Higher Reserve Requirements From Acquirers

Thursday, August 6th, 2020

Traditionally, when processors get interested in raising the reserve, acquirers give merchants 3-5 days’ notice to come up with the cash. In case merchants can’t, processors can postpone the settlement proceeds. This article tells you about the հigher reserve requirements in the current situation.

Money & Chargebacks During COVID-19

COVID-19 has brought its immense impact on cash. As a result, there’s a shortage of coins in circulation. One of the basic reasons has to do with quarantines, which makes merchants make changes to their payment strategies.

Before COVID-19 appeared, banks had already appeared under growing pressure to cut costs for the purpose of compensating for negative interest rates in the Eurozone and low-interest rates in the UK. This made banks cut jobs so to avoid higher structural costs.

In the US, the shift to the online shopping space because of lockdowns resulted in a surge in chargebacks of more than 20%. To respond to the increasing number of chargebacks, lots of acquirers have started increasing merchant-cash reserve requirements. The so-called ‘merchant account reserve’ is a fixed amount of money belonging to a business that the acquiring bank puts aside as a security deposit.

Higher Reserve Requirements

Currently, lots of card-accepting merchants are facing more chargebacks caused by cancelled trips, non-deliveries, and so on. A number of merchants are already faced with demands from their merchant acquirers for more cash for the purpose of funding their reserve accounts.

If you’re a UK-based merchant seeking reliable payment-processing services, consider working with a respectable payment-processor comparison specialist like BestPaymentProviders.co.uk. Best Payment Providers UK is dedicated to offering the most trustworthy review of processors in the country. No matter you’re interested in higher reserve requirements or other payment-related issues, you can be sure to get the best help from Best Payment Providers UK.

According to Darvin R. Davitian, a payment and fintech attorney, counsel at the Washington, D.C., office of Perkins Coie LLP, 15% – 20% of his merchant clients have recently been notified by their processors of the need to organise a discussion over the possibility of increased reserves.

So, the world is faced with a severe economic crisis. Merchants are dealing with increased chargebacks, which lead to a higher reserve requirement, and other consequences. It’s more important than ever to work only with a reputable payment expert to overcome the existing challenges.

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