Password must be 8-15 alphanumeric characters with these requirements
- Minimum one number (0-9)
- Minimum lowercase letter (a-z)
- Minimum one uppercase letter (A-Z)
- Minimum one special character "#?!@$%^&*-+<=>"
- Example password 99azTR?!@
Offshore payment gateway with associated merchant account number is a financial instrument used to accept online payments made by credit or debit cards outside the tax residence of the business.
“Cash is a king” used to be one of the main lessons we were taught in Economics. However, with the growth of e-commerce, currently, in many countries, card payments are surpassing cash, the most traditional payment method, and payment gateway is becoming the most popular tool to accept credit card payments.
Who benefits from this shift from one payment method to another? Since the main characteristic of accepting card payments through payment gateway is transparency, the governments of high tax countries finally have an opportunity to control all the transactions made by a merchant. As a result, the risk of tax evasion and money laundering is reducing making it more difficult to cheat in annual declaration. Due to this positive practice, some countries, like Denmark, are even opting for eradication of cash, limiting their citizens to using only credit and debit cards payment systems.
Having a traditional local or low risk business gives its owner all opportunities to obtain a payment gateway and associated to it merchant account in any bank of its country of registration. But what happens when an offshore company tires to contract this service? Since the reputation of many offshore jurisdictions is not very positive the companies registered on its territories have it very difficult contracting additional services such as bank account or payment gateway. The main reasons why financial entities don’t always approve merchant accounts for offshore companies are: recent date of constitution, restriction by countries of operation, nature of business that doesn’t fit into the portfolio of the bank, doubtful background of the beneficial owner or very high average ticket of sales. However, the main reason for decline of payment gateway application is a high risk of chargebacks that can generate a large debt for a bank. Therefore, the best solution for this kind of business is to turn to companies, such as OBS E-Commerce Consulting that offers card-processing services through associated IPSPs.
Payment gateways can be classified by the location of the merchant account in two groups: offshore and onshore. As we have mentioned before, offshore payment gateway and its associated merchant account are located outside of the country of registration of a company that uses it to process card payments. These payment gateways guarantee tax saving and greater anonymity for the beneficial owner but the processing fees are always higher. On the other hand we have onshore payment gateways that are widely requested by traditional low risk businesses. This type of payment gateway is used to accept credit and debit card payments made in the same country where the company is registered. Its advantages are: low fees and proximity but at the same time these merchants are the most monitored by the banks and tax agencies.
Many of our clients think that high-risk payment gateways can be attributed only to illegal or questionable business activities where low risk means onshore, traditional and legal. However, it is not totally true and this classification involves more aspects. Of course, the main credit and debit card brands such as Visa, MasterCard, Amex or Diners Club don’t accept clients whose activity is related to money laundering and illegal activities but these are not the only factors that they take into consideration when approving or declining payment gateway.
The natures of business activity that are usually classified as high risk are those that generate higher number of credit card frauds and chargebacks. Examples of these activities are the following: casinos and bingos, sale of electronic products, software, cigarettes, alcohol, health insurance, jewelry, erotic content, legal services, online marketing, tarot or grow shops. Depending on the nature of the business mentioned above a bank, in order to approve the payment gateway application, my request a special license and rolling reserve. If the request is approved the financial entity will comply with anti-money laundering strict protocols in order to reduce the risks.
Examples of commercial activities classified for low risk payment gateway are: clothes and shoes online stores, sale of flowers, home décor, cheap beauty products and jewelry, motor and sport goods. This type of payment gateway presents low risk of fraud and chargeback for the financial entity, which leads to lower fees and less strict anti money laundering protocols and restrictions.
As we can see, before applying for a payment gateway, it is very important to make a good research of service providers and analyze of your own business. It will help you understand better in which category falls your commercial activity and what your requirements are. Having a low risk startup with small number of sales it might be expensive for you to accept credit and debit card payments through offshore payment gateway. However, once your business starts growing and tax saving becomes a crucial aspect, you might consider switching to offshore payment gateway. Those clients, whose commercial activity is of a high risk and generates high turnovers, might be undoubtedly interested in applying for an offshore payment gateway straight away.