bank account, you create a business website, and you source customers. Many founders discover that getting access to payment services is not quite that simple.

Payment service providers have to, for the most part, balance protecting the individual and the business with the risk of fraud. As the risk of fraud is increasing and the amount of business being conducted on the internet is increasing, payment service providers have to implement additional risk measures. Unfortunately, these measures often create barriers for a startup that has no or very little business history. Knowing the cause of these barriers helps founders forecast these barriers and adjust their growth plans for the startup.

Why Payment Access Matters Earlier Than Ever

Accepted payments are at the very core of many startups' operations. If you are an online business, you have a payment services subscription, or you have overseas clients, your business operations and revenue are directly impacted by your ability to accept payments.

There are many new systems in modern, digital commerce. This is the result of the increasing need for security during transactions, systems, and services designed to facilitate e-commerce. At the same time, the service providers have to be extra vigilant to minimise their exposure to fraud, chargebacks, and financial crime. During 2025, UK Finance reported over four million fraud cases in the UK banking sector. Fraud cases were estimated to have caused losses of £1.28 billion. Most of the cases of authorised fraud were done online, and this highlights the problems that payment service providers have to deal with.

Because of this, more and more specialised services are emerging to support businesses in higher-risk industries. More of these services and products provide a payment gateway high risk solution and are focused on near-zero fraud cross-border high-risk payment gateways, chargebacks, transaction gateways and payment gateways. These services also provide transaction risk management frameworks and case dispute management.

For startups, the goal is the same. They must have a plan to capture payment gateways as they have for seed funding, marketing, and operations.

The Most Common Payment Gateway Obstacles for Startups

Most startups assume payment providers only check the legitimacy of the business. The payment provider's business legitimacy check also has a comprehensive risk review.

A new startup also typically has little or no trade history. Without any trade history, payment providers have no way to evaluate the customer, the payment gateway provider, the refund rate, or the transaction value. Lack of transaction history can also trigger payment provider risk controls.

Also, payment service providers assess payment gateways based on the business model or the service being provided. These businesses can also generate a lot of disputes or chargebacks: subscription services, online coaching businesses, travel businesses, and businesses that sell internationally.

The continuing risk of fraud is also a cause for concern. As noted by UK Finance, losses due to authorised push payment fraud in 2025 hit £576.4 million, a rise of 19% from the previous year. Fraud losses resulting from investment cases totalled £221.5 million.

As a consequence, providers are demanding more evidence, including business plans, supplier agreements, identification documents, and financial forecasts to support applications for merchant accounts.

While these demands may seem unreasonable, they are necessary to combat the fraud and abuse that is prevalent across the payment systems, and ultimately to enhance the confidence of users in the systems.

The Effect on Cash Flow and Development of the Business

Payment restrictions can lead to delays in generating revenue. This can affect a business's ability to make purchases, pay for marketing expenses, and even recruit new employees.

One of the main reasons startup businesses fail is due to a lack of cash flow. According to research conducted by Sage and the Centre for Economics and Business Research, 2025 saw 44% of small business invoices in the UK being paid late. In addition, the UK's smallest businesses had an average of £42,000 in unpaid invoices.

For new business ventures with little cash flow, delays in payments add even more strain. Due to this, potential entrepreneurs should consider payment options as an integral part of the business plan. Implementing secure payment options is crucial for sustaining operations during essential growth phases.

High-Risk Labels and Entrepreneurship

The phrase “high-risk” causes lots of concern among founders. While it’s often bad to see your business operations classified as “high risk,” it’s not always indicative of crime or bad practices.

Providers of payment solutions classify risk for the likelihood of fraud and chargebacks, and the ease of doing business with the provider. Many sectors of entrepreneurship have a higher likelihood of a customer dispute.

For example, businesses with operations that span many countries will face different customer payment rights and payment rules in each of the countries in which they do business. Businesses with subscriptions also have payment and business model issues, as customers can more easily unsubscribe. Last, businesses that sell digital goods have an increased customer dispute challenge. This is because the customer is not receiving a physical good. These factors will cause payment providers to classify your business as “high-risk.”

Maintaining a clear and precise refund policy, accurate record maintenance, and clear communication can help strengthen a founder’s position with payment providers. Solid financial controls and strong customer service and care can help as well.