Open an Offshore Merchant Account

Merchant accounts are used by companies that have an e-commerce activity. Through this type of account, the seller can easily accept online payments from international clients.

Offshore merchant accounts are created for the same purpose, the difference being that they are set up in offshore jurisdictions. This account is necessary for a business when a large part or its operations is done in a foreign country.

Unlike a regular merchant account, the offshore merchant account can be set up by all types of businesses, including those which develop business operations that are considered to be of risk.

This includes many types of activities. Offshore account providers will not restrict the access of high risk businesses to the online account, only that the fees charged can be higher compared to the ones applied to regular business operations.

What are the advantages of an offshore merchant account?

There are plenty of advantages one can have by setting up an offshore bank account. For instance, one can access an offshore high risk merchant account following a much simpler procedure compared to high risk merchant accounts in the country of origin.

Below, you can find out some of the advantages on an offshore high risk merchant account:

it is better to open an offshore merchant account in the offshore jurisdiction of interest so that you can easily accept payments from local customers;
it is a way through which the online platform can accept large volumes of transactions;
it is recommended to have a diversified portfolio of merchant accounts on the e-commerce platform that can increase the number of completed transactions;
one can obtain an offshore merchant account instant approval, compared to regular merchant accounts providers, who may deny the set up of the account due to the nature of the business;
offshore high risk merchant account providers may accept higher-risk businesses, but they must still apply AML/KYC checks and the card schemes’ (Visa, Mastercard) rules.

Quick Facts
What is an offshore merchant account	It represents a type of account that is made for the purpose of accepting credit card transactions from international clients, regardless of where they are. The transactions are completed through a bank that is located in a jurisdiction different than the one where the merchant account holder resides.
Basic advantages	It is recommeded to businesses that are considered high-risk that develop their operations at an international level. The account allows high volumes transactions and it can be set up in multiple currencies.
Rates charged by services providers	It starts from minimum 2.5% for high-risk merchant accounts.
When it is recommeded to open an offshore merchant account	When it is difficult to set up a merchant account in the home country, due to bank refusals, business activity, the residency/nationality of the applicant, the low credit score of the company, etc.
Main high risk business categories	Online dating, tobacco and cigarettes sellers, weapons sellers, companies developing online auctions, etc.
Documentation required to open a merchant account	The certificate of incorporation, the articles of association, personal identity documents of the company’s founders and other corporate documents.
Submitting financial statements (yes/no)	Yes
Advantages of merchant accounts payment processing	Fast approval procedure, rapid transactions, high volumes of transactions, access to a wide range of currency accounts, lower fees (taxes depend on where the company is tax resident, not on where the account is held).
How to select a service provider	The duration of the approval procedure, the documentation required for setting up the offshore merchant account, the security systems used by the provider, the types of cards accepted, the technical support, etc.
Types of credit cards accepted by the merchant account provider	Credit and debit cards issued in most of the world’s jurisdictions.
Ideal technical support system of services providers	When selecting a merchant account provider, companies should select the provider that offers 24 hours a day/7 days a week technical support to customers who experience any errors when purchasing online.
What influences the rates charged by services providers	The country selected by the investors, the services provider, the business activity developed by the company.
Implementing more merchant accounts on the e-commerce platform (yes/no)	Yes
International coverage of merchant account providers	Companies should select services providers who are present in most of the world’s jurisdictions (there are providers who are present in more than 150 countries).
Why have more merchant accounts on the online platform	It provides a more solid system that can increase the success rate of transactions and it is a way to ensure that when a merchant account is not working properly, clients will still be able to complete their transactions through other available accounts present on the platform.
Types of businesses that can use a merchant account	It is recommended to open an offshore merchant account if you operate in the ecommerce industry, the catering sector, retail, healthcare, non-profit industry, etc.
Personal information of the business owner required by account providers	– the name, – the address where the person has his or her permanent residency, – the personal identification number.
Factors that can influence the approval of the merchant account	The approval of the account can be influenced by the procedures of the services provider, the information offered by the client, the profile of the business, the additional documentation that can be requested by the provider, etc.
What is the underwriting process?	Underwriting refers to the process through which the services provider establishes whether the client is eligible to open an offshore merchant account and can meet the risk criteria for accepting payments.
Business license required (yes/no)	Yes
Duration of setting up the account	Clients can open an offshore merchant account in a period of minimum 1 to 2-3 business days.
Can the merchant account be used for a physical store?	Yes, if the business uses the same payment platform.
Types of fees charged by providers	– the setup fee, – annual fees, – chargeback fee, – early termination fee, etc.
Testing the system for the merchant account	Prior to accepting payments from clients, the service providers must initiate a testing of the system, to identity any potential issues that create errors in the processing of the payments.
What is a payment processor?	The payment processor is the system through which the the money from the client’s bank are redirected to the merchant account.
What is a payment gateway?	The payment gateway is the system through which it is decided whether a payment is accepted or denied. If accepted, the information is sent to the payment processor, which will then process a payment that is secure.
What are the basic requirements for an ecommerce platform?	– an ecommerce website, – valid web hosting, – website domain, – a shopping cart.
What is an ecommerce merchant account?	An ecommerce merchant account is a type of merchant account that is specifically designed for the needs of ecommerce sellers, who typically handle a large volume of transactions on a daily basis, for a wide category of products.
Advantages of merchant accounts for small businesses	– easy to use, – they can offer free accounting invoicing, – direct processing, – compatible with most of the websites, – compatible with most credit card types, – free ecommerce tools, etc.
Fees for mechant accounts available for small businesses	They can offer $0 monthly fees in most cases, and low rates for in-person or online transactions (0.1% to 2.59%).

