There are two principal motivations for choosing an offshore merchant account rather than one based in the UK. Predominantly, it can be easier to obtain an offshore merchant account rather than one based in the UK. This applies to start-ups and businesses involved in high-risk industries such as gaming, dating websites, adult services, subscription services and businesses where payments are taken well in advance of delivery. Business owners with poor credit histories can often find that they can obtain an offshore merchant account when they cannot do so in the UK.
The second reason is to take advantage of the lower taxation that is available in certain offshore jurisdictions. This applies mainly to larger corporations that wish to reduce their tax bill and to big gaming brands that prefer not to pay UK gambling levies.
Disadvantages of Offshore Merchant Accounts
There are several downsides in choosing an offshore merchant account:
They are almost without exception more expensive overall, though some offshore high-risk merchant accounts can be cheaper than their UK equivalents.
Businesses that use offshore merchant account providers face the possibility of damaging their reputation and they might attract the attention of UK tax authorities.
In case of a dispute, dealing with overseas legal issues can be problematic and expensive.
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Offshore credit card merchant account providers
There are many providers that offer merchant accounts. Some of these include:
Instabill provides offshore merchants for a wide range of high-risk business categories. Following approval it is possible to get an account up and running within two days and fees can be as low as 2.2%. The company is listed in the UK and also operates in the US; it has been providing accounts since 2001.
Cardcharge is a payment service provider that specialises in offshore and high-risk merchant accounts and provides services for a wide range of high-risk business categories. They deal directly with acquirers, or if they cannot find an acquirer that will work with your business then they can provide third-party merchant accounts.
Veripayment is a large specialty online payment processing provider offering offshore merchant accounts and a special selling point is minimising its clients’ exposure to fraud. Fees begin at 4.95% + $0.65 a transaction and there is a 10% rolling reserve for six months.
NPS Global claims to provide offshore merchant accounts for all business categories. Settlement is seven days and funds can be wired to any bank in the world. The company doesn’t publish costs; these are only supplied on application, but it does offer to price match any existing offshore account you might have.
PayNow is located in Bahamas and works with banks based in Cyprus, Panama, and St. Kitts. It is a small company with just 5 people. Fees are from 5.5% + $0.35 per transaction and payments are made ten days in arrears though they can be more expensive for companies without a trading history.
If you are considering an offshore merchant account, it is important to research potential providers thoroughly in order to minimise your exposure to risk. Also ensure that you understand exactly what you are signing up for, so don’t ignore the small print. However; many merchants successfully run offshore merchant accounts, even big brands.
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