Merchant accounts are short term traces of credit extended by a bank which allow companies to accept card payments. Cash from card payments represents the one greatest supply of income to most ecommerce businesses. With no capability to take card payments, or to support higher amounts of handling as business increases, liquidity is affected. New laws, such as the Basel iii accords, are being imposed on banks in reaction to the global economic situation. These include changes in capitalization risk/ book ratios for banks. As a result, banks are tightening credit, including collections of credit extended to businesses for card processing. As collections of credit get tighter, corporations that be determined by two banks or only one for payment processing are finding it harder to obtain additional lines of credit to support growth. And, if a bank does agree to expand collections of credit, stores might be needed or other constraints imposed to the control account.
They are reviewing portfolios to attempt to unload risky loans, as banks struggle to lessen risk/reserve ratios. Term loans for fixed intervals, for example mortgages and car loans, are tough for a bank to remove. But business account portfolios are easy to purge since business services functions have no term limitations. More, companies and ecommerce bad credit merchant accounts in high risk merchant types are now being targeted because these portfolios represent possible future losses for banks. Ecommerce companies are thought higher risk than stores with actual locations by banks. The card not present atmosphere for net purchases increases the likelihood of fraudulent orders and chargeback’s, developing contingent liabilities for the banks.
Companies in risky processing categories have been at risk of the vagrancies of banks. Through the years, several banks have jettisoned total high risk merchant portfolios. A bank at one time or another has advised almost every risky merchant a bank will no longer manage its high risk processing. But, as the new regulations come into play, businesses formerly classified as standard ecommerce are being reclassified as high risk merchants. These days, ecommerce businesses do not need to be selling jewelry, travel, electronics, digital information or other historically risky products to be classified as high risk merchants. Companies selling clothing books and other reduce risk products are now being thrown into high risk categories mainly because the business is internet based.
As banks examine their portfolios, the majority are taking drastic measures which find retailers that are unprepared entirely off guard. Some banks are eliminating high risk merchant portfolios and online. Additional banks are exiting the merchant processing business altogether. When banks remove business portfolios, all companies handling with the bank are overlooked within the cold. Firms need to find new accounts quickly. Organizations that feel a good processing background as well as a stable partnership with the entire bank will do to guard payment processing records need to reconsider. The changing banking environment makes it imperative that ecommerce companies have a strategic plan in position to make sure continuity of payment processing.