F.A.Q. - Merchant Accounts

Topics
Banking Structure for Processing
Types of Merchant Accounts
Aspects of 'Offshore' Merchants Accounts
Bank Account for Payouts
Structure for 'Online' Credit Card Acceptance
Rates and Fees

Banking Structure for Processing

What is a Merchant Account?
A specific bank account that enables a merchant to accept payment by credit card for goods or services offered through their business. Such credit card payments can only be processed through this type of account.
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What is an 'Offshore' Bank Account?
An international bank account, located in another country, which can be used to simply house funds, or to be linked with a businesses Merchant Account in order to receive business revenue.
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What is an Acquiring Bank?
Sometimes referred to as the Processing Bank or the Acquirer, the bank that has the relationship with Visa/MasterCard and other credit card acquirers and at which the merchant account is setup to initially receive funds resulting from credit card transactions of the merchant. Funds are transferred from the Acquiring Bank into the merchant's bank account weekly. If using a Third Party Merchant Account, it is usually the case that a Processor will be transferring the funds to the merchant's bank account.
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Who is the Processor?

The entity that has an established relationship with the Acquiring Bank. Transactions are processed via the Processor, sent to the Acquiring Bank for authorization, and then settled out to the merchant. The Processor underwrites the merchant account in the case of Third Party Accounts, and forwards documents for due diligence to the Acquiring Bank for underwriting in the case of Direct Merchant Accounts? In either case, the Processor supplies the Payment Gateway and customer service to the merchant.

With Third Party Accounts, the Processor absorbs much of the risk because the merchant is using the Processor's Merchant Account and the Processor is paying settlements to the merchant, in many cases, prior to receiving settlements from the Acquiring Bank. For this reason, it is common for Processors to impose high Reserves to cover their potential losses. However, in the case of offshore accounts, it is common for banks to do this even with Direct Accounts since it is often times the case they are dealing with higher risk businesses that warrant backup Reserves.
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Types of Merchant Accounts

What is a Third Party Merchant Account?
Sometimes referred to as an Aggregator Account, a merchant account used to process the transactions of many merchants all processing transactions under, what can be thought of as, a multitude of sub-merchant accounts. This type of account is usually owned and operated by a processor. It is ideal for merchants that do not qualify for their own Direct (Dedicated) Merchant Account and/or merchants not wishing to setup a corporation with a resident agent in the country of the acquiring bank. This is now required for Direct Merchant Accounts per recent Visa/MasterCard regulations. It is standard for merchants to begin processing with this type of account before acquiring a Direct Merchant Account.
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What is a Direct Merchant Account?
Sometimes referred to as a Dedicated Account, a merchant account solely dedicated to the merchant by the processing bank. In opening a Direct Merchant Account, a merchant acquires a private merchant identification number (MID), and though still processing via a processor's payment gateway, provides their own customer service and is allowed their own billing descriptor (name and number to appear on customer's credit card statement...for Third Party Accounts, the processor's name and number would appear). Many merchants find this lowers their chargeback percentage since customers recognize the charge.

Through a Direct Account, merchants more likely than not enjoy a lower discount rate with the bank and begin to establish their own offshore credit history with the processing bank. It should also be noted that, even though a Direct Account is essentially a merchant's own account directly with the bank, they are still able to take advantage of the processor's payment gateway technology and customer service if they'd like while, at the same time, control their own merchant account. A Direct Account acts as a comprehensive platform enabling merchants to perform a multitude of processing functions, including batch uploads/captures, full control of transactions, and fraud management.
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Aspects of 'Offshore' Merchant Accounts

How is an Offshore Merchant Account different from a Domestic Merchant Account?
The transactions are processed through an offshore bank account. An Offshore Merchant Account is harder to acquire than a U.S. Merchant Account because offshore banks tend to accept higher risk accounts that domestic banks are not willing to take on. Because of this, the offshore banks have a very tedious underwriting process. This is not to say that offshore banks will accept more risk, but they will underwrite accounts considered to be high risk in the industry. Such accounts can range from those simply processing large monthly volumes, those without processing history, and those with a bad rap as with adult, gaming, online pharmacy, telemarketing, and travel.
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Bank Account for Payouts

What Bank Account should I use with my Offshore Merchant Account?
An already existing U.S. Bank Account can be used to accept the funds resulting from the credit card transactions of an international merchant account. However, we provide Offshore Bank Accounts to which a merchant can have funds from their credit card transactions sent as well. Our bank accounts safely secure and hide funds while offering many of the benefits U.S. bank accounts offer, including online banking & international debit cards for easy access to funds.
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How often will I Receive Payment for Transactions Processed Through my Merchant Account?
Funds will be transferred weekly, unless otherwise stated at the time of underwriting, from your merchant account into the account of the bank that you designate for settlement of funds by your processor.
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Structure for 'Online' Credit Card Acceptance