What are the rates charged by merchant account providers?

If you want to open an offshore merchant account, you must know that you will also need to pay some processing fees charged by the providers.

We invite you to watch a short video on how to open an offshore merchant account:

The rates can vary based on the following: 1) the offshore jurisdiction of choice, 2) the selected provider and 3) the nature of the business.

Thus, if you will address to offshore high risk merchant account providers, you may need to pay larger fees compared to general merchant account providers. Some of the rates can be the following:

for general e-commerce activities, the provider can charge a rate of 2.8%;
for industries such as cryptocurrency, adult, dating, travel, the rates are of 4%;
for forex operations, the rate charged can be of 5,5%;
those selling CBD products can be charged with 7%;
for the pharmaceutical industry, the rate can be of 8%.

What should one know about offshore credit card processing?

Offshore credit card processing refers to a service that high risk merchant accounts users can benefit from in certain situations.

For instance, this can happen when the bank account has difficulties in being accepted by the bank of choice of a business.

Refusals can appear due o a large set of reasons. In the list below you can find out some of the main problems that have been associated with credit card bank refusals and which can be resolved by offshore credit card processing:

the bank decides that the entity has a poor credit situation;
the residency of the applicant can be an issue;
the citizenship of the company’s shareholder/owner;
the industry in which the company carries out its activity.

In practice, banks consider that a business can be included in the high risk category when dealing with activities such as: 1) trade of tobacco, 2) cigarette retailers, 3) electronic cigarettes sellers, 4) CBD retailers, 5) matchmaking and online dating, 6) online auctions, 7) weapon sellers, etc.

The refusal to set up a merchant account can also be influenced by other factors. Thus, an offshore payment processing method can be of help for those who need a merchant account for their business.

Open an offshore merchant account – necessary documents

Whether you want to open an offshore high risk merchant account or if you need an offshore merchant account instant approval, you will have to submit specific documentation to the service provider.

Typically, the documents of the company you represent are required, such as: 1) the articles of association, 2) the certificate of incorporation, 3) the identity documents of the company’s representatives.

Then, for the offshore merchant processing, one has to submit documents referring to the company’s object of activity, the company’s financial statements for the last 2 years of activity or the business licenses required for the respective field.

What are the advantages of an offshore payment gateway?

There are many advantages for which investors should choose an offshore payment gateway system for their online business. This is recommended even in the case in which the company is not considered a high risk business or even when it has a good credit history.

Some of the basic advantages an online business can benefit from when selecting offshore payment processing are presented below:

it provides access to rapid transactions;
the company may pay lower processing fees (its taxes depend on its tax residence, not on the location of the payment provider);
it benefits from a rapid approval procedure;
the service is completely available for business activities that can customarily be refused by onshore banks;
it provides access to multiple currencies.

What are the characteristics of a reliable offshore credit card processing provider?

Foreign investors who will search for a suitable service provider for their business should carefully verify what each services provider can offer. One should be interested in the types of cards accepted by the services provider – 1) credit cards, 2) debit cards, 3) cards issued in foreign countries.

Other matters that should be of concern are: 1) the application procedure, 2) the duration of the approval, 3) the registration procedures, 4) integration systems used by the services provider (the IT systems used by the platform).

Then, companies should verify if the services provider offers reliable fraud prevention software, but also the rates charged for the service.

The international coverage is also important. One should address to offshore credit card processing providers who are present on as many markets as possible, as this increases the reliability of the respective company.

There are services providers who are present in more than 150 countries across the world and they are able to accept transactions in more than 80 currencies.

When selling online and when being able to ship products or deliver services internationally, this should be one of the most important aspects for an expanding business, because being able to provide to customers a reliable and fast offshore payment processing system is crucial for the development of the company.

One should also take into consideration card processing providers who have a 24 hours support system, that can help clients when shopping online. If the service can be available 7 days a week, it is even better.

Please mind that the fees charged by offshore payment gateway providers can be higher if the business activities are considered high risk.

When is it required to have more merchant accounts?

The online sellers are not legally required to have more merchant accounts, but it is highly recommended. This should be a concern for very large international merchants, that have a wide range of transactions from clients from all around the world every single day.

Having an offshore high risk merchant account is recommended so that in the case in which the other accounts experience any technical difficulties, at least one will be functional.

This is compulsory, as not being able to process transactions can lead to unsatisfied customers and this can cost the company a lot, depending on the average value of sales registered per day. Please contact us for more details.

If you are interested in knowing other costs associated with starting a business in an offshore jurisdiction, such as the registration fees or startup capital for offshore company formation, our specialists remain at your service.

Please mind that in certain jurisdictions, legal entities do not require a minimum share capital and that the business benefits from numerous tax exemptions, as it starts its activity.