QuadraPay: Your Solution for Offshore Merchant Accounts
Every day hundreds of merchants face rejections from domestic credit card processing companies. The reasons for these rejections can include a poor credit score, large ticket sizes, high volume expectations, or operating in industries such as CBD, tobacco, wineries, forex, betting, or gaming. Whatever the reason, it should not put a permanent restriction on a merchant’s ability to accept digital payments. For merchants consistently rejected by domestic processors, offshore merchant accounts can be a game-changer.
In this detailed article, written by merchant services specialists at QuadraPay, we provide an extensive overview of offshore merchant accounts, covering benefits, the application process, KYC requirements, and other related questions. We are confident that after reading this industry insider’s guide, you will have a better understanding of offshore merchant processing. By the end, you’ll be equipped to choose the best offshore merchant account provider. Let’s begin.
What Is an Offshore Merchant Account?
An offshore merchant account is a specialized bank account set up in a foreign country. It allows merchants to accept credit card payments from customers worldwide. Businesses from high-risk industries like gambling, CBD, or forex trading typically use these merchant accounts.
Industries That Need Offshore Merchant Accounts
Offshore merchant accounts are exceptionally important for high-risk merchants, as most local banks and payment service providers say no to them. Let us explore a few industries that mostly need offshore credit card processing accounts.
Online gaming merchants are considered high risk because of various reasons, including strict government regulations, the potential for high chargebacks, and cross-border transactions. Local US banks generally do not prefer to work with merchants from such industries. However, offshore merchant accounts are excellent solutions for these businesses. This is because offshore payment processors operate from jurisdictions that may have more relaxed gaming and gambling laws.
The adult industry is often neglected by processing banks. The reason is simple to understand. Banks and PSPs avoid working in this industry because of reputational risk. Merchants from sectors like adult streaming, dating, toys, magazines, novelty stores, cam sites, and entertainment all can benefit from offshore processing. As a matter of fact there are specialised offshore payment processing options for adult content
Trading industries, including forex brokers, prop trading, and forex coaches, can be risky for payment processors. Businesses operating in such industries face uncertainty due to changing regulations and potential fraud risks. Offshore banks and payment processors are well aware of these complexities faced by merchants, including the need for high-volume transaction support and multi-currency payment processing. This makes offshore credit card processors an excellent choice for all Forex-related businesses.
Merchants who sell products including CBD, hemp, HHC, nicotine pouches, snuff (smokeless tobacco), kava, kratom, THC, vape, bongs, hookahs, paraphernalia, and cannabis-related products generally have a very hard time getting approved for domestic payment processing. Inconsistent regulations and social stigma in certain regions make domestic processing difficult for these businesses. Many offshore banks operate in jurisdictions that welcome merchants from such industries. While there is no guarantee that offshore processors may give card processing options to such merchants, they may definitely be worth a try.
Tech support companies are known to experience high chargebacks and returns. The industry is also infamous for its high fraud ratio. All these factors make domestic providers extremely cautious about working with tech support merchants. Still, offshore merchant providers are best suited for these companies. Such processors can handle high-volume transactions and can also offer recurring billing facilities to tech merchants. However, tech support payment gateways offered by offshore providers may be a bit expensive and can have delayed payouts.
The travel and airline booking industry is considered high risk because customers make payments for services that they are not going to receive immediately. Delayed delivery can attract refunds and chargebacks, and thus domestic credit card processors avoid certain travel merchants. Another reason is high-ticket transactions, which create the possibility of chargebacks. Offshore merchant accounts offer higher processing limits, making them a strong option for travel and airline businesses dealing with delayed service fulfillment.
Nutraceuticals, supplements, herbal products, vitamins, and skincare generally have a high refund rate, and such businesses operate in legal gray areas because of product claims. Domestic sponsor banks generally do not prefer to work with such businesses; however, offshore payment processors are flexible when it comes to working with merchants from these industries.
Offshore Merchant Accounts: Key Features
Access to International Markets: Sometimes domestic acquiring banks limit a merchant’s ability to accept payments. Many local processors only permit the acceptance of payments in the merchant’s home currency. This is a risk mitigation step, which can be beneficial for the bank. However, it can be a financial loss for the merchant. Offshore credit card processors allow merchants to accept payments in various currencies and offer settlements in the merchants’ home currency.
Higher Processing Limits: Many domestic payment service providers set low monthly transaction limits for merchants. Domestic processors generally put a monthly volume cap of USD 25,000. However, any e-commerce merchant who manages marketing well can easily exceed this volume in just a few days. In such a scenario, business owners require alternative options to continue processing payments. Offshore processing serves as a lifesaver for such merchants. They offer much higher transaction volume and sometimes even provide no-limit accounts. Any merchant that conducts high-ticket sales or has very high monthly sales volumes should explore such solutions.
Bad Credit Scores: To receive approval for a merchant account from domestic providers, merchants often need to maintain excellent credit scores. It is a fact that every business faces challenges, and many are unable to maintain perfect credit scores throughout their operations. Such businesses with poor credit scores generally face rejections from local banks. On the other hand, offshore processors may offer more relaxed requirements regarding credit scores.
KYC Documents for Offshore Merchant Services
To get the approval of an offshore merchant account, the business must comply with the KYC requirements. This is mandatory. Here is the list of the documents that the merchant must produce to the offshore payment processor.
