WHAT IS FOREX INDUSTRY?
Foreign Exchange Industry also known as Forex Industry is a huge market where the currencies of different countries are bought and sold. In simpler words various national currencies are traded. For instance, suppose, you want to buy something from Japan then you have to make payment in Japanese Yen as your country’s currency is different and is not acceptable. So, now in order to make this payment you have to buy Japanese Yen by paying equivalent amount in your country’s currency. And to fulfil this purpose you require a broker who will buy it on your behalf from the Foreign Exchange Market.
With this we can state that foreign exchange is converting one country’s currency into another country’s currency.In recent years forex trading has emerged as a very popular and approachable type of financial trading. Every day in fact every minute many more traders are investing and earning pretty good amount of profit. According to the stats this booming industry is worth $1.93 quadrillion!! There are more than 170 different currencies around the world that are traded.
If you are forex broker or dealer who wants to fund their trading accounts from their clients then you need a high risk forex merchant account. It should be noted that forex industry is labelled as high risk by financial institutions so it is a tricky task to get a merchant account approval from them.
For your information, Merchant Account is a type of online account that allows your business to accept payments by debit or credit cards. Retailer, a merchant bank and payment processor make settlement of credit card/debit card through an agreement finalized by them for a merchant account. While there are businesses which are at higher risk than others. Such businesses have to go with a high risk merchant account, which simply means that the merchant has to face various restrictions and high fees.
WHY FOREX INDUSTRY FLAGGED AS HIGH RISK?
This is a very common mistake done by majority of forex merchants; they apply for traditional merchant account without knowing that their business is flagged as high risk. There are various grounds why a processor might label a forex merchant as “high risk”.
Main reasons why forex industry is labelled as high risk in payment processing are as follows:
- High average transaction amounts: Transactions in forex industry are usually high as it deals in different currencies. There are many transaction fees involved in foreign exchange that’s why foreign exchange companies earn high income on each customer. Considerable high average transaction amounts make forex industry high risk because any fraudulent activity or chargeback may cost very high to cover.
- Very high volume of chargebacks: Across the globe, forex brokers are facing the problem of high volume of chargebacks. Chargeback has been a problem for all types of business but industries like foreign exchange industry is likely to attract high volume of chargebacks because of the nature of work and its wide range of transaction across the globe.
- You are an international merchant:If you are an international merchant, deals in multiple currencies, outside the U.S., Japan, India, Canada, China or any other country than you are considered as high risk. And forex is all about international transactions that is why many financial institutions do not provide merchant account to them. Only experienced merchant account provider like iPayTotal offers high risk forex merchant account.
- Number of years in business: To get a merchant account you need to have good credit card history especially when you are into high risk business type. Many new brokers get rejected because of the same. As no bank wants to take extra risk, they ask for healthy credit card history.
- High rate of frauds: Many cases of fraud brokers as well as from forex brokers were reported recently. Foreign exchange is prone to frauds which makes it a high risk industry. Financial institutions take this very seriously as it ruins their reputation in the market. They are very selective in approving a merchant for high risk forex merchant account
- Fluctuation risk involved: There are uncertain constant currency fluctuation for forex traders which makes it risky
PRECAUTIONS FOREX TRADING COMPANIES SHOULD TAKE?
By owning a high risk business doesn’t mean you cannot get a merchant account. You just have to be little careful about things and take certain measures.
- You really need to have a first-hand business experience because that shows your potential to face frauds and risk. Learn from your work and past experiences.
- Maintain a healthy credit card history.
- Clear all your dues on time and prevent liens, judgements and bankruptcies.
- If you had a merchant account earlier also then it will work as an indicator for your new merchant account provider. So be honest about previous merchant accounts and its reason for termination.
- As you know you are flagged as a high risk industry then you should be willing to pay higher fees than traditional merchant account because very few merchant account provider will be ready to provide you high risk forex merchant account.
- Try all possible ways to avoid chargebacks. Use up-todate security measures, use a recognisable descriptor.
- Lastly, do proper research and then only choose a merchant account provider because it plays a very important part in your payment processing. Go through the reviews, customer feedbacks, past experience and then select the most suitable high risk merchant account provider, like iPaytotal.