A search for merchant accounts and high risk processing reveals hundreds of companies that promise they can be of service to you.   But, basic common sense and a bit of due diligence investigation on your part will narrow down the field to a few real contenders.

Establishing a merchant account through a high risk processing service that works directly with acquiring banks takes time.  That is simply a fact.  Some companies promise to set up merchant accounts for high risk processing in just a few days.  This is not going to happen if an account is direct.

Let’s face it, the amount of paperwork required for a direct account is extensive.  It takes underwriting time to review the file and to get the necessary sign-offs for approval.  Domestically, it will take a minimum of 1-2 weeks for a high risk account to be approved.

For merchant accounts offshore, it can take 3-6 weeks for an account to be approved.  Time zone and cultural differences in the way business is transacted are factors.

How realistic is it to believe a bank will approve you in a few days?  Not likely, is it?  The only way a high risk merchant account will be approved quickly is if it goes through a third party processor,  In this case, you do not have a relationship directly with the acquiring bank.  And it’s always dangerous to put a third party between you and your money.

Be careful of companies that offer merchant account high risk processing services and charge you upfront fees.  Their only goal is squeezing as much money out of you as possible.  The vast majority of reputable companies will not charge you any up front fees and will give you a fair rate quotation.

Companies sometimes complain about the amount of paperwork required to establish merchant account high risk processing.  However, documents you provide during the application process ultimately keep you safe and protects your business.  After all, do you really want to do business with a firm that is not selective about clients?  Ultimately, these types of companies endanger the merchant account processing bank because bad accounts can put the entire processing portfolio at high risk.

After you’ve narrowed down your search for a merchant account high risk processing provider, email and call them.  Find out how long it takes to get a response from an email or phone call.  If it takes more than a day, take the provider off your list.

It’s amazing how much a short telephone conversation can help in your decision making process.  Compile a list of questions and ask each merchant account high risk processing provider to answer them.  In addition, trust your instincts.  If something doesn’t seem quite right or seems too good to be true, your gut reaction is often more accurate than your intellect.

But, the EU wants to aggressively encourage the growth of ecommerce.  Reuters reports that the EU is removing barriers to ecommerce to try to spur economic growth by expanding the single market concept to the online world.

Ole Sohn, Denmark’s Minister for Business and Growth, says the European ministers want to double online sales by 2015.  Sohn told Reuters, “That will give more growth in the EU and better competitiveness.  In a time of economic crisis, it is necessary to get growth back on track.”

Another initiative is to increasing electronic procurement.  This will make it easier for companies to send electronic invoices, saving them administrative expenses.  And it makes conducting business online more secure for consumers.

Domestic and international merchant accounts provide the way for firms to take payments online.  Companies should offer as many payment options as possible because the more ways a customer can pay, the more orders will be received.

Within the UK, credit and debit cards are a popular way to pay online.  And the use of cards is certainly expanding elsewhere in Europe.

However, EU merchants should also explore popular payment methods such as local bank transfers and country specific bank debit processing schemes.

The push for ecommerce growth in Europe is good news for US merchants too, who need to be sure their sites offer international payment options.  Europeans represent one of the largest source of new customers for US companies.

A chargeback is when a consumer contacts his card issuing bank and disputes a charge.  Buyers can dispute a charge up to 180 days after purchasing a product or service.

Banks are ultimately responsible for contingent liabilities of 6 months on every purchase made using a card.  If a merchant goes out of business or cannot meet its obligations, the banks have the responsibility to refund the buyers’ money and thus take the loss.

There are a wide variety of causes for chargebacks.  Some are valid.  For example, sometimes a buyer may not receive the merchandise.  Or a merchant may refuse to refund money to an unhappy consumer.

Sometimes, a buyer will simply call his bank rather than than the merchant and the merchant has no chance to refund the money.  And there’s no doubt that there are a lot of savvy internet shoppers who know how to “game” the system.  They know if they call the bank and dispute a charge, there is a very good chance that the bank will credit their card back for the amount of the purchase.

Other times, neither merchant nor the buyer is to blame for chargebacks.  Chargebacks may be caused by identity theft, fraud and cybercrime.

For example, millions have their identity stolen each year  by identity theft each year.  The American television show “Dateline” reports that a stolen identity, including all credit card and banking information, can sell for as little as $5 on the internet.

As soon as a the stolen card information is released, merchants are targeted by cybercriminals who buy items using stolen credit card information.  The criminals are rarely caught.  Chargebacks ensue and merchants are held responsible for the them.

Businesses lose the money on the goods or services sold.  In addition, excessive chargebacks put merchant accounts in jeopardy.

Merchants have the right to dispute chargebacks.  Companies even win chargeback disputes sometimes.  But, chargebacks remain part of the payment processing history and are considered when chargeback account ratios are calculated.

The credit card companies require that the merchant chargebacks stay under 1%. If a company consistently exceeds the 1% threshold, the bank is subject to fines, which are passed on to the merchant.  And if chargebacks stay high, the bank will terminate the high risk account because it’s become too risky and expensive to keep the account in place.

