Offshore high-risk merchant accounts

Who gets high-risk online merchant accounts?

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A merchant account is a financial instrument that allows vendors to process and receive payments from clients’ credit cards. Some companies, including iGaming and virtual betting platforms, set up the so-called high-risk merchant accounts. This may be required due to the specifics of the industry (as with gambling enterprises), or because of the high percentage of chargebacks. Another reason why businesses are usually considered to be high-risk is the processing of ‘card not present‘ payments, as these transactions are much more likely to be at risk of fraud.

It’s important to understand that if your business can be classified as high-risk, it doesn’t mean that you will not be able to get a merchant account. It just means that you should be prepared to face some difficulties when applying for it, and that’s why the best option is to seek professional support. 

LicensingAid can assist you in opening an offshore high-risk merchant account. We have extensive experience working with clients from the online gambling industry and our team is here to help you choose the best option for your gambling business. Having an offshore high-risk merchant account will make it much easier for your business to accept payments from multiple jurisdictions and in different currencies. 

High-risk and low-risk merchants: what’s the difference

Now let’s highlight the main differences between high-risk and low-risk merchants.

  1. Online/offline transactions

While the customers of low-risk companies present their credit cards physically when making transactions, high-risk businesses accept payments online. Usually such enterprises don’t even have brick-and-mortar stores. 

  1. Chargeback ratio

One of the most common reasons for being classified as a high-risk merchant is a high chargeback ratio. In this case, you must strictly monitor this indicator — if it rises above the permissible level, you may lose your account and will not be able to accept clients’ payments.

Chargeback ratio of low-risk merchants is usually low to nothing.  

  1. Industry risk level

Some industries are considered inherently risky, and therefore providers of these services are invariably assigned the status of high-risk merchants. These are businesses related to gambling, cryptocurrency, e-commerce, travel, dating platforms, some digital products, forex trading, subscription services, etc.

On the other hand, there are industries where the probability of being scammed is low and chargebacks are rare. These include retail, restaurants, home goods, office supplies, clothes, accessories, books, health and beauty products. Retailers operating in these industries are usually considered low-risk merchants.

  1. Offshore companies

A lot of high-risk businesses are registered offshore. It means that their activity can cover numerous countries and currencies. In addition, offshore merchants can operate in jurisdictions with a high risk of fraud. 

Pros of offshore high-risk merchant accounts

There are a lot of benefits of holding an offshore merchant account, especially for high-risk businesses. Here are some of the most significant ones: 

  • Opportunity to operate on several markets and accept different currencies

Offshore high-risk merchant account holders are usually less limited in their choice of markets to operate in. This provides an invaluable opportunity to expand the geography of a business by working legally in several jurisdictions at once.

The same goes for accepting different currencies. This will expand your clientele and, accordingly, bring increased income. 

  • Increased chances of getting an account

High-risk business holders are much more likely to get a merchant account offshore because offshore financial institutions are used to working with risky businesses. They know how to deal with this kind of enterprises and have the most suitable processing solutions for them. However, it is worth noting that there is still no 100% guarantee of obtaining an offshore merchant account, but the probability of your application being accepted is much higher with offshore banks.

  • Leniency towards high volumes of transactions and amounts of money received

While regular banks may consider huge amounts of incoming payments suspicious and will take action against you, offshore banks are used to big numbers. Offshore financial institutions are well aware that your average check can be higher than in other industries and try to tailor their services to the specifics of your business.

  • Reduced costs of establishing and running a business

As a rule, establishing and running a business in an offshore jurisdiction is cheaper. This includes reduced company registration costs, affordable license fees (for gambling platforms), lower taxes, and much more. It is likely that you will need to invest much more money to operate a similar enterprise in your country, and it will take much longer to become profitable.

To sum it up, offshore high-risk merchant accounts are more convenient and flexible than regular ones. Also, by operating as an offshore entity, you can reach more international markets and attract more customers without raising any suspicion on the part of the bank.

How to open a high-risk merchant account

To obtain an offshore merchant account you should prepare several mandatory documents about your company, its specifics, business goals, expected transactions and merchant account activity, and the origin of your funds. A list of required documents differs from case to case, and you need to be ready to prepare as many details as needed.

In addition to all the above, companies wishing to open an offshore merchant account are required to provide information about all key personnel. It is mandatory to provide certified copies of their passports and utility bills (the latter serves as a confirmation of residence address), letters of recommendation from the bank and biography of each person.

It can be very difficult to get an account as a representative of the gambling industry. In addition, a beginner can easily get confused by the intricacies of the procedure. To avoid this and facilitate the process of opening an account, contact us and we’ll help you collect the necessary documents and check your platform for compliance with the requirements of a particular payment processor.

How to not lose a high-risk merchant account?

Here is some useful advice for current and future holders of merchant accounts that will help you avoid penalties or even losing your account. We are talking about compliance with generally accepted standards, which will allow your business to maintain good relations with the bank.

  1. Make sure your business uses a clear and understandable descriptor that allows customers to quickly identify a transaction. The thing is, if the client sees an indefinite payment on a bank statement and can’t remember its origin, he or she may suspect fraud and request a refund. This, in turn, will not play in favor of your reputation.
  2. Make sure to provide high-quality technical support to your customers. Your experts should be able to answer all possible questions and resolve disputes without refunds wherever it’s possible. This will help reduce the number of chargebacks and foster customer retention.
  3. It is very important to store detailed data about all transactions. This information will definitely come in handy when resolving disputes.
  4. Don’t forget to set up automatic notifications to your customers’ emails after they make a purchase. The letter must contain information about the completed transaction and a receipt with the amount paid. This measure will, among other things, protect your business and prevent fraudulent transactions.
  5. Establish a good practice of collecting customer feedback. This will allow you to understand the level of satisfaction with your services and amend the points that the clients are dissatisfied with, which again will lead to lower chargebacks ratio.

As you may have already understood, in case your business is considered risky just because of its nature, the most crucial thing you can do to obtain and then not lose a merchant account is to monitor the transparency of transactions and the rate of money returns. Your main task will be ensuring the confidentiality of customer data and the security of their funds.

How can LicensingAid help you?

If you think that your enterprise can be deemed high risk (as most gambling providers are), don’t hesitate to contact us and seek professional support with obtaining an offshore merchant account. Our specialists can help you to prepare all mandatory documents and ensure your business complies with offshore requirements. You can also get legal advice on any questions regarding high-risk merchant accounts and chargebacks ratio in the iGaming industry. 

In addition to helping with opening a merchant account, our team also provides assistance with the registration of gaming companies, licensing, design, and trademark issues. Leave a request for any of our services and start your journey to a successful online casino right now.

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