International edition
March 02, 2021

By Ron Mendelson, Fast Offshore Founding Partner

Gaming merchant account: Why is my gaming company considered high-risk? What can I do about it?

Gaming merchant account: Why is my gaming company considered high-risk? What can I do about it?
"Applying for a high-risk merchant account can be one of the most complex parts of the setup process, on a par with acquiring the online gaming license itself," Ron Mendelson says.
Costa Rica | 02/18/2021

The columnist shares the basic insights into merchant accounts, the reasons for high-risk classifications by banks, the possible ways and requirements to acquire one of those accounts, and the following steps.

Ron Mendelson is the Director of Costa-Rica based International Business & Corporate Services consultancy firm, Fast Offshore. With ... (+ Info)

I

f you’re in the process of starting an online gambling company or are considering it, you might have heard that it’s considered a ‘high-risk’ business. But there’s no need to panic. While operating in a high-risk industry does pose some challenges, these challenges can be solved.

One of the essential parts of the setup process is getting a high-risk merchant account for gaming. Without this, you cannot receive or make any payments- both of which are kind of essential in the online gambling business!

What’s a merchant account?

A merchant account is a facility to process payments from customers. It will typically allow payments to be made via credit and debit card. But as mentioned, online gambling companies and other business entities like eCommerce, subscription-based services, forex, and exchanges also fall under the high-risk category. This means they must apply for a high-risk merchant account.

Why is my business considered high-risk?

There are several reasons why your business and those mentioned above are considered high-risk by banks. Typically, there are a variety of behaviors that they consider to be high-risk, these include:

  • High chargeback ratio
  • High refund rate
  • Large volume of transactions
  • High transaction value

Other matters that can result in a high-risk classification include lack of processing history, where your customers are based, where your business is licensed and where your operations are located. 

What can I do?

Getting one of these accounts is not easy but if you comply with the criteria laid down by the bank and stick to the terms of your agreement with them, the process can run smoothly. Firstly, the smartest thing you can do is partner up with a corporate service provider who has existing relationships with account providers and is familiar with the application process. This will give you a great head start and will save you time looking around for options and struggling to meet requirements. 

Navigating the onboarding process with an acquiring bank is always easier with the assistance of experienced professionals. Not only they will help you complete the process smoothly but also typically get preferential rates. 

What are the requirements?

Once you’ve teamed up with a service provider, it’s time to start the application process for your gaming merchant account. For this part, you will generally need to submit:

  • An application form
  • Copy of your gambling license
  • Company registration certificate
  • Certificate of Good Standing
  • Official company documents such as M&A
  • Certificate of Incumbency
  • Register of Directors as well as Register of Shareholders within the last 3 months, signed by the Director of the company
  • Due diligence and official documentation relating to the directors of the company

At the same time, you will need to submit some data such as how many transactions you expect to have per month, the average value of each transaction, and information on where your cardholders will be based. 

To supplement all of this, you will also have to provide due diligence and KYC information on yourself as the applicant, but also for directors, officers, shareholders, and any ultimate beneficiaries. The information required includes at least a certified passport copy, a recent utility bill, a letter of reference (bank or professional) and an up-to-date CV.

Remember, this is just a guide and you may be asked for other documentation depending on the bank and the particulars of your business.

Is that it?

No! Once you have the account, you need to ensure you keep it in good shape and don’t violate any of the agreed terms. If you do, you can find your account closed with very little notice, and it will be very difficult to get an account elsewhere.

To keep your account in good standing, you can take heed of the following tips:

  • Stay within your allowed chargeback ratio. If your rate goes up, take immediate steps to remedy it.
  • Record particulars of every transaction and keep them stored appropriately. This is essential should there be any disputes.
  • Offer full refunds when necessary but always try to negotiate for another kind of settlement such as credit on the account.
  • Have a clear descriptor so it’s apparent what the service is when it appears on a client’s bank statement.
  • Send a transaction confirmation after each deposit.
  • Stay on top of customer service, send satisfaction surveys, and communicate with customers to resolve issues before they happen.

Applying for a high-risk merchant account can be one of the most complex parts of the setup process, on a par with acquiring the online gaming license itself. Furthermore, you need to stay on top of your finances once you have it to make sure you stay in your bank’s good books. To make the whole process much easier, you can contact Fast Offshore who are ready to advise you and guide you through the whole process from start to finish.

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