Required KYC Documents:
- Business Registration Proof: The merchant can provide any document that is proof of a valid business entity setup. This can be a certificate of incorporation or any similar document.
- Financial Documents: Merchants must provide 3–6 months of business bank statements. For some merchants, the processor may ask for the latest credit card processing history. Merchants must ensure that the history includes the chargeback ratio and monthly sales volume.
- Identity Proof: Government-issued photo IDs, such as a passport or driver’s license, can serve as identity proof for directors and all other major stakeholders.
- Address Proof: For proof of the company and the directors’ addresses, the merchant must submit a recent utility bill.
- Website Compliance: For e-commerce credit card processing approval through an offshore bank, the merchant must ensure that the website is fully functional. It should include the mandatory terms and conditions, refund policy, privacy policy, and contact information. Along with that, the website must also have detailed product information with pricing. The website should have an active SSL certificate.
The payment processor may ask for a specific license relevant to the industry. For instance, the payment processor might request lab certificates from a merchant selling CBD oil. A tobacconist license may be required for any business selling cigars or tobacco products. For telemedicine practitioners, the underwriters may request a medical license. For e-commerce and dropshipping merchants, a supplier agreement is generally required.
Offshore Online Merchant Account Application Process
You can understand the entire process in simple steps. It starts with the research and selection of the right provider. The merchant must identify at least 3 to 4 offshore processors that specialize in the merchant’s industry. The merchant should compare features such as currency support, processing limits, and pricing structure. Based on the analysis, the merchant should make the selection.
The next step is the application process, in which the merchant fills out the application form and submits business and personal KYC documents to the underwriters for evaluation.
The third step is the underwriting review of the merchant’s risk profile, financial stability, and compliance. In this step, the underwriters may require additional documents.
The last step is account approval, where the provider sends an offer to the merchant. The merchant reviews the contract and then signs it. In general, the approval timeline for an offshore merchant account is between 1 to 3 weeks. The provider sends the gateway login details and integration information once they approve the account.
Integration of Offshore Merchant Accounts
Let us quickly look at the steps involved in the integration of an offshore merchant account.
In the first step, the payment processor sends API access to the merchant. The API document will have detailed information about various webhooks available on the payment gateway. Along with that, it will also include some sample codes that the merchant may use for integration. The payment processor may also provide a ready-to-use plugin for some shopping carts like WooCommerce and Magento.
Next, the merchant implements the codes or the plugin on the website. Once the integration is complete, the merchant uses the processor’s shared test credit card details to conduct test transactions. After a few successful test transactions, the processor switches the gateway to live mode, and the merchant can start accepting real transactions. The merchant can always contact the processor if there are any technical challenges.
The future and scope of offshore merchant processing
At QuadraPay, we are confident that offshore merchant processors will continue to play a key role in the global e-commerce industry. While domestic processing companies are becoming very choosy about the industries they wish to support, these offshore payment gateway companies are still open to merchants from a variety of high risk industries. The stricter domestic processors become, the more demand for offshore credit card processors will increase. However, it is important to remember that offshore credit card processors may not always be as flexible as they are today.
FAQ: Offshore Merchant Processing
Is there such a thing as a free offshore merchant account?
No, there is no such thing as a free offshore merchant account because they do not exist. Some providers may offer free setup or zero annual charges; however, offering everything for free is just not financially reasonable. For merchants, the quality of service should be more important than looking for free payment processing.
How can offshore payment processing help businesses rejected by U.S. banks?
Any American business struggling to get approval through domestic banks can approach offshore processing companies. After approval, the merchant can use the offshore account just like any other U.S. merchant account.
What is a common obstacle for e-commerce merchants when setting up an offshore merchant account?
The key challenges that merchants generally face when setting up an offshore merchant account include excessive setup costs, delayed approval, and potential tax implications. However, the team at QuadraPay is ready to assist you. Our partner providers can help you set up your offshore company and offshore bank account in various locations.
Is it necessary to register my company in a different jurisdiction to get an offshore merchant account?
In some countries, the credit card processor may ask the merchant to register a local company. In many other countries, this is not mandatory. For example, a offshore payment service provider located in Sofia, Bulgaria, might not ask a Romanian company to register a business entity there to open a credit card merchant account.
Why is Belize a preferred jurisdiction for offshore merchant accounts?
Belize used to be a favorable destination for opening an offshore merchant account, but not anymore. Now there are many other jurisdictions that can offer better solutions. However, it is important to note that the jurisdiction offers a business-friendly environment with low corporate taxes. It can help businesses reduce operational costs.
Which countries are the best for offshore merchant accounts?
The best country for an offshore merchant account can vary depending on the merchant’s requirements and preferences. Mauritius is well known for tax benefits, making it a preferred choice for merchants in high-risk industries. On the other hand, Seychelles is well known for its ease of company formation and lenient regulations. Exporters, AI companies, and SaaS providers prefer Hong Kong. Offshore merchant processors in Cyprus are more comfortable onboarding merchants from fantasy sports, social gaming, and skill competition areas.
Are instant approvals available for offshore merchant accounts?
Some providers may offer instant approvals; however, we don’t recommend them. We recommend approving an account only after thorough risk evaluation and underwriting. Once completed, the merchant can enjoy a more stable credit card processing experience.
