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How to understand it’s time to change your offshore high-risk merchant account provider?

by Peter Marah

What is an Offshore Merchant Account?

An offshore merchant account suggests that the acquiring bank or offshore payment processor is other than the firm’s main headquarters. For example, if a US company opens a payment processing account in Europe, the European description is considered offshore for the US Company.

 

Offshore merchant accounts work in the same way as international merchant accounts. The primary distinction is that businesses seeking offshore merchant accounts are typically categorized as high risk by the US acquiring banks. On the other hand, international merchant accounts can be used by both traditional and high-risk merchants that want to take advantage of the global e-commerce boom.

While using offshore merchant processing might provide certain benefits to your organization (and may be required in certain instances), you should be aware that it also entails considerable hazards.

Your capacity to seek legal redress against a foreign bank or processor may be substantially hampered – if not nonexistent. At the very least, you can think about legally registering your company in the country where your account will be situated. Even if you have legal standing in the country, be aware that pursuing legal action outside your own country may be exceedingly inconvenient and costly.

You are at a higher risk of becoming a victim of fraud or identity theft. Banks in other countries acquire identical personal information about you and your business as banks in the United States do, but they don’t always protect it as well. Keep a close eye on the merchant account, business account, and any personal accounts about which you’ve supplied information to be approved for an offshore merchant account.

High-risk merchant accounts are known for charging higher processing rates and account fees, and offshore accounts can be even more problematic. Providers are aware that you are in a state of extreme desperation, and some, but not all, will take advantage of your condition by charging you as much as they believe they can get away with. When looking for an offshore account, we recommend that you shop around and compare multiple rates. Accepting the first offer from a bank or processor just because they are the first to not reject your application due to the nature of your business is a bad idea.

Merchant account providers who sell offshore accounts frequently downplay or omit to highlight these risk elements, so you must protect yourself. Before signing up for an account, conduct your independent research, compare several offers, and thoroughly check all contract details. It’s Time to Replace Your High-Risk Offshore Merchant Account Provider.

Keep a Close Eye on Your Reserves

Some payment processors may require high-risk merchants to have a reserve account. The account serves as protection against chargebacks and fraud. When a company receives a chargeback and cannot recover the payment, the reserve account is utilized to offset the loss. Payment processors typically request one of three types of reserve accounts:

Rolling reserve — Payment processors hold a portion of your sales and progressively release it after a set length of time. Processors often employ the rolling reserve to guard against fraud and chargebacks, in which the merchant may lose money.

Up-front reserves — At the start of a contract, a sum is placed in a reserve account. When all payment processing fees have been paid, the initial money is refunded to the merchant. The processor can withhold 100% of credit card payments with the merchant’s permission until the reserve amount is achieved.

Fixed reserve – A reserve amount is agreed upon at the outset of the contract. The payment processor deducts a percentage of each merchant transaction until the agreed-upon sum is met. Unlike a rolling reserve, which takes a proportion of your sale over time, a set reserve will only take a percentage of your transaction once the agreed-upon sum is met. Once the cap amount is reached, the deductions stop, and no fees are charged.

The restriction of revenue access due to reserve deductions can result in inconsistency in cash flows. Reserves, while crucial, may cause a company to struggle to satisfy its usual financial requirements. Cash flow problems can eventually drive a merchant out of business.

Why High-Risk Merchants Opted for Offshore Credit Card Processing

High-risk merchants open offshore merchant accounts for five reasons: industry type, processing volume, tax considerations, diversification, and targeted markets.

 

Due to the nature of the items or services sold. For example, offshore merchant accounts are often used by Forex trading platforms, online gambling/sportsbooks, adult entertainment, and nutraceuticals. High-risk merchants in various industries have discovered that offshore merchant accounts have more permissive underwriting and friendlier authorities than the US.

 

International banks permit larger processing quantities than US institutions. Offshore merchant accounts, if approved, ensure high volume processing capacity. Volumes are rarely capped, which is especially advantageous for fast-growing, high-risk merchants. More:

 

Some businesses open merchant accounts overseas for tax considerations or take advantage of commercial incentives available in specific countries. Others set up offshore credit card processing to benefit from varied regulatory conditions. Consult with your business consultants to see if offshore payment gateways are a good fit for your firm. Another reason firms send payments overseas is to diversify their acquiring banks. Different countries of the world, for example, have political or cultural standards that are more accepting of particular products or services than others. Diversification of offshore merchant accounts decreases processing risk while preserving company operations.

 

Conclusion

You don’t need to think if your company falls into the high-risk group. The rates for high-risk merchant accounts may be higher, but they are reasonable. High-risk payment processors might be costly to manage for a firm, but they are worth a shot. Finding dependable payment solutions for domestic and offshore merchant accounts is your best bet. 

 

For example, if you are a high-risk online merchant in Asia, you must look for the top high-risk payment processors for an offshore account in the United States. Credit card processing, chargeback disputes, MOTO processing, internet payment gateways, and merchant cash advances are all handled by reputable processors. They increase sales by guiding you on how to manage chargeback transactions best.

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