Tuesday, December 6, 2022

Risk Offshore Merchant Account: Things to Be Aware Of

If you run a business, you may end up having to open a risky offshore merchant account. It’s most likely to happen if you are a high-risk merchant. Even though you run a legitimate business, its nature may be prone to fraudulent transactions. For instance, it applies to e-commerce businesses that deal with international customers.

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Are you being offered a high-risk offshore merchant ? Is your bank suggesting that you should get one for your business? It’s hard to make a decision when you don’t know anything about the matter.

To help you out, we’ve put together everything you need to know about risk offshore merchant accounts, including the things to be aware of.

What is an offshore merchant

As a business, you have a couple of options when it comes to accepting credit card payments through banking institutions. For instance, you don’t have to choose a bank that is located in your country. You can align with a financial institution located outside of the country where your business is registered in a completely different jurisdiction.

If you do so, your account is conveniently called an offshore merchant . Most of the most prominent players across verticals do this to lower their tax burden in the country where they work and live. What is a high-risk offshore merchant account, then?

These are also accounts that enable a company to accept credit card payments through a bank outside of the company’s jurisdiction. However, these payment processing accounts belong to businesses that banks render high risk. These businesses are more prone to chargebacks, and banks have specific terms for them.

Fees are not the same across the board! By Account

When people hear about a high-risk offshore merchant account, they usually think it is this super-special type of account. In reality, it is not. We are talking about a regular payment processing account for businesses. There is at least one thing that sets it apart from other offshore merchant accounts – the fees.

After the initial assessment, the banks can see some merchants are riskier to do business with than others. These merchants will be offered to set up high-risk offshore merchant accounts, but they will have to pay higher fees. So when you are looking through the offers, expect to see higher prices than usual. Different banks will offer additional fees. Take your time to choose the one that gives you the best deal.

Some banks ask for a ridiculous rolling reserve!

If you are going to be operating through a risky offshore merchant account, you need to be aware of one more thing – rolling reserve. To understand what a rolling reserve is, you need to know how a bank assesses you. Two things paint you as a high-risk merchant in the eyes of the banks – chargebacks and refunds.

When you apply with a bank, the bank will ask for your business history. If the bank sees many refunds and chargebacks in the past, it will likely ask you to put a rolling reserve on your account. It’s a precautionary measure. A rolling reserve will sit there in case there is a need to cover fraud or chargebacks.

Learn about security indicators For Account

While the bank is taking care of minimizing the risks of doing business with you, you should not sit idle. You need to ensure that you are placing your business’s future in the right hands. Working with banks willing to open high-risk offshore merchant accounts comes with certain risks too.

For instance, chargebacks can hurt your bottom line if you don’t have some kind of prevention system. Data protection has to be industry grade too. You don’t want to end up having to deal with data leaks.

So before you even apply to open an account with a bank, you need to ensure that it has strict security rules and follows best practices. It should at least have anti-fraud tools, a chargeback prevention system, and encryption to render all sensitive data unusable to hackers.

Application may not be the same with all banks!

Finally, banks that offer high-risk offshore merchant accounts have different requirements. Some will ask for more paperwork than others. If you want to streamline the process, you should do your research before choosing a bank.

The best place to do it would be the bank’s official website. Look for the “How to apply” or “High-risk offshore merchant account requirements” sections. There you’ll be able to find all the details about the application and get your payment processing account up and running as soon as possible.

There are not that many things that you need to be aware of when considering opening high-risk offshore merchant accounts. However, each one of them is important. It can help you know what to look for, the potential risks, and enable you to make an informed decision.

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