Offshore Merchant Account – International Credit Card Processing
Extremely High Risk merchants or merchants that have been terminated and placed on the Match/TMF list find themselves pushed toward offshore processing. It’s a very good option IF and WHEN done right. Here are some pros and cons:
International Processing Pros:
Processing!You get to accept credit cards and keep your business moving. Face it: customers are used to immediate gratification and ability to pay within seconds with their favorite credit card is important. Offshore processors often have different laws regarding specific industries, and third-world countries are simply more lenient and hungry for more business, which means they will accept more high-risk merchants.
International clients. International clients are happier if they have a local option to pay.
Offshore Processing Cons:
High percentage of declines.Domestic cards will flag an international transaction as fraud because they haven’t been notified that their customer is traveling.
Foreign Corporation Set-up. Offshore processors often only work with a non-US corporation and sometimes even require a bank account in their country. Foreign corporation registration shouldn’t cost you more than $1,000, but a bank account can cost more because of the local director requirement.
International Laws. It’s no surprise that they differ from U.S. laws. Make one legal mistake and the consequences will prove very costly, often you will be at a great disadvantage in the international court system.
Third-World Country Banks.These banks often pose a greater risk due to political or economic turmoil. The U.S. Government is known to bail failing financial institutions, but it’s not the case in other countries. Banks or Merchant Service Providers get shut down and merchants will be left without funds especially if a reserve was held.
If offshore processing is the option you are choosing, take some measures to protect yourself:
Ask for short batch-out times
Decrease your Rolling Reserve after a certain period
Don’t pay any fees before your merchant account has been approved and you tested some transactions. This includes upfront fees, application fees, deposit fees and setup fees
Do a lot of background research online (or go directly to allrates.org and let them vet a processor for you)
Digital goods are better suited for offshore merchant accounts simply because you will lose less of sunk costs
Choose larger banks in stronger countries: Think Germany, England or Japan versus Georgia, Ukraine or China