What Credit Cards will I be able to Accept?
A business can accept payment from Visa, MasterCard, and other credit & debit cards through a merchant account. Depending on the processor we send you to, among the cards accepted online are Visa, MasterCard, Discover, America Express, JCB, Asia Debit, Solo, and Switch credit and debit cards. We will be expanding our services to other types of cards as demand for such increases.
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What is a Payment Gateway?
A real-time transaction processing system that operates as a payment service using a secure transaction server on the Internet. Most of the systems our processor's provide are used to submit, authorize, capture, and settle credit card transactions without the need for a separate transaction terminal or processing software. However, often times, merchants will already have processing software and/or shopping cart software established for their website. The software is integrated with the processor's Payment Gateway. Data entered by the customer online is transmitted to the credit card acquirer. The transaction amount is then authorized by the bank in real-time, and the transaction is settled.
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What is a Virtual Terminal?
An online transaction terminal hosted on the Payment Gateway's transaction server. Merchants simply gain access to their Terminal by logging in using their web browser. They can then perform live online transactions using their merchant account. The merchant enters a transaction manually and the Virtual Terminal will process the transaction in real-time just like a physical card terminal would. Just as with an automated Shopping Cart, data entered into the Terminal is transmitted to the credit card acquirer. The transaction amount is then authorized by the bank in real-time, and the transaction is settled.
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What is a Shopping Cart?
A software program that is integrated with the payment gateway of a merchant's website for the purpose of transmitting data from online credit card transactions to the credit card acquirer. The transaction amount is then authorized by the bank, and the transaction is settled just as when transaction data is entered into a Virtual Terminal.
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What makes a Shopping Cart different from a Virtual Terminal?
A Shopping Cart does not require the merchant to enter data manually since the data is already entered online into the cart by the customer and transmitted automatically to the bank.
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What makes a Virtual Terminal different from a Shopping Cart?

A Virtual Terminal is not integrated with the merchant's website. Rather, it is a terminal apart from the website that allows the merchant complete access to their account giving them the freedom to charge customers' credit cards and issue credits back to customers' accounts manually. If they wish, the merchant can have a Shopping Cart linked to their website for automated charges and still use a Virtual Terminal to enter charges and credits manually.

The key difference is that, with a Virtual Terminal, orders can be taken from pre-collected forms or telephone orders and entered manually. In this case, a Shopping Cart is not used. A merchant is however able to have an automated Shopping Cart and a Virtual Terminal, using both to process their online transactions.
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Will the processor you use supply a Shopping Cart with my merchant account, and do I need to have one?
No and No. In most cases, the processors do not supply Shopping Carts with their accounts. They only supply the Payment Gateway with your merchant account so you can process orders online. If you do not sell numerous different products, or if you are just providing a service for a fee, then you probably do not need the extra convenience of a shopping cart. In that case, you can use a Virtual Terminal to enter orders manually in your online terminal separate from your website. For instance, you would retrieve customers' credit card information from a secure form on your website, and then enter it manually in your online terminal. If you would like customers to enter their credit card information themselves, but do not feel the need for a Shopping Cart, you can even have a hyperlink "Pay" button, similar to a "PayPal" button, which directly links to your Virtual Terminal for customers to still take advantage of real-time processing without the integration of a Shopping Cart. If you choose to use a Shopping Cart Program or Software Package that you already have setup, we will let you know whether or not it's compatible with the Payment Gateway the Processor will supply with your account.
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Will the processor you use supply a Virtual Terminal with my merchant account?

In most cases, a Virtual Terminal will be supplied with your merchant account. However, in some cases, after underwriting a particular account, the Processor determines that Virtual Terminal access would warrant too much risk.
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Does my Shopping Cart Software have to be compatible with the Processor's Payment Gateway?
Yes. If you will be using a Shopping Cart with your website, the Shopping Cart Software you use must be compatible with the Processor's Payment Gateway in order for the Cart to function properly. There are usually over 100 popular Shopping Cart Technologies that are compatible with any given Payment Gateway, so there is usually not a problem with Integrating the Shopping Cart and Payment Gateway. If there is, the Processor's have technical staffs on hand to assist you or your technical assistant(s).
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Rates and Fees

What are Offshore Bank Source's Consultancy Fees for Merchant Accounts?
Depending on your particular type of business and certain aspects of your business, the setup cost for your Merchant Account will vary. The cost covers document processing, establishing a connection to the processor, and helping to assist the processor with due diligence through the underwriting process for the setup of the merchant account. The cost also includes the processor's fee for setting up the account along with the Payment Gateway.
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What is a Discount Rate?
The processing fee associated with a Merchant Account. It is the percentage of the gross transaction amount that the bank/processor deducts prior to transferring the deposit into your bank account. Typical Discount Rates offshore range from 3 to 10% of transactions, depending on your type of business and various other factors determined by the specific bank and/or processor at time of underwriting. High volume and/or low risk accounts may qualify for lower Discount Rates. Already well established businesses with good processing history can also qualify for a lower Discount Rate.
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What is a Per Transaction Fee?
The fee associated with each transaction processed through a Merchant Account. It is a nominal amount charged on each transaction. Typical Per Transaction Fees offshore range from USD 0.35 to 1.00 of each transaction.
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What is a Chargeback?
A credit back to a cardholder's account, which occurs when a cardholder informs their credit card issuer, acquiring bank, or the processor that a particular charge was not authorized or that goods or services were not delivered or provided as promised. If a customer alleges the goods or services paid for were not delivered or provided, then the merchant has seven days on average to produce evidence proving the goods or services were delivered or provided or that the cardholder's account was credited. A high Chargeback history can often times result in a Processor holding funds and, in excessive cases, closing the Merchant Account. Excessive is usually considered to be over 2.5% by a standard Processor using international banks. Typical fees range from USD 25 to 40 per Chargeback.
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What is a Reserve?
A given amount of money held by the Processor to guard against excessive chargebacks and other potential financial risks. Most Offshore Processors processing transactions for higher risk Internet businesses generally impose a 5 to 10% Reserve for six months. This is called a Rolling Reserve because each month after the sixth month, the first month's Reserve is paid out to the merchant while the lot of the Reserve 'Rolls' into the seventh month.
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For a breakdown of all costs, please visit http://www.1offshorebanksource.com/merchant_account_rates.htm.