Offshore Payments: Everything High Risk Merchants Need to Know
Ecommerce stores have provided immeasurable convenience to many customers of today and have increased the potential income of many entrepreneurs. But like any other innovative breakthroughs, online stores also have their downfalls. One of which is its limitation when it comes to accepting payments. Fortunately, offshore payment processing has provided a solution to this major setback.
Offshore payment processing has made it possible for eCommerce stores to accept credit card payments not only from major credit card companies like Visa, Mastercard, and American Express but from other credit card providers as well. Businesses can process transactions from any place all over the world and accept all forms of payments in multiple currencies.
All things considered, there is no doubt on how offshore payments can significantly increase a business’s profitability. But is it really necessary, especially for high risk industries?
Why is offshore credit card processing needed for high risk merchants?
Once tagged as high risk, merchants often find themselves having a difficult time acquiring a merchant account. Many banks and financial institutions turn down applications from these industries let alone process their credit card transactions. This is because of high chargeback rates, instances of fraud, and the legal concerns of high-risk businesses. Contrary to local banks and financial institutions, merchant account providers overseas can enable the following advantages for high risk business:
Access to a Broader Market – merchants can transact with a bigger target market with an offshore account. Aside from local clients, merchants then have access to global clients. This gains them more prospects to open their trade to. The bigger the clientele they can accommodate, the more chances of increasing their sales.
Higher Volume Capacity – given the size of the new market merchants have access to, it can be expected that the volume of transactions for merchants will double or go higher. An offshore account will give them the capacity they need to process a larger number of transactions as compared to a local merchant account.
Leniency in Processes – this doesn’t mean that merchant account providers overseas won’t require proper documentation. In fact, merchants need to provide the same paperwork. However, offshore banks are more lenient than domestic banks when it comes to the type of business the merchant offers. Offshore banks welcome trades from adult entertainment, cryptocurrency, online gaming, among others that are considered as high-risk industry.
Tax Benefits – offshore accounts follow the tax laws of the country where the account was opened. In low-tax countries, merchants are liable to pay a lower amount than that of what they are supposed to compensate in high-tax countries such as the US. There are even countries who exempt taxes for capital gains of foreign-based accounts.
Ease in Company Registration - high risk merchant account providers overseas can help in breezier company registrations. It can be hard to complete legal processes considering all the leg work but with a reliable processor, merchants wouldn’t have to go through the difficult work.
What types of businesses need offshore payment processing?
Not all types of businesses have to get offshore payments. While there are some low-risk merchants who opt for offshore payment processing, most types of trades who acquire this service are from the high-risk industries. See the list below for some of the many types of industries who need offshore credit card processing:
- Accounting and Bookkeeping
- CBD and Hemp
- Credit Repair
- Dating Services
- E-Cigarettes and Vape
- Foreign Exchange
- Financial Aids
- Magazine Subscriptions
- Online Pharmacies
- Payday Loans
But there are other businesses that might not belong to these industries yet are still in need of offshore payment processing. How is that possible? A merchant can also benefit from acquiring services from merchant account providers overseas when they have, they happen to hit the following drawbacks:
- A chargeback rate of more than 1% or higher than what banks have set
- Poor credit history of the business owner
- The business/company is in the MATCH list
- Majority of the transactions in the account are in a foreign currency
- Irregularity in the sales pattern of the business
- High volume or high average amount of regular transactions
- The business owner is not a local citizen or resides in a foreign country
Cons of offshore payment processing for high risk merchants
As promising as an offshore merchant account is, there are still some disadvantages to it. For one, offshore payment costs higher than local processors. High-risk merchant accounts are already known to have higher processing fees, more so for offshore accounts. And many will take advantage of this. This is why business owners need to look around for the best option. The cheapest pricing plan is not always the best and neither are the most expensive.
There is no one size fits all plan. Merchants should check the conversion services, customer support, currency support, equipment provided, and security features among other features included in the agreement. That said, merchants should look out for themselves before signing the contract. They must be agreeable to the terms and fees including the termination charge which they might have to deal with.
Aside from the fees, offshore payment processing also has limited legal solutions. Pursuing any legal concern with the processor would be done overseas and would follow all laws applicable to the country it is based on. It can be inconvenient and costly for any legal action that has to be done overseas.
Furthermore, merchants can also put their sensitive data at risk. Overseas processors would need important personal information from the business owner and there is no guarantee on how they will protect the said data. The best solution for this is for merchants to look for an offshore credit card processing company that has the best security to offer. They would need a trust-worthy processor who will make the best effort to protect their personal data and the customer data they will be handling.
How to find an offshore payment processor?
There are many who will claim to be the best overseas payment processor, but one shouldn’t be easily convinced. Merchants should find a reliable international processor who specializes in their type of business.
They should take the extra time to do their research and while they’re at it, merchants should have their documents ready for approval. Underwriters can review applications faster when they have all the requirements they need. Get in touch with EU Paymentz today to get started!