Historically, high risk merchants had greater levels of chargebacks and were more susceptible to fraud, insolvency or other liabilities.  Whether or not this is true for any particular business did not matter since all businesses within certain parameters are grouped together.  Now, the banks are also reclassifying businesses into high risk categories, even though the companies were not formerly considered so.

There is no doubt that chargebacks cost banks hundreds of millions of dollars each year.  Losses from  one rouge merchant in a payment processing portfolio can cost the acquiring bankmillions. Few payment processors and even fewer banks are willing pay for qualified staff and aggressive monitoring systems needed to mitigate risk across merchant categories.  Managing risk and reserves of high risk merchants simply becomes too time consuming and expensive for most banks and processors.    It is far easier just to stop processing for companies.

The loss of processing accounts is hitting ecommerce accounts the hardest.  Within the UK alone, banks are purging merchants that represent the faintest possibility of risk.  Fast growing high volume ecommerce merchants in any industry are have always been considered high risk.  But, these days, companies with stellar payment processing history are shocked to discover that the banks no longer want them as customers.

Merchants in high risk categories have always encountered challenges in expanding or diversifying merchant accounts.  But these days, even companies that were formerly classifed as low-risk and those with  substantial processing histories with low chargeback ratios, find that few banks want to accept their account.

Additionally, the surge of bank mergers, acquisitions, and changing bank regulations has increased the challenges faced by internet merchants.  Capital reserves mandated by the regulators have caused some banks to exit the merchant processing sector completely.

Offshore Merchant Accounts

Internet merchants are wise to always  explore additional processing options.  These days, it is no longer enough for any company selling goods and services online to rely on a single bank to process payments.  In addition, companies should consider diversification of accounts across multiple jurisdictions to to protect their ability to accept card payments online.

Offshore merchant accounts are a good backup. As domestic acquiring banks become scarcer, offshore financial institutions provide another avenue to secure payment processing accounts. Businesses may find that offshore jurisdictions offer incentives or opportunities that are not available domestically.  And international merchant accounts frequently have no caps on processing volumes, which is helpful to rapidly expanding businesses.

In any event, keeping multiple payment processing options available is part of any good strategic plan for merchants selling online.  The ability to accept cards online is the greatest source of cash flow for most internet businesses and needs to be protected.

Here are some common sense tips for successfully maximizing order from European consumers.

Offer payment options preferred by shoppers in each country..  Credit card payments are not enough.  Direct debit and, local bank transfers are often preferred over credit card payments in Europe.  Preferred methods of payments vary by country.  For example, many UK buyers will use cards.  However, Germans prefer bank transfers.

Still the more payments options you offer, the more sales you will make.  And international merchant accounts that include alternative payments can boost sales as much as 40%.

Translate your sites into local language.  Yes, most Europeans do speak English.  However, a website in a native language builds buyer trust, demonstrates that you’re a truly an international merchant, and shows that you are interested your buyers.

There are 23 languages spoken in the European region.   Translating into all 23 is a big task.  It is best to start with the countries where you believe you’ll have the greatest success with your product.  For example,  translating into German, Spanish, French, Italian, Russian, and Swedish is a good start.

Ask a native speaker review all translations.  A native speaker will proof-read for grammar, phrasing, correct use of slang terms and local variance in language.

It’s distracting for a vistor to visit a site a site and see mistakes in language.  You get only one chance to make a good first impression so go the extra mile to be sure all language is perfect.  Otherwise, you will lose sales.

Geo-optimization lets you display the sites in the native language of the visitor without any additional effort.  You want shoppers to be automatically engaged with your site, without looking for transalation buttons

1. Decrease Risk.  Diversification amongst different acquiring banks is prudent way of assuring processing continuity with backup merchant account facilities
2. Save Money.  Interchange rates vary by region and discount rates for offshore merchant services can be lower than domestic processing accounts.
3. Eliminate Cross-Border Fees.  Processing transactions through merchant accounts offshore can eliminate costly foreign exchange fees for international transactions.
4. Flexible Underwriting.  High risk merchants often find it easier to get approved offshore than with domestic banks.
5. Higher Processing Volumes.  Merchant accounts offshore have no caps on payment processing.  Particularly helpful to fast growing businesses.
6. Multi-Currency.  One of the fastest ways to boost sales from international buyers is to offer payments in local currencies, a standard feature on offshore merchant accounts.

More Advantages to Your Business

As mentioned above, merchant accounts offshore can save you money on discount rates due to interchange differences between regions.  Yet, there are is another ways in which you can reduce costs.

Card processing fees for international transactions are more expensive than fees for domestic credit cards.  For businesses with a global market reach, processing fees charged by domestic acquiring banks for international transactions are expensive and negatively impact operating costs.

For example, when buyer in Europe purchases with a EU card, and the merchant processes through a US bank, it is an international transaction.  Fees paid are substantially than if the transaction was processed through a merchant account in Europe.

Instead, run EU transactions through a European bank, US transactions through a US bank and so forth.   This saves money by taking advantage of low-cost “in-country” processing rates for international transactions.

These are a few to keep your high risk merchant processing running smoothly.

