If you are a businessman, you should be familiar with merchant accounts. A merchant account is nothing more than an ordinary bank account established for business purposes. This type of account allows businesses to make and receive payments using multiple methods, typically using debit or credit cards and other electronic payment methods.
There are generally two types of merchant accounts: domestic and offshore. National accounts are those located in the country of origin of the company. On the other hand, a offshore merchant accountt is established in a non-resident country. It is beneficial for high risk traders who have customers all over the world.
If you are expanding your business beyond your own country, you may want to consider opening an offshore merchant account. This article will explore what an offshore merchant account is and discuss six basic things you need to keep in mind when setting up an offshore merchant account for your business.
1. What is an offshore merchant account?
An offshore merchant account is similar to an international bank account for businesses rather than individuals. “Offshore” means that it is located in a region other than the country where the main head office of the merchant is located. Offshore merchant accounts are suitable for businesses and ‘high risk’ businesses that:
- operates internationally,
- Mainly deals with online transactions,
- Have offices located in different countries,
- Deals with high risk products like pharmaceuticals, nutraceuticals, skin care products, tobacco, etc.
2. How does the offshore merchant account work?
Businesses that cater to international customers have to deal with multiple online transactions in multiple currencies. An offshore payment processor provides a secure payment gateway to ensure secure and threat-proof transactions for these businesses.
When customers transact with a company, they are asked to log into the merchant’s online patent portal and enter certain information such as bank details, credit / debit card number, etc. The data provided by the customer is then transferred to the merchant’s offshore account processor. . They transmit the information to the banking nexus for verification.
Once the information is verified, the data is routed to the customer’s issuing bank for further processing. If the issuing bank approves the payment, it transfers the fund to the offshore bank account electronically. The whole process is fully automated and governed by the offshore account processor. Although it may seem like a long time, the whole process is safely completed in a matter of minutes.
3. Who should acquire an offshore merchant account?
Offshore merchant accounts are particularly beneficial for industrial sectors classified as “High Risk”.
- High risk traders are complex businesses that are more prone to the risk of fraudulent transactions. They are more vulnerable to bad credit scores, potential chargebacks, and multiple repayments. Offshore account processors help things run smoothly in exchange for additional fees.
- E-commerce companies like Amazon and eBay are also classified as high risk merchants. These businesses depend almost entirely on electronic transactions. Offshore merchant accounts help them process overseas payment transactions and accept a wide range of credit cards and multiple currencies.
4. Benefits of an offshore merchant account
An offshore merchant account offers several benefits in return for processing fees, such as:
- The owner of the offshore merchant account has to pay lower taxes than the owner of the domestic merchant account.
- Offshore merchant accounts allow a higher volume of transactions than a domestic merchant account.
- An offshore merchant account can be opened in any currency.
- The merchant would be able to handle all internal and external transactions online.
- Offshore merchant account processors keep all transactions confidential.
- The trader can operate his business anywhere in the world.
- Foreign companies do not have to pay capital tax.
5. How to choose an offshore merchant account?
Choosing a merchant account for your business is a daunting task. There are several factors you need to consider to make sure that the offshore bank you choose keeps your money safe and helps strengthen your brand as well. Here are some tips to keep in mind when choosing an offshore merchant account.
If your business caters to international customers, you would have different currencies in your bank account. Before choosing an offshore account, check if it supports currencies from different countries and helps convert them to the currency you need.
Flexibility and customization
Financing and banking is not a “one size fits all” concept, especially when you are running a large business. So, when choosing an offshore account, make sure that the bank offers you arrangements to discuss rates and conditions and develop a tailor-made solution specific to your business.
As a high risk trader, the safety of your money is one of your top priorities. Check with your offshore account provider to see if they have multi-layered security measures and if they use anti-fraud tools to prevent scammers from breaching the layers of protection.
When you entrust your money to an organization, you need to make sure that all the information you need is disclosed up front. Read their terms and conditions, disclaimers, and contract to make sure the account provider is safe and reliable.
Responsive customer support
When you have a business headquartered in another country and an offshore merchant account in a foreign country, you will need a responsive customer support system to help you oversee all the little things that might come up in management. of a bank account for a complex business model. . Make sure that your offshore bank allows you to contact them at your convenience to help you with your questions and complaints.
6. Tips for Choosing an Offshore Merchant Account Service Provider
You need to make sure that the supplier is reliable before you entrust them with the income for your business. Here are some things to consider before choosing an offshore merchant account processor for yourself:
- Check the credibility of the processor by investigating his background and testimonials from other renowned companies with which he has worked. Go for reputable service providers with great reviews.
- Make sure that all information regarding payment processing and associated charges is provided in advance. Avoid the processor if you find a difference.
- Make sure the supplier is actually offering what they claim. Check if they offer 24/7 customer support, troubleshooting, and maintenance support. Select the processor which can assure you top quality services.
We believe this article has helped you understand how offshore merchant accounts work and what benefits you can expect of them for your business. It’s a great choice for keeping your money safe and growing if you want to expand your business reach and plan to involve international clients.
Interesting related article: “What is a merchant account and why is it important?” “