The world is now smaller than ever before. Free trade and connected devices have allowed people from all parts of the world to make business transactions without borders.
Today, every company has the ability to be fully global from the moment it opens for business.
Manufacturing services are steadily moving overseas, and many business services are not location-dependent. This has given rise to offshore payment processing services.
What are offshore payment gateways?
Offshore refers to a location outside of the region in which a company is based. In the banking and finance sector, an offshore payment gateway is similar to international services that enable customers to find the service outside of the country where their headquarters are located.
In recent years, offshore payment gateways have expanded among international e-commerce businesses as a standard payment option. The primary advantage of e-commerce is that it is borderless, and international businesses can rely on both domestic and foreign transactions. Therefore, online businesses should integrate offshore payment gateways into their websites in order to accept digital, credit, or debit payments from their clients outside their operation regions.
An offshore payment gateway and associated merchant account are financial tools that enable a business to accept online credit or debit card payments from clients who are located outside the country in which the business operates.
Types of businesses that can take advantage of offshore payment processing
High-risk businesses are the primary beneficiaries of offshore merchant services. Other kinds of enterprises can, however, also add offshore merchant functions.
- High-risk merchants
Businesses that are susceptible to illegal transactions are considered high-risk merchants. Most payment processors categorize these companies as high-risk merchants. They might therefore be prone to numerous chargebacks, refunds, and fraudulent transactions.
Not all high-risk businesses are considered illegal. Nevertheless, some are seen as having bad credit card scores, not adhering to security standards, and being prone to a significantly higher number of sales. Banks typically penalize these merchants for these risks by adding extra costs or, in the worst case scenario, preventing them from processing future transactions.
Some examples of businesses in the high-risk category include weapon retailers, blockchain, travel, finance, and health companies.
- Low-risk merchants
Low-risk merchants include companies in the retail, food, and beauty industries. Even though they are considered low-risk, they can choose offshore payment processing if their chargeback ratio is low.
- E-commerce businesses
Processing international payment transactions can be difficult for e-commerce enterprises because they frequently sell to clients around the globe.
Because they can access a larger demographic, the e-commerce sector is able to fully benefit from offshore payment processing. They can increase their income generation while doing so.
Why do high-risk merchants choose offshore payment gateways?
High-risk merchants open offshore merchant accounts for a variety of reasons, including processing volume, industry type, tax considerations, targeted markets, diversification, easy and quick payments in different currencies, cost effectiveness, and increased profitability.
Offshore payment processing companies are known for stringent security requirements. They have implemented strict security measures like address verification, fraud management, and screening systems. Moreover, processors like Emerchantbroker offer 24/7 customer service, which helps businesses with chargebacks and fraud prevention.
- Industry type
Some high risk merchants are not eligible for US merchant accounts due to the goods or services they sell. For instance, offshore merchant accounts are often used by forex trading platforms, adult entertainment, online gambling and nutraceuticals. High risk businesses find that overseas merchant accounts have friendlier regulations and more lenient underwriting than those in the US.
- High processing volume
Foreign banks permit higher processing volumes compared to US banks. Offshore merchant accounts guarantee high volume processing capacity. Volumes are rarely capped, which is especially helpful for high-risk and rapidly expanding merchants.
- Tax purposes
Some businesses open offshore merchant accounts for tax reasons or to take advantage of commercial advantages available in some countries or regions. Others set up offshore credit card processing to benefit from various regulatory frameworks. Consult your business experts I If you want to know if offshore payment gateways are suitable for your business.
Another reason why companies process payments abroad is the diversification of the acquiring banks. Different regions of the world have different cultural or political practices that are more tolerant of particular products or services. Offshore merchant accounts allow diversification, which reduces processing risk while safeguarding core business operations.
- Target market
Another argument for offshore credit card processing is targeted markets. Card acceptance rates are significantly higher when processing through acquiring banks based in the areas where the buyer is located.
- Easy and quick payments in different currencies
Organizations can accept online payments in several currencies through offshore payment processing services. Since customers can easily pay in their local or preferred currency, cart abandonment cases are significantly reduced.
- Increased profitability
Customers prefer online shopping to visiting physical stores because it is more convenient.
For this reason, online transactions with businesses are made easier by offshore payment processing. As a result, these companies are more likely to see repeat business and keep their clientele.
- Cost efficiency
Businesses have the option to sell their goods and services globally at a competitive price thanks to offshore payment processing. Additionally, by lowering foreign currency fees and tax expenditures, firms can lower their overall costs.
In general, offshore payment processing enables businesses to significantly reduce their operating expenses.
Other factors may also influence whether a business needs or benefits from an offshore merchant account. A merchant who lacks approval for conventional banking solutions because of their credit history or that of their company may also benefit. American banks may reject a merchant application for factors other than industry, such as:
- The business has a poor or no credit history.
- The business owners have poor credit histories.
- High return or chargeback ratio
- Owners are not US citizens, or they reside in foreign countries.
- Irregular sales patterns.
- Transactions are conducted in foreign currencies or internationally.
- Transactions being processed at a high average dollar amount or at a high volume
How does offshore payment processing work?
Emerchantbroker offers fraud prevention and reliable online payment processing solutions.
This allows them to guarantee the success of all online payment transactions coming from various regions.
The offshore payment processing process works as follows:
- To make an online purchase, customers must first log in on the retailer’s online portal or website.
- After that, users must provide the data needed for the payment method they have selected. These payment options include online banking, debit and credit cards, and others.
- The data is transmitted to the merchant’s bank.
- The transaction will then be forwarded from the merchant’s bank to the network of the customer’s issuing bank, where it will either be authorized or declined.
- Whatever the outcome, it will be sent to the merchant’s bank.
- Then the offshore payment processing provider will immediately send the outcome to the consumer via the merchant’s portal after sending the outcome to the merchant’s bank.
- The issuing bank will transfer the money to the merchant’s account after the transaction is approved. This includes automated receipts that are emailed to customers and business owners alike.
The entire process is typically completed quickly and safely for customers and merchants alike.
Offshore payment gateway advisory for high-risk businesses
It is important to note that, in contrast to low risk company models, an offshore payment gateway for high-risk business does not mean dubious or illegal business activity. Low-risk business operations do not always include all onshore or conventional, lawful firms.
No matter the level of risk your business faces, all clients must strictly adhere to global AML (anti-money laundering) regulations in order to set up a merchant account and an offshore payment gateway for high-risk companies. This means that our offshore payment gateway for high-risk companies still abides by both local national law and international regulations.
Even if you’re looking for offshore payment gateways for high-risk activities, you should still review the list of prohibited industries before applying.
There are various activities that are considered to be prohibited business fields in some jurisdictions. However, those company models are legal in other countries. Therefore, you can apply for an offshore payment gateway without being concerned about high risk.
Terms and rates for offshore payment gateways
Emerchantbroker offers reasonable pricing for clients with offshore companies. The fees for the various jurisdictions where our clients are headquartered have no variations. Moreover, Emerchantbroker allows you to set up a new payment gateway easily and quickly for your online business.
Your e-commerce company will benefit from affordable international fees and high volume processing when you work with Emerchantbroker.