1. Communication.  Confirm that your customer service number is listed on the consumer’s credit card statements.  Promptly respond to telephone calls and emails. It’s amazing how this small step can prevent unnecessary chargebacks.
2. Extraordinary Customer Service.  Give your customer service reps the authority to  resolve any customer disputes.  If a customer requests a refund, issue it immediately.  Do your best to  to resolve the issue in the customer’s favor as often as possible.   Some merchants refuse to issue a refund if a consumer isn’t “right”.  However, it is smarter to issue a refund instead of having the customer initiate a chargeback through his bank.  Even if you win a chargeback, it remains on the processing statement and is factored into the chargeback ratios if the acquiring bank reviews the account or if you apply for another account.
3. Ongoing Customer Contact.  Let  customers know the status of orders.  Email customers when an order has shipped.  Provide a tracking number for the shipment.   If a product is on back order, communicate regularly with the customer and provide the opportunity to cancel the order.
4. Fast Response.  Customers sometimes call their bank to dispute a charge rather than calling the merchant.  You will be contacted and asked for information and documentation on the sale.  Answer all requests immediately and provide supporting documentation.
5. Account Monitoring.  Monitor your high risk merchant account for suspicious activity.  Guard against fraud.  of any transactions that could be fraudulent.  Manually review suspicious orders.
6. Implement Fraud Protection.  Learn how to use automated fraud fighting tools which are a standard part of high risk merchant accounts.  Block transactions from countries that are notorious for high levels of fraud.  Set velocity controls on the gateway to screen out potential fraud.  Validate each credit card transaction against a standard criteria including place of origin of the order, size of the order, referring URL and use all other toolsavailable to you.
7. Comply with the Merchant Agreement.  Read the terms and conditions of the merchant agreement.  Know what your processing limits and ticket size ranges are.   If you are going to have any material changes on the account, contact your merchant account provider.  For example, you may run an advertising campaign that will drive more volume than normal.  Banks hate surprises but are often willing to work with you when they know in advance the reason for changes in the account.
8. Guard Against Chargebacks.  Keep a close watch on chargebacks.  Excessive chargebacks are the primary reason for high risk account termination.  To help avoid chargebacks:

• Do not complete a transaction if the authentication request was declined.
• Disclose all policies including returns, refunds or cancellation on your website.
• Settle transactions and close batches daily.
• For high ticket items, require a signature upon delivery, including proof of identification from the customer.
• For recurring transactions, cancel the order immediately upon customer request.

Here are the most common types of business financials:

1. Balance Sheet.  Also known as a statement of financial position or condition.  A balance sheet gives a “snapshot” of business operations at set point in time, providing information on, assets, liabilities and net equity.
2. Income Statement.  Also known as a  a Profit and Loss Statement.  The P&L provides information  on a results of operations over a period of time.
3. Statement of Retained Earnings.  This shows the changes in a retained earnings over the reporting period. Retained earnings are the part of net income that is retained by the corporation rather than distributed to shareholders.
4. Statement of Cash Flows.  As the name indicates, this gives information on cash flow activities, particularly its operating, investing and financing activities.

Business financials prepared by a licensed professional such as a certified public account are preferred.  But, well-prepared financials created internally by the business can also be accepted.

Credit and debit cards do not have deep penetration in many world markets.  Adding localized payments for your international markets will certainly boost revenues.  Not having them on your site will depress sales and even drive you out of business in a certain countries.

But, you must be sure to offer the payment methods preferred by your customers.

International payment preferences vary among countries.  In the United States, internet shoppers love credit and debit cards.  In many EU countries, buyers prefer bank transfers are commonly used.  In China, Asian cards and bank transfers are used.  Mobile payments are used for micropayments of digital content and online entertainment worldwide.

The simplest way to add multiple payment options is to work with a processor that has already integrated global payment methods onto a single platform.  A single plug in to the platform via an API gives you the ability to switch on and off various payment options to meet the specific demands of your customers.

A good processor will also handle all the necessary FX and currency conversion functions for you.  And provide you a dashboard through which to manage all transactions types and regions on an individual or global basis.

How much can international payments increase revenues?  Some merchant report sales lifts up to 40%.

It’s not rocket science.  It’s common sense.  The more ways your customers have to buy from you, the more sales you will make.

As a result, many companies are seeking additional payment processing facilities.  Maintaining existing accounts, if possible.  And diversifying accounts amongst multiple banks and various jurisdictions to mitigate risk.  This is certainly a smart strategy.

International ecommerce companies can gain even greater benefits by diversifying payment processing accounts throughout the world.  For example, foreign exchange expenses can be drastically reduced.  And emerging markets give these companies the ability to take advantage of a rising middle class of tech savvy buyers who are eager for goods and services.

The easiest way to diversify payment processing is to use a single payment processing platform that has multiple banks attached to it.  One plug-in gives access to merchant account services from financial institutions throughout the world.  Expanding potential lines of credit and extending payment processing capacities.

These days, companies need to protect themselves from the uncertainties of the banking industry. Multiple merchant accounts safeguards your cash flow from card payments.  It’s important to have backup so your business can continue to ring up orders, regardless of what happens with any one bank.