The biggest risk to ecommerce companies is depending on a single bank to process payments. Card payments represent the largest sources of cash flow for internet companies. But, if you rely on only one high volume merchant account, your cash flow is compromised when the bank processing your payments encounters difficulties.
The risk doesn’t reside with your company. Nor does it matter whether your business is classified as a “high risk merchant”.The real risk to your payment processing comes from your bank.
According to the FDIC “Many banks simply do not have the managerial expertise, resources, or infrastructure to safely engage in merchant processing…” When banks do not know how to manage payment processing “risks can be very problematic, and even lethal, to the bank.
The sad fact is that most banks simply do not know how to properly management merchant processing portfolios. When a bank runs into difficulties, all merchant accounts processing with the bank are at risk.
And the changing banking climate world-wide is further impacting payment processing accounts.
The banking industry throughout the world is evolving rapidly. New regulations are requiring increased capitalization and more reserves. As a result, credit is getting tighter.
A merchant account is nothing more than a short term line of credit that banks extend to businesses. As lines of credit are drying up, payment processing is being affected.
Companies seeking payment processing discover it is challenging because fewer banks are willing to underwrite merchant accounts. And ecommerce companies with existing lines of credit are shocked to find out that banks will not increase lines of credit to accommodate growth.
Additionally, banks are under pressure to control potential losses from contingent liabilities. The banks are examining payment processing portfolios with an eye to getting rid of accounts that represent the slightest bit of risk from chargebacks or fraudulent transactions.
Ecommerce accounts, not matter what product or service is being sold, are considered higher risk because no card is physically present at point of sale. And comapanies selling what were traditionally lower risk products, such as books and apparel, are being reclassified by the banks into high risk merchants because of fears of future chargebacks or fraudulent transactions.
Large ecommerce companies are aware of the strategic necessity to have multiple merchant accounts in order to protect cash flow and liquidity. Additional lines of credit available through multiple banking relationships give companies access to virtually unlimited payment processing.
But, how does a company identify and establish multiple banking relationships? And how can multiple merchant accounts be managed effectively and easily?
The simplest way to manage multiple merchant accounts is to use a payment processing gateway that lets you load balance between accounts. View and manage all accounts individually or globally through a single login.
The payment gateway lets you easily establish accounts through the banks connected to the gateway. Simplifying account management. And giving you access to high volume processing capacity to power your business growth.
Interested in protecting your ecommerce business by diversifying your payment processing accounts?
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