With the globalization of business, companies are eager to expand their business, capture new markets and earn more profits.
Today, business is not restricted within the national boundaries. Companies want to be competitive not only in their home country but also offshore.
The impact of globalization is so much that the foreign products have out smarted the local products in many countries. Take the case of automobile sector. Japanese car manufacturers have reached to almost every country in the world. Japanese car can be seen in USA, Canada, Germany, UK, and Australia in spite of the fact that there are car manufacturers of their own counties.
If you want to buy any product for computers in USA, most of the items on the shelves would be of China origin. The reasons for such a competitive market is due to various reasons like availability of low cost labor, cheap raw materials, low cost of land, industrial development, and availability of technology.
The global market opportunities are not limited to some products only but have opened up doors for any business including high risk merchants.
One pertinent question is: What is high risk business? A company is considered a high-risk business based on two conditions:
The company is in an industry classified as high risk by payment processors & banks. A high risk classification is based on a greater statistical likelihood of chargebacks & fraud for an industry as a whole, rather than for a particular company.
This is related to the company’s viability also known as continued profitability.
Both these conditions have an impact on company’s ability to get financing, insurance and merchant accounts.
A business with high level of charge backs is termed as ‘high-risk business’ by banks and merchant account providers. If a merchant receives credit card payments, but customers cancel transactions; refunds and returns; and is involved in credit card fraud, the business is considered as high-risk. If a company has a history of late payments or provide no collateral for loans, the company is termed by the banks as high risk.
Businesses with bad personal or business credit scores, a high chargeback history, a startup in a high-risk industry, or high frequency or high average tickets fall in the category of high-risk businesses.
Such companies do not easily get US domestic processing and usually go for ‘offshore merchant account’. There is a long list of offshore industries, examples are:
Such offshore businesses obtain offshore credit card processing facility.
The businesses need an offshore accounts because of the nature of their business or industry. The need may vary from industry to industry. The reason for offshore account could be any one or more than one from among the following:
An offshore merchant account provider assist a high-risk business in many ways such as:
In US, the domestic merchant account is usually capped out at $50,000 unless the
high-risk business has previous good record to support growth. An offshore merchant account does not put a ceiling on this amount. Unlimited processing facility could be availed by adequately communicating with the payment processor
Business owners in US, who are listed on the TMF or MATCH list are unable to get merchant account in US. An offshore merchant account is ‘offshore’ because the sponsoring bank is located outside the US and have different regulatory rules and underwriting requirements.
Offshore merchant accounts offer some additional chargeback flexibility, but in general a 2% rule applies with an offshore merchant account.
Offshore merchant account provider uses fraud prevention services to detect any problem during, after the sale, after the customer complaints and keep a tag on the chargeback ratio.
With the globalization of business, many high risk businesses and industries are actively engaged in doing business across the world. These businesses have high risk operations due to higher risk of chargebacks and frauds.
In spite of the high risks, these businesses can do business effectively by opening offshore merchant account, which takes care of the interest of such businesses by additional protections.
Are you interested in an offshore merchant account for your business?
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