Are you running a software business?
Many traditional acquiring banks and low-risk payment service providers consider software businesses under the high-risk category because of recurring payments and elevated chargeback percentages. Sometimes they give approval for a merchant account and later terminate it or freeze funds for many weeks. This can badly impact the reputation of the business. You can connect with one of the most reputable high-risk software merchant account providers like QuadraPay. We work with acquiring partners who understand the software and digital-goods-selling business and the risks associated with it.
What is a Software Merchant Account?
A software merchant account is a payment processing account designed specially for businesses selling software like apps, licenses and downloads. A merchant account for software companies allows them to accept credit card payments securely and reliably.
Why Are Software Companies Flagged As High Risk?
1. Digital Products Lack Physical Delivery Proof
An e-commerce business can show a courier receipt or a signed delivery receipt as proof during disputes. However, software is an intangible product. There is no physical delivery, just like an e-commerce product. This creates a major problem during chargeback disputes.
Software businesses can only keep evidence like download history, login activity and account creations. If they dont have these records, then it becomes difficult for businesses to prove that the customer has actually received the product. Hence, traditional acquiring banks and low-risk payment service providers consider software and digital product businesses in the high-risk category and usually do not give approvals.
2. Subscription And Recurring Billing Increases Risk
Many software companies provide subscription billing services to their customers. They charge every week or monthly from the customers automatically. This is highly beneficial for software businesses as it enables them to earn steady incomes. However, it becomes challenging to get approval for a software merchant account. Customers can sign up for any product or service and later forget about it. They identify something suspicious while checking bank statements and raise a dispute with the bank.
3. International Sales Add Cross-Border Risk
Software businesses sell their products globally. They receive payments from various countries, and this increases fraud risks compared to domestic transactions. Each country has different banking systems and currencies. This makes it harder to verify transactions and resolve chargebacks efficiently. QuadraPay provides software company payment processing solutions that support multiple international currencies.
4. Freemium Models Resemble Trial Offers
Many software companies offer a freemium model, which means a user can start with a free trial and then be charged automatically for buying any product or service. Some customers cannot fully understand the model, and they file chargebacks when the charges begin. Traditional acquiring banks consider such models in the high-risk category, especially if the terms are not clearly written on the checkout page.
5. High Chargeback Rates
Digital goods and software businesses generally experience higher chargebacks compared to other industries. The customer can download the software and later claim that they did not receive it and raise a dispute with the bank. Acquirers check the chargeback ratio of the business while evaluating for a software merchant account application. Businesses need to maintain low chargeback ratios and transparent billing to build good credibility with the acquiring banks.
What Underwriters Check In A Software Merchant Account Profile?
1. Clear Product Description
Underwriters need to know completely about your software business, like its products, target users and how users can access it. If you provide a vague description of your business model, then your software merchant account application can get rejected.
2. Website And Checkout Compliance
Your website needs to clearly show pricing, billing structure, refund and cancellation policy. This is highly essential for subscription-based businesses. Customers must understand exactly for which product they are being charged before making a payment. If the information is not clear, then underwriters consider your business in a risky category and may not approve your software merchant account application.
3. Processing History Or Financial Proof
Underwriters check your previous payment processing history of 3-6 months. They check the chargeback ratio and refund rates of your business. If your business has higher chargebacks, then clearly explain the reasons and what steps you have taken to reduce them. If your software business is new, then provide financial details, revenue projections and investor funding details. This will help underwriters to know about your business potential and financial stability.
4. Business And Director Verification
KYB is the standard verification process in the payments industry. Underwriters need to check your company registration documents, ownership details and ID proof of directors. Proper KYB helps acquiring banks to build trust in the software business.
How Does QuadraPay position Your Software Merchant Account Application
1. Honest Application Review
QuadraPay reviews your website, policy details and product descriptions. If we find any issues, then we suggest ways to fix them for quick approval of the software merchant account.
2. Matching With the Right Acquiring Bank/PSP
QuadraPay connects your business with acquiring banks/PSP that truly understand software businesses and digital products and the risk involved.
3. Application Submission And Support
We prepare all your necessary documents and submit your application to the acquiring bank. We also help in negotiating transaction fees, rolling reserves and processing limits for your business.
4. Ongoing Support After Approval
QuadraPay supports you even after the software merchant account is approved. We help you with integration.
Frequently Answered Questions
1. Is a software company automatically considered high risk?
Software companies are usually considered high risk because of no proof of physical delivery, the recurring billing feature and their dealing with international customers.
2. Can I get a software merchant account as a start-up with no revenue?
Yes, you can get a merchant account with almost no revenue. However, you need to have proper business documents, a compliant website and realistic revenue projections.
3. I have been using Stripe successfully. Should I switch?
If Stripe is working well and your transaction volume is low, then you do not need to switch immediately. However, if your revenue is growing, then it is better to get a backup dedicated software merchant account.
4. Do I need separate merchant accounts for different products?
No, in most cases, one merchant account is enough to manage multiple software products and pricing plans. However each website must be approved by the acquirer.
Final Words
A software company requires stable payment processing solutions. You can contact QuadraPay. We work with payment processing companies in the US, UK, Australia and New Zealand and provide quick approval for software merchant accounts. Simultaneously, we provide payment gateway solutions that support multiple currencies. QuadraPay even provides AI based fraud monitoring tools that monitor transactions and halt it if it detects any suspicious activities. Ask us for more details today.