The Special Requirements of Offshore Merchant Accounts

Gaming, adult, pharmacies, phone card sales, timeshare rentals, multilevel marketing, credit repair & counseling, collection agencies and outbound telemarketing are amongst the industries usually caught in the high-risk net.

As a result, businesses in such restricted industries seek offshore merchant account solutions.

An offshore merchant account processes a business’ credit card transactions through a non-domestic processing bank. Many foreign banks are not subject to the same regulations and restrictions as U.S. banks.

Offshore ISO’s usually have relationships with a number of banks in different jurisdictions – individual banks may vary considerably as to the industries they will accept and the rates they charge. These banks are willing to assume more risk than their American counterparts – but as their motive is to earn profit, they compensate for the additional risk by charging higher fees than do domestic banks.

Offshore merchant accounts usually do not require an actual physical presence in the foreign country. Generally, all business types can qualify ; background checks on the business owners are not typically undertaken; the set-up time for the account is short (often just a week); real-time internet solutions are provided (with a ‘virtual terminal’ commonly also offered, for manual inputting of transactions as required); and your sales proceeds are wired directly to your local bank account.

Often, neither monthly volume maximums nor ‘ticket size’ limits are imposed. Therefore if the merchant can maintain a low chargeback history, his business growth should not be limited by restrictions imposed upon him by the offshore processor. This is not the case with many U.S. providers who may impose volume limits on his processing, thereby effectively limiting or slowing down the business’ growth potential.

The negative factors involved in setting up and maintaining an offshore merchant account are that the costs of initially setting up the account are often quite high, as are the ongoing discount rates, transaction fees, etc.

You may have to provide security in the form of an upfront cash deposit or an ongoing reserve (generally a percentage of your sales each month – 5% to 15% is the norm – are held back for a period of 3 to 6 months). It may be required that you incorporate an offshore international business corporation in the jurisdiction where your merchant account is to be located.

Note: You should always seek professional, legal, taxation and accounting advice before committing to any offshore credit card processing solution.

If you continue to have difficulty locating a merchant account for your business, please check out our Third Party Processing section.

For information on the credit card processing costs you may incur with your offshore merchant account, see our Fees Discussion.