Forex Trading Merchant Account | Payment Processing For Forex Trading Companies
Traditional acquiring banks consider forex businesses under the high-risk category and usually reject the forex trading merchant account applications. Forex trading companies can connect with QuadraPay. We connect forex trading companies with payment service providers that truly understand the industry and the risks associated with it.
Why Are Forex Trading Companies Classified as High-Risk Merchants?
1. High Chargeback Risk
Forex trading does not guarantee that you will always make money. People can even lose money. Some people get emotional and frustrated, and they request a refund from the bank. This can put the acquiring bank at financial risk.
Many acquiring banks and low-risk payment service providers freeze funds or terminate accounts of forex trading companies because of a slightly elevated chargeback percentage. In such scenarios, merchants cannot accept any new payments from the traders. This disrupts the cash flow of the business.
QuadraPay has established a network with the finest payment processing companies, and they give quick approval for a high-risk forex trading merchant account.
2. Regulatory Complexity And Jurisdictional Inconsistency
Forex trading companies usually work with various countries. Each country has its own rules and regulations related to trading, which can create confusion for many acquiring banks.
For example, a forex broker can have a license from prestigious authorities like the Financial Conduct Authority and the Cyprus Securities and Exchange Commission. Still, it may not be valid in another country.
Acquiring banks need to carefully check whether the forex trading company is following the rules of every country from which it is accepting payments. Many acquiring banks don’t want to handle this complexity and reject the forex trading merchant account application.
3. AML and KYC Obligations
Forex trading companies should follow strict rules related to AML (anti-money laundering) and KYC (Know Your Customer). These rules are set to prevent illegal activities. KYC means the merchant needs to verify the user’s identity by asking for name, contact details, identity proof, and sometimes bank details. AML means the trading company needs to monitor the transactions of the customer and report if it finds any suspicious activities.
Acquiring banks can face heavy penalties if the forex trading merchant does not follow AML and KYC policies. Some acquiring banks may not have expertise in checking whether the forex trading company is fully compliant, and hence, they reject the forex trading merchant account application.
4. High Average Transaction Values
Forex trading usually involves large amounts of money. Traders deposit thousands of dollars, euros, and pounds into their accounts.
High transaction volume increases the financial risks of the acquiring banks. Monitoring and managing a high volume of transactions requires advanced systems and resources. Not all acquiring banks want to handle such complexities and hence reject the forex trading merchant account application.
5. Cross-border payments
Forex trading companies operate globally, which means they accept payments from customers of various countries. Each country has its own tax laws and banking systems. Cross-border payments even increase fraud risk.
Hence, many traditional acquiring banks and low-risk payment service providers consider forex businesses in the high-risk category and reject forex trading merchant account applications.
The Problem With Aggregated Payment Platforms
Many businesses use platforms like PayPal and Stripe for accepting money from customers. These platforms offer fast onboarding and do not involve much scrutiny. But all the businesses share merchant accounts. This is good for low-risk businesses. But PayPal and Stripe are not meant for forex trading companies. In some cases high-risk accounts may get terminated, or funds may get frozen for 90-180 days if the payment system of Stripe or PayPal finds an elevated chargeback percentage. (Please note this happens only for very high-risk merchants). The best solution is to get a dedicated high-risk forex trading merchant account.
What Do Acquirers Require From a Forex Trading Company?
1. Regulatory License Documentation
Forex trading companies need to have a valid license to operate. Acquiring banks check which authority has given a license, such as the Financial Conduct Authority or the Cyprus Securities and Exchange Commission. They even want to ensure whether the license is valid and active. If the merchant works as a partner, then it must show its relationship with the licensed company. If the merchant cannot provide proper licensing proof, then acquiring banks will not approve the account.
2. KYC and AML Policy Framework
Acquiring banks want merchants to follow proper KYC and AML policies. They check whether the merchant verifies user identity before signing up, monitor each transaction, and report any suspicious activities.
3. Chargeback History and Dispute Management
If a forex company has done payment processing before, then the acquirer will check the previous chargeback and refund ratio. Forex merchants must clearly explain the reasons for disputes and chargebacks and what steps they have taken to reduce them.
4. Business Bank Statements
Acquiring banks usually ask for 3-6 months of bank statements while reviewing for a high-risk merchant account for forex. This will help the acquiring bank to understand the cash flow and financial stability of the business. If the company is new, then it needs to show investment proof, estimated transaction volumes, and a business plan.
5. Website And Platform Compliance
Acquiring banks also review the merchant’s website; it needs to have clear terms and conditions, risk warnings, and withdrawal policies. A poor website design or complicated terms and conditions are considered a red flag by the acquiring bank.
Forex Merchant Account: Key Infrastructure Considerations
1. Multicurrency Processing
Traders prefer to pay in their local currencies. So, forex companies need to have a payment gateway that supports multiple currencies like USD, EUR, and GBP.
2. Multiple Payment Methods
Forex traders should not depend only on cards for payment processing. The solution must support multiple payment methods like credit card, debit card, e-wallet, gift cards, APMs, and cryptocurrencies.
3.3D Secure Authentication
QuadraPay provides a forex merchant account and payment gateway solutions that provide 3D secure authentication. It adds an extra security layer while doing transactions and reduces chargeback and fraud issues.
Frequently Answered Questions
1. Does a forex company need any regulatory license?
A forex broker needs a valid license to get a merchant account. A license from renowned authorities is usually preferred. Acquiring banks usually reject a forex trading merchant account application form if it does not have a valid license.
2. How long does the approval take for a forex merchant account?
If the merchant submits all the necessary documents, then the forex trading merchant account application gets accepted within 2-4 weeks.
If documents are missing or the website is not properly designed or does not list the terms and conditions properly, then the merchant account approval gets delayed.
4. What fees should a forex merchant expect?
Forex merchants are considered in the high-risk category. So the payment processing fees are higher compared to normal industries. Forex brokers need to pay 2.5 to 5 percent per transaction. A small percentage of each transaction (5-10 percent) is usually kept by the acquiring bank as a rolling reserve. The bank holds it for a period of 90-180 days.
Conclusion
Are you a forex trading entrepreneur and struggling to have a stable payment processing solution? If yes, then you can connect with QuadraPay; we have done partnerships with the finest processing companies of Europe, the US, and the UK. We will provide quick approval of a forex trading merchant account. Our payment gateway solutions support multiple currencies and various payment methods. Contact us today.