There are many speculations about what an offshore merchant account is. Some of these have negative connotations, while others offer positive, new business potential. One fact is inevitable; many merchants do not fully grasp the concept. That is why we will detail what an offshore merchant account is the advantages and the process to get one. This is especially important for a high risk merchant account.
What is an Offshore Merchant Account
An offshore merchant account is a merchant account that allows a business to take payments online through credit cards from a banking institution that is not in the same country as the business itself. Some top businesses have started using this financing option to enjoy the benefits it offers, including an increase in sales and a more extensive customer base.
Why Should You Consider an Offshore Merchant Account
Many businesses are forced to opt for offshore merchant accounts, usually due to their high risk industry presence. Usually, high risk businesses have a more challenging time getting approved and set up for a standard merchant account, so a simple alternative is an offshore account. If you are running a high risk business, it will also depend on your payment processing partner's choice. However, signing up for an offshore merchant account is not so bad. It has many benefits of its own; these include:
- Numerous tax benefits
- Increase in sales and market share
- More payment options accepted and currency options
- Transaction processing is more confidential
- Easier payment processing with your ecommerce options
- Extensive transaction options are easier to handle
- Easier for high risk businesses to get set up
- Location is not so important
And much more, we will look at these in detail below:
While many developed countries impose high taxes on businesses, others offer favorable business rates in their country of origin. The aim is to attract more businesses and reduce the possibility of monopolies while providing variety to their residents. The result is that many businesses are setting up offshore accounts in these countries. This choice proves favorable to both the country in which the business sets up an offshore account and the business itself.
Smaller countries tend to experience an increase in economic activity with new businesses' setup, while a business that sets up an offshore account experiences a smaller tax rate.
Offshore Merchant Accounts are More Tolerant
While there is a typical business that chooses to apply for offshore accounts, many businesses that choose this option are high risk. High risk The high risk business model requires a is due to the tolerance that they incur from the banks in foreign countries in which they are to invest. These offshore banks tend to accept the high risk industry merchants and tend to accept almost any industry type; however, they can also be more expensive than the local banks.
Entering New Markets
One of the main reasons’ merchants opt for an offshore merchant account is entering a new market. If the payment processor you currently work with does not offer the opportunity to take payments from other countries, offshore is an incredibly good option. Most U.S. companies tend to want to enter the European market. However, without the possibility of taking payments in Europe, for example, through SEPA, they cannot do this. That is why many merchants see an offshore merchant account as the only option of entering new markets.
Dealing with Higher Volumes
Contrary to local banks, offshore banks are more flexible with higher sales volumes, particularly useful for businesses in the tangibles markets, reducing the need to worry about the number of transactions per month, which is a great advantage that leads to h higher profit potentials.
Registering a Company is Easier
Registering an offshore account can also be a more straightforward process as the requirements are lower and reduced paperwork. Also, the registration rules are more lenient. Rules for offshore merchant account holders are also more flexible than those in the business origin country.
How to Get an Offshore Merchant Account
If you are considering applying for an offshore merchant account, the process is straight forward. Usually, the application with the payment processor itself is free. You will need documents that the payment processor will specify. There is also the usual monthly processing sales volume to qualify for an offshore merchant account, which averages about $50,000.
For European offshore merchant accounts, you may also need to have a physical presence, opening some business presence in the country where you wish to have your account, including proof of staff, office address, and EU bank account.
In the end, it is up to you as a merchant and whether you see an offshore merchant account as the right option for your business. As we mentioned above, there are some benefits to having an offshore merchant account that you can consider. Of course, if a payment processor can allow for some of these benefits without you having to ship your business abroad, this too can be a plus, especially if your business is a high risk merchant account one.