The foreign exchange is a vast market. On average, a turnover of over $5 trillion is traded in the market every day. When different currencies trade, a considerable impact is experienced in the cash flows, investments, and tradings of different countries. The selling of currencies attracts different participates. Banks, insurance companies, and individuals all seek a share of the liquid market. The interest is basically because of the high potential for high returns in foreign exchange markets. But with huge potential comes the high possibility of risks for the investors.
For years, forex trading companies have struggled to find reliable payment processing solutions for their business. They are always on the look for payment gateways that are safe and acceptable for their large transactions. With every minute proving crucial for all their debit and credit card payments, finding a reliable payment processor is of utmost importance.
Most payment processors have a great concern for the volatility of the forex market. Forex trading has a high potential for fraud. There is also the concern of significant losses in the case of substantial differences in the market margins.
As these merchant account providers struggle to adapt to changes in the forex market, traders are struggling to find the best forex payment processing solution for their business. They need to have a better understanding of both their businesses to succeed. Understanding the risks of forex trading is beneficial for productive cooperation between payment processing solutions and forex traders.
The Foreign Exchange Risk
The foreign exchange risk arises from the changes in the value of currencies. Since the forex market transacts with different national currencies, a change in the supply and demand always results in a shift. The massive variations occur in the appreciation or depreciation of the value of the outstanding transactions. Every foreign exchange shift is a risk to the investor, the international market, and businesses involved.
Because of the risks posed by forex tradings, most merchant account providers stay away from the trade. They avoid the risks of loss by choosing to operate with low-risk forex traders. A trader who transacts high values is deemed high risk. If the trader has an active contract with a processor, the processor takes precautionary measures by canceling the contract or withholding large sums for reserve accounts.
With the reserve, the high risk merchant account provider is confident of minimal losses. The forex credit card payment solutions require three types of reserves; the rolling reserve, up-front reserve, and fixed reserve account. The reserves, together with the best forex payment gateway, secure the forex trading companies from foreign exchange risks.
The Leverage risks
Some forex trading companies use borrowed funds to operate. They aim to increase profits by building up and controlling large transactions. As much as the funds are a potential for tremendous growth, they can also be the cause of the companies downfall. The forex market is volatile, and without good experience, a trader can lose as much as he gains.
A payment processor understands how much risk leverage is for the company. Before offering payment processing solutions, high risk payment processors consider the strength of financial records, the number of business years, expertise, chargebacks, and rates of fraud of a forex trading company. If the records and leverage are at a point of high risk, then applying for a merchant account becomes a struggle.
However, high risk payment processing solutions for forex trading specialize in the merchant account. They see the possibility of high returns and embrace the most high risk forex traders. For security purposes, the payment processors set transaction limits and follow up on the daily outcomes of forex tradings. They study market changes and are keen on when to allow leverage of up to 100:1 to its traders.
Interest Rate Risk
Forex trading companies borrow funds in exchange for interest to their borrowers. Since they are not in control of the interest rates market, a fluctuating change can affect the decision of most tradings in the market.
Central banks control interest rates according to the growth and stability of a country’s economy. Some of the decisions are predictable, while others are unexpected. For a forex trader, understanding how to predict the changes in interest rates can prevent losses. But for unforeseen changes due to political or sudden national announcements, high risk payment solutions can be applied.
Payment processors are aware of the effects of sudden interest changes actions. A payment processing solution for forex trading will set up a merchant account designed to deal with such eventualities. The charges are higher for high risk customers but the risks are worth the price. The opposite can be said for low-risk clients who receive lower prices for transactions with a forex payment processing solution.
The operating systems, internal processes, and individuals involved in running the company are a major risk to forex trades. It is through a company’s’ operations that fraud and chargebacks occur. For example, miscommunication with a trader can lead to loss of money. If after the loss the trader chooses to recover the money, they will dispute the transaction by issuing a chargeback.
Chargebacks, if received in high volume, are a significant challenge for forex trading companies. Every chargeback implies a refund, or money returned to the customer for unsatisfactory services. If not well managed, chargebacks can put the forex trading company out of business.
Forex merchant account providers understand the risks of chargebacks. Before offering payment processing solutions for forex accounts, they review the chargeback history to determine the level of risk. If the chances are high, payment processors charge higher as insurance for expected losses.
A payment provider that is not equipped to deal with high risk merchants will avoid credit card processing with high-risk trading companies. They will consider the risks of fraudulent activities and opt for safety in low-risk customers. For some of these companies, their operating system is not designed to detect the slightest of suspicious activities. Due to the challenges of the operating systems, the forex trading companies avoid the risk of offering credit processing solutions.
What To Do
Research about the categories of risky businesses. A forex trading company needs to understand if they are a low, medium, or high risk merchant. Their judgment on the risk category may not be final, but it will prepare them for eventualities when they finally apply for a forex merchant account.
If a trader falls under the high risk forex trading merchant, they need not worry. Researching on the expected rates of service can help budget on costs. The rates for high risk clients are known to be higher, but with proper planning, the prices are manageable. Forex trading companies should educate themselves on the pros and cons of payment processing solutions. They need a personal understanding of the benefits of reserve accounts and offshore merchant accounts.
To top it up, they need to be honest about the kind of business that requires a payment processing solution for forex trading. It might be tempting to lie about your transaction history and business endeavors. But since merchant providers have the expertise to run high risk forex merchant accounts, the truth will finally reveal. Protecting the forex trading company from account freezes should be of utmost importance to every trader. By delivering correct information, the forex trading company will prevent the freezing of their accounts.
Getting a payment gateway is essential for the convenience and reliability of forex trading services. Payment gateways are a fast way to complete forex trading payments. Since forex traders transact with multiple currencies, the best payment gateways give a secure means of completing transactions. Payment gateways are a useful tool for payment processing solutions when negotiating with various payment methods.
Forex trading companies indeed struggle for payment processing solutions. Operating a forex account is no simple feat. If you are looking for credit card processing solutions, and you are a high risk forex trading company, the struggle could be more. Payment processing solutions for forex trading are those that understand the risks of the trade. The answers should involve a payment gateway that is secure for forex traders.
Since the lack of regulation is a significant concern, a reliable payment processing solution for forex trading should address the issue. Payment processors need to understand the problems concerning licenses, fraud, money laundering, and underwritings in the forex market. With vast expertise, processors can resolve and give advice where necessary.
Ipaytotal is an expert in high risk payment processing solutions for forex trading companies. They understand the risk of forex trading and offer complete solutions for the traders. They know the effects of chargebacks and high transaction cost to forex merchants. Because of that, ipaytotal has designed a payment solution for individual forex traders. They have a credit card processing solution for forex trading in the domestic and offshore accounts.
A payment processing solution from ipaytotal comes with a full-fledged payment gateway which secures your system. Suspicious activities can quickly be flagged with in-built fraud detection and system monitoring tools. Take advantage of the payment gateway solution for forex trading, which can be integrated into your website, software, and cashier system.