Panama Payment Gateway: A Comprehensive Guide for International Businesses
A Payment Gateway plays a significant role in the daily operations of any ecommerce business operating in Panama. Every Panama-based ecommerce business, whether small or large, requires a payment gateway and merchant account. With the right merchant account, companies can efficiently accept card payments from their customers.
QuadraPay is an experienced partner when it comes to providing payment gateway solutions for credit card processing in Panama and all its cities like Colón, Boquete, Pedasí, Coronado, and El Valle de Antón, to name a few. Our team of experts has created this extensive guide for all merchants that need detailed information about all aspects of credit card processing in Panama. We are confident that this guide will answer all your queries related to Panama payment gateways and merchant accounts. Let’s begin.
What is a Panama Merchant Account?
A Panama merchant account is a specialized bank account that allows ecommerce businesses to accept online credit card payments from customers in Panama and internationally. These accounts are especially beneficial for merchants operating in high-risk industries and those businesses looking to expand their operations in Latin America.
What is a Panama payment gateway?
It is a service that works together with a Panama merchant account. The payment gateway acts as a bridge between the Panama merchant acquiring bank, the merchant’s website, and the card brands. The function of the payment gateway is to validate transactions, stop fraudulent transactions, pass transaction communication between all parties, and ensure smooth transaction flow.
Benefits of a Panama Merchant Account
There can be many reasons why a business may opt for a Panama merchant account. Such accounts can bring in a variety of benefits.
Merchants get access to the growing market of Latin America. Panama is strategically located and has a robust economy in comparison to many other Latin American countries, which makes it an attractive destination for international businesses. According to the World Bank, Panama has consistently been one of the fastest-growing economies in Latin America, with an average growth rate of 4.6% between 2014 and 2019.
Another reason that makes Panama one of the favorite destinations for E-Commerce businesses is favorable tax and economic conditions. Panama offers a merchant-friendly territorial tax system, meaning only income earned within Panama is subject to taxation. This alone can be a significant tax advantage for international businesses.
Many acquiring banks in Panama offer multi-currency merchant accounts, which allow local and international businesses to cater to a larger global customer base.
Merchants from a range of high-risk industries have found Panama payment solutions to be reasonably flexible. This merchant-friendly approach of various acquiring institutions in Panama makes it a perfect choice for businesses from hard-to-place industries.
Another reason which makes Panama an extremely attractive destination for businesses is enhanced privacy and strong banking. This provides an additional layer of secrecy for businesses and their transactions. However, it is important to know that Panama banks and merchant acquirers follow the mandatory regulations as per local and international laws, including reporting income for taxation purposes.
Application and Approval Flow for Panama Payment Gateway.
For an offshore company that wishes to get a payment gateway in Panama, the application process can be a bit complex. The language barrier and low online visibility of acquiring companies can make the search difficult. With a partner like QuadraPay, the application process can become easy. Let’s look at some steps involved in the process.
Finding a reputable payment service provider in Panama is the first task. It includes identifying providers and then evaluating their service offerings and comparing the pricing structures. Based on the analysis, the perfect payment gateway solution is chosen.
After selecting the payment provider, the merchant is required to submit business documents and an application form for underwriting. These documents are popularly called KYC in the payment industry. The full form of KYC is “Know Your Customer.”
The applicant company must have a valid registration in the public registry of Panama (Registro Público de Panamá). The applicant company/business can be of any of the following corporate structures:
Corporations (Sociedad Anónima or S.A.): This is the most common type of company structure in Panama and is similar to corporations in other countries. This type of structure offers limited liability for the shareholders and also offers limited confidentiality of ownership. This type of company registration is generally used by ecommerce companies for international business, asset protection, and holding companies.
Limited Liability Company (Sociedad de Responsabilidad Limitada or S.R.L.): This is similar to an LLC in other nations. It can be managed by one or more members and has fewer formalities than S.A. This type of structure is generally used by growing or small-size ecommerce companies.
Partnerships (Sociedades en Comandita and Sociedades en Nombre Colectivo) and General Partnership (Sociedad en Nombre Colectivo): These structures are for regular partnership businesses. Both structures slightly differ in terms of liabilities of the partners.
