Offshore Merchant Accounts

A question I am often asked is about offshore processing. This has come up enough so that I have to say here, "Pay close attention".

Offshore processing is by definition risky and is only used in environments where traditional US Domestic services will not handle it. The main thing you should ask yourself now is "Why would a traditional US Domestic service not handle this type of transaction?" If you did, you've earned a cookie. Answer: too risky and the processor generally can't get underwriting for it. Underwriting is basically insurance, and as you should know insurance companies rule the world.

Offshore is generally for things such as adult material, time shares, gambling and other things you wouldn't go to with your four-year-old daughter. However, if there is a demand (and there is), then there will always be supply. Enter: Offshore processing. Offshore means any processing bank that is not on US land and is therefore not restricted by US banking regulations. Trust me on this one. The US knows what to do and what not to do (making us the supreme financial super power on the globe) and this is why people leave and go off shore to avoid restrictions like Jonah fleeing God. Remember what happened that time?

I have had a chance to consult for several non-adult themed accounts that were high risk such as time shares and I had to tell them that if they wanted a merchant account to accept credit cards they were going to be forced off shore. There are not a lot of groups that have both.

Now, what to expect. Generally one is going to pay a higher Discount Rate which is a percentage. This is due to the risk nature of the business. For example: a business that has a charge-back rate of 1% in the US will get delisted. A charge-back is not a refund. It is when your customer calls their bank and says that they never purchased the item or service that your company sells that is on their credit card statement. 1% may seem small, but think about your business. Should you ever really get a charge-back? Only in rare cases.

The adult industry; however, can get a charge-back rate of 50%. Half of all purchases are claimed as never made! Imagine this scenario. A wife looking at a credit card statement asks her husband who made a $39.99 purchase from "Ladies Who do Something I won't write here.com"? Her husband creates the best clueless face he can, says it must be a mistake, and while she sits there, calls the bank who issued his card and says that he never made such a purchase.

Just to be fair, there are many times when the man is actually innocent. Companies do make mistakes.

Anyway, these high risks put a premium on the service. Not to mention, as they are off shore and not restricted as American banks are, there are less securities for your money earned. This is where a good relationship comes in. Call. Contact them and see. Talk to an agent and ask what type of assurances do they have from their Offshore Groups. Do they require money down as a security measure? How much higher are the rates than a normal transaction? How long have they worked with that particular offshore processor? What is the normal gripe (there is always a gripe whether offshore or Domestic) about that particular group?

Finally, put in an application and get some more data. Most groups are simply looking for better rates and you want to do plenty of scouting before you jump into high risk ventures. It's better to have friends in the industry with these types of things. OK, I'll be one since you asked. Maybe Ms. Merchant Account can be the other.

If you have any questions on offshore/high risk topics, feel free to post a comment and we will follow up.