A beginner’s guide to offshore merchant account

Online businesses and the e-commerce market have seen a tremendous surge recently. Thanks to the improvement in banking services, now payment processing is much easier, and credit cards are leading the way. E-commerce businesses primarily work in virtual environments and face many regulations compared to traditional companies. Due to this, global firms with many overseas clients tend to operate their financial operations in regions with more favorable terms and conditions. These conditions include more privacy in financial transactions, low or no tax, soft red tape, and other regulatory measures.

What is an Offshore merchant account?

When a company handles its financial transactions from a country other than its headquarters, it does so through the off shore merchant account. For example, when an American business sets up a payment processing account in Asia or any other region except the United States, that account would be offshore for the American company. High-risk businesses prefer offshore merchant accounts as it provides them more control over their funds, protecting the business’s liquidity. In the United States, banks are pretty conservative towards high-risk e-commerce businesses. They require a pile of paperwork and past credit history of transactions, which is also time-consuming and frustrating, due to which merchants with a global footprint prefer to set up an offshore payment processing system. These offshore accounts have no limit on the volume of transactions; however, you will need at least $50000 or its equivalent in the respective currency in transaction history.

Why offshore merchant accounts are the first choice:

While any business with a large volume can opt for an offshore merchant account, high-risk industries prefer it most due to their business type, tax rebates, transaction volume, and market coverage. Some of these high-risk businesses like adult entertainment, forex trading, gambling, and other sportsbooks that platforms don’t qualify for the US merchant account. If you are a global business, then you have many reasons to opt for an offshore merchant account which includes but is not limited to the reasons listed below:

• You are associated with a high-risk business and unable to open a merchant account in a US bank on favorable terms.
• Your company has multiple offices across the globe and needs an exclusive merchant account for each region.
• You want to accept payment in regional currency.
• You want to save in tax or get benefits from the pro-business policy of the respective country.
• International banks also offer higher credit transaction volumes compared to their US counterparts. If your offshore merchant account gets approved, you can easily transfer funds without worrying about the restrictions on volume, which is essential in the case of rapidly growing high-risk businesses.
• If you want to diversify your funds in acquiring banks, an overseas merchant account is an excellent option for you. Diversification lowers the processing risks and protects the merchant’s operations if there is a face-off situation due to political or cultural reasons.
• Offshore merchant accounts also help if you have a significant market foothold in a specific area. The card acceptance rate is much higher if the processing bank and client are located in the same region or country. This is also known as targeted coverage, as the merchant increases sales and profit by setting up a credit card processing account offshore.

Benefits of an Offshore merchant account

E-commerce businesses have made the world into a single marketplace where buyers and sellers can connect from any part of the world. Companies can easily grow in overseas markets with an offshore merchant account and increase sales and profit by acquiring new customers. If a business sets up an overseas merchant account with an acquiring bank in a targeted market, it can easily save money on funds processing and operational cost. You can also use this merchant account to pay your local vendors and service staff in the local currency saving on transaction fees.

Global businesses tend to establish many overseas merchant accounts with banks worldwide. Additionally, merchant accounts offshore also offer multi-currency processing, which means pricing shown on the checkout page will be the same as buyers’ balance statement.

Rates and other terms:

Merchant account in an overseas acquiring bank also differs in rates depending on the acquiring bank’s location and trade volume. However, if you own a high-risk, high-trade-volume business, you can easily get the most competitive rates out there. Similarly, high trade volume merchant accounts also get a more favorable settlement period for credit card payment processing. In general, a high-volume merchant qualifies for daily settlements in all overseas merchant account.

While interchange rates are variable across the world and depend on the country, merchant accounts overseas can save you money on payment processing if both buyer and seller are located in the same region. You can also save on tax money by setting up an offshore corporation that you neither own nor control directly. With this method, while you can easily accept and process all major credit cards, you can also keep transaction processing details confidential. It will help you lower the tax obligation compared to your domestic merchant account and help in growing profits overseas and that too, tax-free.

Conclusion:

While there are many rules and regulations with a domestic merchant account, including the paperwork, what makes a merchant account offshore an excellent option is the ease of opening. The application process for opening an overseas merchant account is free and without any obligations. All you need is to submit the application form with the required supporting documents and evidence showing a minimum transaction volume of $50000. If all documents are provided correctly, your merchant account will be approved within 7-14 working days, and in the meantime, you will be assigned a dedicated account executive. Opening a domestic merchant account for high-risk businesses is quite challenging, and application forms get rejected frequently, whereas you can open an overseas merchant account hassle-free.