Sucursales de Empresas Extranjeras: Many offshore companies use this structure to register a branch in Panama to conduct ecommerce business. This type of company operates as an extension of the offshore company. International companies register local entities to operate directly in Panama.
Sole Proprietorship (Empresario Individual): This type of business structure is owned by a single person, and the owner takes full liability for business profit, loss, and debts. This type of structure is suitable for small and individually-run ecommerce businesses.
Depending on the structure of the company, the KYC requirements may differ. Here is a list of some general documents:
- Filled merchant account application form
- Business registration document
- Proof of address
- Company directors’ photo ID
- Domain registration proof
The merchant must submit all the required KYC documents along with the application form to the payment processor. Once the processor receives these, the underwriting process starts.
The underwriters start with business model analysis. They evaluate the risk level associated with the merchant’s industry. Certain high-risk industries like CBD, high-ticket items, or travel undergo extensive analysis.
For ecommerce merchant accounts in Panama, the underwriters review the merchant’s website to make sure it complies with legal requirements. The site must have clear terms and conditions, and it must display the products/services accurately and in detail.
The underwriting team may also check the credit score of the business owner. Businesses with poor credit scores may be subject to higher fees, rolling reserves/fixed reserves, or even rejection. Business credit is evaluated for companies that have established credit profiles.
The underwriting team also assesses the expected monthly transaction volume and average ticket size. This comparison gives an excellent idea about the risk potential of the merchant. They also evaluate the potential for chargebacks as per the nature of business and past processing history.
It is mandatory for underwriters to do the PCI Compliance check. The business must adhere to Payment Card Industry Data Security Standards (PCI DSS) to ensure the protection of cardholder data. KYC and AML compliance are done to verify the legitimacy of the business and prevent fraud.
Based on the above-mentioned checks and many other factors, the underwriters decide whether the merchant can be approved or rejected. (Merchants that are rejected can look for other options like high-risk merchant accounts or alternative payment methods.) If approved, the underwriters will finalize the terms of the Panama merchant account agreement that includes details of fees, reserves, and transaction limits.
After signing the contract, the merchant starts the integration process and initiates test transactions. The credit card payment processing company validates the test transactions and then switches the account to live mode. Even after approval, the account stays under regular monitoring to reduce risk.
Types of Payment Gateways in Panama
There are a variety of payment gateway options available in Panama. Depending on the business needs, a merchant can select the most appropriate solution.
Hosted Payment Gateways in Panama: This is the most common and easiest payment gateway solution widely used across Panama. In this type of payment gateway, the customer is redirected to a hosted payment page where they can submit their credit card details. This payment page is hosted on the PCI DSS compliant web server of the payment gateway company.
A hosted payment gateway is very easy to implement and requires minimum technical knowledge to operate. It also reduces the PCI DSS compliance burden for merchants. To match the look and feel of the merchant’s brand, most hosted payment gateways offer customization options which allow modifying the colors and adding logos. This kind of gateway is best for small and medium businesses that do not have technical resources for high-end integration.
API Integration-Based Payment Gateways in Panama: This type of gateway allows direct integration of the merchant’s website or application with the payment gateway by utilizing Application Programming Interfaces, also known as APIs. An API-based payment gateway allows Panama companies to have much better control over transactions and user experience. Merchants can extensively modify the checkout process to match the brand’s look and feel. The merchant must have technical expertise to implement such a solution. API-based payment gateways are extremely popular with larger businesses in Panama that have in-house technical teams or access to experienced developers.
Invoice Link Payment Gateways in Panama: This type of payment gateway generates unique payment links for each invoice, which the merchant can send directly to the customer for transaction processing. This type of gateway is highly beneficial for businesses that have irregular billing cycles. An invoice link payment gateway is easy to integrate with popular accounting software. This type of payment gateway is especially popular among service-based businesses, freelancers, and companies that need to accept project-based billing.
Offshore Payment Gateways in Panama: This type of gateway processes credit card transactions through banks located outside of Panama. Offshore payment gateways are generally more accommodating for merchants from high-risk industries. These gateways may offer certain tax advantages and provide access to a wider range of currencies.
