Offshore Merchant Account

Do you need a merchant account based outside of the USA? Are you looking for a provider of credit card processing services specializing in many of the industries considered to be high risk? These are many of the reasons why a business might need an offshore merchant account.

Every year it seems to always be harder for high risk businesses to be approved for a merchant account. The majority of independent sales organizations, processors, as well as sponsor banks that specializing in acquiring merchants, do not always like risk. In most cases, they decline to provide their services to businesses that are viewed as prohibited or restricted. This results in only a handful of providers that are willing to provide high risk services and finding them is not always an easy feat.

Most experienced merchants have learned to seek out the services of consultants familiar with the high risk merchant account industry.  Consultants will be familiar with the best banks and payment service providers in the offshore payment processing industry.

Typical Offshore Merchants

The business model, processing history, location of the business, or the personal credit background of the owner are some of the things that can affect a companies merchant account.  Merchants that have an issue with one or many of these areas are generally considered to be high risk merchants.

Within the high risk industry, there are a number of merchants that are prohibited no matter how strong of a business they have.  Most might think that there are no future options for these businesses to accept payments, but these are the ideal candidates for an offshore merchant account.

The following are examples of some offshore business types:

Software downloads
Collection agencies
Short-term payday lending services
Supplements
Credit repair services
Online dating services
Telemarketing
Internet services
Cryptocurrencies
Gems and other precious metals
Fantasy sports
Lead generation services

How do you Set Up an Offshore Merchant Account?

If you are looking to start your application for an offshore merchant account, you first have to submit a short pre-app form with previous processing statements. The acquiring bank and provider will then review these documents during the pre-approval process. Only after the pre-application has been approved will merchants be invited to complete a full application. This requires a more detailed application to be completed along with full supporting documentation.

What documentation is needed for an Offshore Merchant Account approval?

Merchants must provide information on the application about the business, the owners, an explanation of the services or products that the business provides.  The application will also require such information as the business domain, forecasted transaction, and monthly volumes along with information on their marketing plans.

Most pre-applications will require:

  • Completed pre-application form
  • Last three months of business bank statements
  • Las three months of business payment processing statements

Most full applications will require:

  • Additional application
  • Articles of Incorporation
  • Copy of the driver’s license/passport of the business owner(s)
  • Copy of a voided check from the business checking account

The following extra documents are recommended and likely required for application:

  • Utility bill of the business owner that displays owner's name and residential address
  • List of shareholders and/or a shareholder certificate
  • Last two years’ annual business financial statements. If the company is less than two years old, interim financial statements should be provided and if it is a startup, the owner’s most recent tax returns might be requested.
  • Copy of supplier contracts
  • Copy of any business licenses required for operation
  • Bank reference letter for the owner
  • Business plan or summary that details the experience of the merchant along with future plans to promote growth
  • Larger merchants might be required to provide financial statements (balance sheet, profit, and loss) and most recent business tax returns.
  • Canadian businesses might be required to provide a Canadian EIN, Canadian bank account and Canadian address that can be verified are needed.

Typical Pricing for Offshore Merchant Accounts

Due to many of the costs involved with accepting payments in different countries with different currencies, the fees on an offshore merchant account are generally higher than traditional high risk merchant accounts.

Businesses using offshore accounts will generally see prices starting in the high 4% range upwards over 10% for smaller or much higher risk accounts.  These fees do not include the reserves that are held on accounts plus maintenance and wiring fees.

Reserves for Offshore Accounts

One of the common factors that all offshore accounts share is the use of reserves.  Reserves are a predetermined percentage or a set amount to be held by the payment processor during the life of the account.  Reserves generally vary between 5% to 10% of the monthly volume and are usually held for 6 months, having the first months funds released on month 7, so on and so forth.  This type of account reserve is called a rolling reserve.

Reserves are required by banks because of the risk associated with accounts.  Businesses operating in industries that traditionally have problems with chargebacks will usually have higher reserves.  Reserves are ultimately based on trust, but in the offshore industry, most banks will not fully release a merchant from a release agreement.

Hold Period for Offshore Funds

The average hold period for high risk merchant accounts can vary based on the bank, the business history, and the industry.  Most banks hold funds for 10-14 days, then releasing those funds to the merchant via wire.  Businesses that establish a good working history can get those hold times down to a couple of days if they can prove the quality of their sales.  Like the reserves, hold times can be negotiated, but they will be clearly listed in the contract signed with the offshore processor.

Offshore Payment Gateway

Having a reliable and secure payment gateway is essential for any business, especially when sending transactions offshore.  Offshore payment gateways will need the ability of work with a number of different processing networks, balance transactions between accounts, and support the volume that many offshore accounts have without compromising security.

One of the best features that secure payment gateways can offer offshore merchants today is fraud scrubbing.  These tools allow merchants to set the parameters for their business to help mitigate instances of fraud and eliminate losses without losing real sales.

In many instances, offshore merchants use the services of multiple accounts from different banks.  While this is not the case with most merchants, many experienced operates have opted for this set up when working offshore.

Do merchants need multiple accounts?

Larger merchants have learned that having multiple merchant accounts is the best way to hedge against interruptions with payment services.  By relying on one merchant account, higher risk merchants are more likely to have problems remaining in business verse merchants that operate multiple accounts.

Another benefit of operating with multiple merchant accounts is the ability to increase monthly volumes through additional accounts.  This allows merchants the luxury of increasing the total sales of their company without using one bank.  The offshore payment processing industry, like other merchant account industries, can change in a moment's notice, so being prepared never hurts.

Apply Today! 

If you are looking for an offshore merchant account, speak to the consultants at Allied Payments. Our highly experience offshore account executives will work with your company to setup as many specialty merchant accounts as your business requires. Contact Allied Payments today and an offshore merchant account consultant will contact you shortly.