For businesses operating on the internet, including general ecommerce, travel, mail order & telephone order, a high volume of credit card transactions is natural. Such business thrive on a high volume of transactions, which also lead to a higher risk of chargebacks and credit card fraud, leading to their high risk classification, and consequently, leaving the merchant with difficulty in obtaining and maintaining a suitable merchant account or third party merchant account. For many of these businesses, their online presence is not just the key to their growth, but their very survival. In order to grow their business they must consider opening an International Merchant Account.
With the heavy growth of online businesses and increase in favorability of online shopping consistently over the years, e-commerce has spread to every corner of the world, not just in terms of customers, but in terms of retailers as well. The growth of non-US online businesses is phenomenal in its own right, but more noteworthy is the growth of e-commerce outside US shores. Hence, the need for accepting foreign currency payments has also become more significant over the years. An International Merchant Account will allow the merchant the ability to accept foreign payments in the currency of where their customer is located without the high currency conversion rates to their customer.
With a domestic merchant account, there are usually extensive security deposits and screening requirements. Additionally, for a high volume processor, a domestic bank may not be interested in providing credit card processing services. The other option is to go offshore to find a provider who specializes in high risk merchant accounts. However, with offshore providers, there is usually a minimum value required each calendar period, and processing rates may be substantially higher than in the case of a domestic provider.
International Merchant Accounts provide multi-currency processing abilities with unlimited processing volumes. They usually will require a minimum transaction value and are not suitable for newer businesses that are not going to be able to meet the minimum processing volume. However, international merchant account providers are usually biased in favor of low to medium risk businesses.
Non-US businesses that are incorporated outside US jurisdiction will sometimes depend heavily on US as well as other global markets for business growth. The same applies to businesses that want to access the UK or mainland Europe market, but would not like to, or are unable to set up a legal entity in that country. Setting up a legal entity in a specific jurisdiction implies having to comply with taxation and legal procedures, which a foreign business may not be able to afford in terms of cost or time.
These businesses in particular will face substantial difficulties in obtaining a domestic merchant account, as domestic banks will only cater to businesses that are within the jurisdiction of their home country’s laws. Third party providers will only accept USD payments and these providers will not provide services to businesses registered or incorporated in specific countries (usually lesser known countries or those known for a high propensity of credit card fraud).
The key advantage of an international merchant account is the ability to cater to a certain geographical market while benefiting from transaction/processing cost savings and potential tax benefits as well. In addition to USA merchant accounts, Carribean, Panama, St. Kitts, Middle East, Germany, Switzerland, Europe, Australia and South African merchant accounts are also available.
International Merchant Accounts work through a merchant account provider who has relationships or tie ups in place with banks in the region of interest. For instance, in case of a European Merchant Account, a merchant (European or non- European) will approach a merchant account provider who deals with certain banks in the EU who specialize in providing merchant services to business that may or may not be registered as corporate entities in the European Union. This bank will then proceed to apply for and obtain a merchant account (enabled with multiple currencies as per the need of the merchant). Once the merchant account is approved, the merchant will need to incorporate in the area of jurisdiction of the bank. Once that is done, the bank will complete the set up of the International Merchant Account and the merchant will be able to start processing transactions.
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