International Payment Gateways in Panama: An international gateway specializes in processing payments across multiple countries and different currencies. These types of gateways generally come with real-time dynamic currency conversion features. International payment gateways utilize robust features to reduce fraudulent transactions. Panama companies with significant international customer bases or those planning to expand globally generally prefer such payment gateways.
High-Risk Payment Gateways in Panama: This type of payment gateway is designed specifically for industries that are considered high-risk by traditional credit card processors. With such solutions, merchants from various high-risk industries including online gaming, CBD, forex, crypto, prop trading, hemp, kratom, dating, escort, pharmacy, and peptides can accept credit card transactions. With this kind of payment gateway, merchants are generally required to pay a high-risk registration fee on an annual basis. The acquiring bank and the payment processor reserve the right to decide which industries they are willing to support for credit card processing.
Mobile App Payment Gateway SDK/Mobile API in Panama: These solutions provide software development kits, also known as SDKs, or mobile APIs which allow merchants to integrate payment processing directly into mobile applications. This type of solution is optimized for mobile devices and is Android and Apple friendly. Customers can easily make in-app purchases by using this type of gateway. Mobile app companies or those that wish to target the mobile commerce market in Panama generally use such gateways.
Key Considerations for Panama Merchant Accounts
Certain factors must be kept in mind while choosing a payment gateway or merchant account in Panama. These factors can significantly help merchants in selecting a secure, efficient, and affordable merchant account:
Regulatory Compliance: The Superintendencia de Bancos de Panamá (SBP) is the primary regulatory body that oversees financial institutions in Panama. Merchants should check if they can validate the payment processor’s details on the SBP website. This simple check can ensure that the merchant is working with a valid processor.
Currency and Payment Method Support: Merchants should work with a payment processor that supports both local and international currencies and provides a wide range of payment methods. Some of the most popular payment methods in Panama include Visa, Mastercard, American Express, Discover, JCB, Clave, Nequi, Punto Pago, and PayCash.
Language Support: For international merchants in Panama, it is important to receive support in both English and Spanish. The payment gateway company should provide support through various channels including phone, chat, and email. The more channels a merchant has for support, the better it is.
Scalability: E-commerce business has phenomenal growth potential, which is why it’s important for merchants to consider a processor that can offer scalable options. Merchants must consider their future growth plans while selecting a payment gateway that can accommodate increased transaction volumes.
By carefully evaluating these factors, merchants can select a Panama merchant account that best suits their business needs. Such a solution will be good for overall success of merchants operations in Panama and beyond.
FAQ: Credit Card Processing In Panama
How long does it take to get a merchant account in Panama?
The application approval timeline depends on many factors, including the company structure, industry type, availability of documents, and the merchant’s risk profile. Generally, accounts get approved within 2-3 weeks, provided the merchant submits all the documents and responds on time.
How does the merchant receive money from the processor?
After a transaction, the money stays in the processor’s holding account for the agreed holding period. After this period, the funds are sent to the merchant’s registered business bank account. The processor sends the funds after deducting processing fees and other agreed charges.
Can US and EU merchants open a payment gateway in Panama?
Yes, American and European entrepreneurs can get a payment gateway in Panama. However, they must comply with the requirements of the local processing company and Panama’s local regulations. This includes having a registered Panama company with a local business operation permit.
Are there specific requirements for US merchants due to FATCA regulations?
Yes, American merchants must be fully compliant with FATCA (Foreign Account Tax Compliance Act) regulations. Panama banks will report US persons’ account information to the US tax authorities. US merchants must also ensure they are reporting their worldwide income, including that from Panama, to the IRS.
Final Words
A Panama merchant account can be a valuable asset for any business that wishes to grow within Panama or expand its reach in Latin America and beyond. By understanding the concept of payment processing, the benefits it brings to the business, and key considerations, merchants can make better decisions and choose the right solution.
Whether you are a local Panama business looking for favorable processing conditions or an international company wanting to establish a footprint in the Panama market, our solutions can be perfect for you. Our Panama payment gateway solution comes with a blend of flexibility, privacy, and economic opportunity that can propel your e-commerce business forward in the Latin American and global marketplace.
