Before the internet, currency markets were reserved for international banks, wealthy individuals, and investment firms. Today, forex trading is readily available to retail traders worldwide. These traders can now access these trading platforms with one of the online brokerages and trade currencies from their homes.
When trading forex, traders are simultaneously selling one currency while purchasing another. The currency pair (i.e. EUR/USD) denotes what is being sold and what is being bought. In the EUR/USD example; EUR is being purchased and US Dollars are being sold. Retail traders usually want to profit from the price differences in currencies. They do not want to take actual delivery of the currency. This is why forex merchant accounts are deemed high risk.
The growth of the foreign exchange markets has been due to several factors, but accessibility and technology have led the way. Residential internet speeds have become faster and less expensive. Retailers can now open an account with as little as $50 or $100 and trade dozens of currencies on their smartphones, tablets, or laptops.
What is a Forex Merchant Account?
Brokerage houses face many obstacles when accepting payments to fund trading accounts. Their business models rely on traders being able to fund and access their accounts online and trading services promptly.
Forex merchant accounts are the optimal service that offers the lowest costs and fastest settlements of funds, regardless of the currency. Through a brokerage’s website, traders can immediately fund their accounts and see them credited. Most consumers today have access to a credit or debit card, making offering these business services to clients extremely simple.
All forex merchant accounts use the same principles, regardless of the merchants or customers location. Banks help brokerages set up forex merchant accounts, and these providers allow access to the payment card network services. These networks maintain security and allow consumer card issuing banks like the trader’s bank to send their client’s transactions through. It’s a simple process in theory but heavily laden with services and technology to ensure the highest levels of security.
Merchants do not have to be limited to forex business accounts that only process credit or debit card payments. However, those are overwhelmingly the most common form of payment accepted by online trading platforms.
Is a Forex Merchant Account considered High-Risk?
Forex payment processing is considered a high-risk merchant for several reasons. Unlike other industries, online forex trading merchants are usually required to be licensed; when not, it becomes a gray area.
Payment processing for brokerages requires the ability to have a high average transaction, and volume amounts, with most transactions exceeding $2,500 regularly; monthly volumes can be seven figures regularly. The higher the transactions, the more likely a chargeback will occur. Unlike other industries, brokers do not generally have a high volume to accompany their higher deposit amounts.
Over the past 20 years, there has been a crackdown on anonymous financial transactions. Brokerages and banks are required to collect KYC (Know Your Customer) documentation which verifies that traders are who they say they are. Trader information must match the information on file at the brokerage, and the information on bank accounts linked to the trader is cross-referenced with different government terrorist watchlists. If a bank or processor makes a mistake, they could lose their trading license because of facilitating money laundering risk.
Forex is an international business with online traders and brokerages in many countries and jurisdictions. A broker business licensed in one country may not be considered licensed in another. Likewise, a trader may be in a country where it is not legal to trade foreign currencies. Still, the broker’s license does not specify whether it is legal or illegal to open trading accounts for traders in that country. This burden lands on the merchant processing provider and the bank. They are left with the job of blocking certain countries from trading and consistently reviewing new laws and regulations for countries around the globe.
Payment Processing for Forex Merchants
- Credit Card Processing; is the most sought-after online payment processing solution for forex brokerages however, Visa and MasterCard regulations make these solutions very unstable. Most solutions for forex merchant accounts do not last more than 6 months, and once they are closed, forex credit card processing banks will keep their merchant’s funds.
- Check Processing; is becoming one of the most popular services for accepting forex payments. Payments and deposits are processed within one company, with no middlemen, and paid out within days, not weeks. There are no Visa/MasterCard restrictions, and payments are not categorized with a Merchant Category Code (MCC) code. Canada and the United States make up most of the check processing traffic.
- Cryptocurrency; is one of the least popular payment solutions since most forex traders do not want to transfer their funds to Crypto before depositing it to trade other currencies. As a broker, do you want to send your clients to another website for them to process their deposit?
- Wire; one would think that bank wire transfers are the forex brokerages’ preferred payment method; however, bank wire transfers pose a risk similar to credit card payment processing. Add this to the fact that the trader has no payment recourse; both traders and brokers find this to be one of the most unfavorable solutions for online payments.
Forex Credit Card Processing
Our network of processors allows merchants to accept payments with a specialized merchant account. Offering the lowest rates, fastest payouts, and easy account approvals, forex merchants have a good track record at Allied Payments.
- Lowest Rates: No matter how much you’re processing each month.
- No Monthly Volume Cap: No need to turn away traders because you have reached your monthly volume limit.
- High Transaction Limit: Allow large traders to easily make larger volume deposits.
- Fraud Mitigation: Minimize fraud by utilizing our suite of fraud prevention tools.
- Easy Approval: Accounts are usually approved within 72 hours.
- Simple Integration: Quickly and easily integrate with our gateway.
High-Risk Merchant Account Alternatives
Are forex card processing companies charging your brokerage high fees? Are your payouts delayed 1-2 weeks? Forex echeck processing solves your brokerage’s card payment processing problems.
New broker business echeck accounts are easily approved and set up. Our proprietary echeck payment platform is operated 100% by the firm. We approve the accounts, manage risk, clear payments, and pay the forex merchants.
- No Visa/MasterCard restrictions: Regulations placed by the card associations do not affect echecks.
- Fast payouts: Payments are wired to the merchant once they clear.
- No middlemen or third parties: No platforms, no card issuing banks, and no acquiring banks to hold your funds.
- Echeck processing is the most consistent and stable payment processing solutions available to a business.
Forex trading brokerages have always preferred bank wire transfers over other payment methods, mainly because of the trader’s lack of recourse, higher volume limits, and faster receipt of funds. When a brokerage accepts a credit card, it could take up to 3 weeks to receive only 80% of their funds. A wire transfer makes the payment of funds a much quicker process and usually, the fees are only a few percentage points.
The problem with bank wires is that the brokerage relies on a third party to process their payments; they rarely receive the funds directly into their brokerage bank account. The brokerage is left trusting sometimes millions of dollars with a money transfer agent who is usually not licensed. A high risk payment alternative to forex merchant account services using the credit card network.
Forex Payment Gateway Solutions
The processor’s gateway is an important part of the forex merchant account service. Working with a processor that offers a payment gateway that can integrate into most shopping carts can save businesses significant time in development.
Allied Payment’s payment gateway allows for customization at many different points. The Allied Payments Forex Payment Gateway has become an industry leader by providing secure and reliable payment gateway services.
Forex Merchant Requirements for Forex Merchant Accounts
Several documents will be required to approve and set up merchant services for your brokerage. Once the processing has them, approval will take a day or 2.
- Completed Application
- Government Issued ID (Passport)
- Corporate Documents
- Utility Bill (Confirming Address)
- Screenshot of Domain Registration (Proving Domain Ownership)
Providing the underwriters with a complete application will help increase the approval time of the payment processing services. Like other types of financial products, banking organizations need to know who they are working with to prevent the risk of illegal activities, including money laundering and terrorism. After a quick check of the financials and corporate history of forex business, most underwriters can approve brokerages for payment processing in days and set up the forex brokerage with merchant account services.
Open a Forex Merchant Processing Account Today
Businesses looking for processors to provide solutions for online forex merchant accounts for brokerages anywhere in the world are welcome to apply for payment processing services. Our simple application process will allow your brokerage to be approved and accept payments within a few days.
Our firm requires a simple application to be completed while submitting a few supporting documents. Our forex merchant services underwriters will review the business and provide feedback, usually within 24 hours. Contact one of our binary and forex payment processor specialists to open your forex merchant account today.