Money Transfer Payment Gateway: The Insider’s Guide
A money transfer payment gateway is a specialized payment processing solution used by MSB companies to offer safe cross-border money transfers. It allows individuals to send funds from one country to another by submitting the card information on the money transfer website. All this is done while fully adhering to regulatory compliance.
These specialized money transfer payment gateways support a variety of payment methods such as bank transfers, credit cards, debit cards, ACH, and digital wallets.
For some reasons, the credit card processing industry considers money transfer payment gateways as high risk. Only specialized payment processors prefer to work with money transfer and remittance companies.
The money transfer payment processing experts at QuadraPay have written this extensive guide. It aims to provide important information that every money transfer business owner must have regarding credit card processing. We are sure that after reading this entire guide you will have an excellent understanding of money transfer merchant accounts and payment gateways. Let’s begin.
Why Is a Money Transfer Payment Gateway Considered High Risk?
Money transfer payment gateways are considered high risk by sponsor banks because of many reasons. Some of these are listed below.
High Chargeback and Fraud Risk
The money transfer industry supports cross-border transactions. Users send money to different countries. In most cases, these are either workers sending funds back home or these are businesses that use money transfer services to send payments to vendors and employees. Such transactions appear to be always safe; however, it’s not the case. International money transfer payment gateways can potentially attract high chargebacks. It is important for merchants to verify the sender’s and recipient’s identities before initiating transfers.
Regulatory and Compliance Challenges
International money transfer businesses must follow strict regulations such as AML and KYC. If the merchant or the payment service provider is found violating any such regulations, then it can attract severe penalties. Many providers consider complex regulations as a demotivating factor, and that is why they avoid working with money transfer companies.
High Transaction Volumes and Large Transfers. The next challenge faced by payment service providers is high transaction volume and high ticket size. Money transfer companies transfer a high volume of funds daily. Payment service providers avoid working with merchants that work with such a high transaction volume. This increases the credit risk, and many providers prefer to avoid the same.
Due to these associated risks, credit card processors prefer to stay away from money transfer companies. Many prefer to work with low-risk businesses. Fortunately, specialized high-risk processors are ready to support licensed money transfer businesses. These credit card processing companies implement strict underwriting to ensure that only genuine money transfer companies get access to the payment solution.
Types of Money Transfer Payment Gateway
Generally, money transfer companies operate in 3 modes. The most common is the traditional retail outlets where customers come and make transfers using their credit cards over a retail credit card reader. Another model is where the money transfer company is licensed and operates a website or a mobile application or both. And the third mode is of a company that has an online as well as a retail presence. Depending upon the mode of business operation these companies choose the payment solution.
Online Money Transfer Payment Gateway Solutions
With an online payment solution, money transfer companies can accept transfers from the users over the business website or mobile application. The customer visits the website and selects the amount he wishes to transfer. Next, the customer completes the identity verification. After successful ID verification, the customer submits the credit card information, and the transaction goes through.
Retail Credit Card Terminal for Money Transfer Companies
Many money transfer companies operate through a retail store where customers visit and make transfers. At a retail money transfer store, the transactions are done in card-present mode. The money transfer company verifies the IDs of the remitting party and then accepts the transaction. Such types of money transfer businesses are found at tourist spots and airports.
KYC Documents for Money Transfer Payment Gateway
When applying for a money transfer payment processing account, merchants are required to submit various documents to the processor for complete evaluation. Some of these documents are common to other business types; however, a few are specific to money transfer businesses. Let’s look at these documents in detail.
The business documents can include the articles of incorporation, business license, tax identification number, employer identification number, VAT, or operating agreement. The purpose of these documents is to confirm that the merchant has a legally valid business.
Ownership documents: The merchant has to provide a copy of the national ID of all directors. These may include a driver’s license, passport, or any government-issued photo ID. For proof of directors residence and business address, recent utility bills are mandatory.
The money transfer business is a financially demanding activity, and that is why it is important for businesses venturing into this sector to have a sound financial standing. This should reflect in the personal bank statements of directors as well as the business bank statements of the applicant company. If your bank statements show a substantial amount of financial reserve, then the possibility of getting an account increases.
For any business applying for a money transfer merchant account, we will require 3-6 months of business bank statements as well as recent processing statements, which should clearly display the percentage of refunds and chargebacks.
The most important documents for this type of industry are the compliance documents and license. Some of the compliance documents that you will need include an AML policy, compliance program documentation, customer due diligence policy, suspicious activity reporting procedure, and money services business license.
Some additional documents may also be required; however, the processors will let you know those when you make an application. Sending all the documents at the same time helps reduce the overall time required for the approval of the merchant account.
Application Process for Money Transfer Merchant Account
The application process is simple. It begins with an initial consultation with the merchant, asking basic questions to understand expectations. Experts guide merchants through the process and provide support even after approval.
FAQ: MSB Merchant Processing
What Is the MCC Code for Money Transfer Companies?
There are multiple merchant classification codes that may apply to MSBs and related businesses.
MCC 4829 for money transfer businesses
MCC 6010 for financial institutions—manual cash disbursements
MCC 6012 for financial institutions—merchandise, services, and debt repayment
MCC 6051 for non-financial institutions—foreign currency, money orders (not wire transfers), and traveler’s checks.
Your credit card processing company will assign the most accurate MCC as per your business activity.