Offshore Merchant Accounts
Offshore merchant processing are the best way to expand your business into the global market. They offer various advantages that encourage merchants to consider setting up such accounts. Additionally, many institutions abroad provide easy account opening procedures for businesses labeled as high-risk within their own country.
Offshore Accounts Explained
An offshore merchant account is a financial arrangement in which a business, typically an e-commerce store or a high-risk business, opens a merchant account in a foreign country or jurisdiction for credit card processing and other electronic transactions.
Offshore payment processors handle these accounts.
In other words, suppose you are a US citizen and want to open an account in the United Kingdom. You can do so through offshore merchant processing. These accounts are completely legal and are often pursued by high-risk business merchants.
Further, revenue is repatriated to the regular bank account in the domestic area.
Offshore Payment Gateway
An offshore payment gateway is a payment processing service that a payment processor offers to merchants outside their jurisdiction. These payment gateways are applied to the business website to receive e-commerce or service payments, such as travel bookings. These accounts allow merchants to accept payments from around the globe.
At Poslinksolution, the processing of these merchant accounts is swift and smooth, with minimal rates. Our instant approval system is state-of-the-art.
Why These Accounts Are Needed
This type of merchant account has heaps of benefits, such as access to a global customer base, tax advantages, diversification, and many more, which attracts merchants to opt for these accounts. In addition, it is sometimes easier to go with an offshore account than to set up a domestic one due to regulatory restrictions.
There are several reasons why a company thinks about these merchant accounts.
1. High-Risk Industries
Some high-risk businesses, like gambling, entertainment, nutraceuticals, etc., find it difficult to get merchant account approval in their own country. Offshore merchant accounts can provide these businesses with access to payment processing services. In addition, offshore banks have no threshold for processing volume, making them ideal for merchants and enabling them to grow and scale internationally.
2. International Exposure
These accounts open up opportunities to do global business. Merchants can accept credit and debit cards across the globe and receive payments in different currencies. This exposure is one of the primary reasons to attract merchants.
3. Low Regulatory Restrictions
These accounts often have reduced regulatory restrictions on businesses, making it easier for companies to set up merchant accounts.
4. Tax Benefits
Companies in countries that have minimal or no tax rates can get rid of heavy taxes on business transactions. Overseas accounts make it possible for businesses to save tax.
5. Privacy And Confidentiality
These accounts are often more secure and confidential as compared to the home country’s accounts. This can be appealing to businesses concerned about data security and privacy.
Offshore merchant processing provide financial diversification. In other words, these accounts serve as a backup for your financial needs when facing economic or regulatory challenges in your country.
1. High Processing Fees
Payment processing via offshore merchant accounts is expensive compared to domestic accounts. These processors charge high set-up, transaction, and currency conversion fees. Businesses need help to afford such high charges regularly.
2. Currency Conversion Cost
As stated, if your business operates in multiple currencies, conversion costs will be an added cost. These fees add up when you have a high transaction volume from multiple countries.
3. Lack Of Trust By Customers
Knowing that the business uses an offshore merchant processing often weakens the clients' trust, as they perceive them as less reputable and secure. Resulting in a loss of trust and potential customers.
4. Fraud Suspicion
Overseas accounts are more susceptible to fraudulent activities. These accounts have been widely used by fraudsters in the past and present, increasing the likelihood of chargebacks and financial losses. In addition, regulatory compliance in foreign jurisdictions is less strict, making it easier for fraudsters to operate.
5. Legal And Regulatory Challenges
Due to the unfamiliar laws and regulations of the country, these account holders need help completing legal and compliance requirements and tax laws, which is time and cost-consuming.
6. Repatriation Of Funds
Transferring funds from an external account to a domestic one can be challenging and subject to restrictions, delays, and additional fees. Repatriation of funds also triggers tax obligations.
7. Account Closure
Foreign merchant processing need to be more reliable. Businesses can face sudden account closures without prior warning due to changes in policies and regulations. Such scenarios can adversely affect the well-being of a business.
8. Limited Customer Support
For domestic accounts, it is very convenient to get financial assistance. You can call, send emails, or visit the office regularly. But when it comes to cross-border accounts, maintaining this high level of customer support is unlikely. Because of time zones and language differences, they may not be as responsive as your domestic service provider.
9. Loans Difficulty
International accounts are marked as high-risk in financial institutions' books due to their perceived risk. Therefore, businesses using these merchant accounts often need help obtaining business loans for further expansion. They may face enhanced due diligence and an extended list of regulatory compliance requirements.
10. Limited Recourse In Disputes
Resolving disputes with your international bank or payment processor can be more challenging and costly, as you may have limited legal recourse in a foreign jurisdiction.
Factors To Consider When Opening A Merchant Account
Opening a foreign account undoubtedly provides certain benefits to your business, but it’s important to consider important factors before proceeding with such an account. These are:
If you are worried about completing the above requirements, we are your go-to option for setting up your offshore merchant accounts. We are industry experts and work at the best rates. Contact us for more inquiries.
To open an offshore account, the base requirements are similar in all countries. However, the time it takes varies from country to country. When you open an account, have these documents ready before requesting a quote. Be mindful that the basic documents are the same. However, some institutions may ask for additional documents as per their policy.
After completing all the formalities, the approval processing will start, which may take three days up to three weeks. Once the account is approved and opened, a service provider will perform an API integration in a few hours, using a plugin to set up a global payment gateway.
What Are High-Rist Merchant Accounts?
A high-risk merchant account is a payment processing account established for businesses with a higher risk of financial losses or chargebacks due to various factors. These factors include the nature of the products or services offered, the industry in which the business operates, its processing history, and its creditworthiness.
High-Risk Merchant List
Below is a list of high-risk merchant accounts.
It's A Wrap Up
Offshore merchant accounts are a favorable way to expand business worldwide. They offer various pros, like being available for high-risk businesses, tax benefits, global market reach, multiple currency acceptance, and diversity. On the other hand, they have some cons, like high processing fees, lack of customer trust, fraud suspicion, regulatory challenges, etc. As a merchant, you should decide your business needs and measure all the factors to find the best account.
Getting an offshore merchant account with bad credit is tricky because many offshore banks and financial institutions approve accounts with strong credit histories and business financial stability. However, you can consult with an offshore payment processor such as Poslinksolution; they have a more relaxed underwriting standard than traditional banks.
To get instant approval:
- Research the right jurisdiction.
- Choose the right bank.
- Ensure that your business bank statement is sound with positive cash flows.
- Make sure you have minimal chargeback cases. If chargebacks are higher in volume, include the proper justification.
- Before submitting your case, ensure that your e-commerce website is fully functional and has all the necessary pages.
A foreign payment gateway is not inherently high-risk but can be associated with higher-risk factors depending on various aspects. The risk level of an offshore payment gateway primarily depends on the type of business using it and the jurisdiction in which the payment gateway operates.