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Commonly used payment methods:
Asia is a diverse region with varying payment preferences, and businesses must understand these preferences to offer their customers the payment options they prefer. Some of the commonly used payment methods in Asia include:
Credit and Debit Cards: Credit and debit cards are widely used in Asia, and businesses that accept card payments can significantly increase their revenue. Major card issuers in the region include Visa, Mastercard, and UnionPay.
Digital Wallets: Digital wallets are becoming increasingly popular in Asia due to their convenience and security. Popular digital wallets in the region include Alipay, WeChat Pay, Paytm, GrabPay, and GoPay.
Bank Transfers: Bank transfers are also widely used in Asia, with customers using online banking platforms or mobile apps to transfer funds.
Cash on Delivery: Cash on delivery is popular in some parts of Asia, where customers prefer to pay for goods upon delivery rather than using online payment methods.
The high-risk merchant industry in Asia is a significant segment of the payments industry, and it continues to grow rapidly. According to a report by Grand View Research, the Asia-Pacific payment gateway market size was valued at USD 18.22 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 11.3% from 2021 to 2028.
While there is no exact data on the size of the high-risk merchant industry in Asia, it is estimated to be a substantial portion of the overall payment gateway market. The high-risk merchant industry includes businesses operating in sectors such as online gambling, adult content, CBD products, and others that are considered high-risk due to the potential for fraud, chargebacks, and regulatory issues.
According to a report by Research and Markets, the global online gambling market size was valued at USD 53.7 billion in 2019 and is expected to grow at a CAGR of 11.5% from 2020 to 2027. Online gambling is a significant segment of the high-risk merchant industry in Asia, and countries such as Macau, Singapore, and the Philippines have become major hubs for online gambling in the region.
Similarly, the CBD market in Asia is also growing rapidly, with countries such as China, Japan, and South Korea experiencing significant growth in the industry. According to a report by BDS Analytics and Arcview Market Research, the Asia-Pacific CBD market size was valued at USD 2.3 billion in 2020 and is expected to grow at a CAGR of 25.7% from 2021 to 2028.
The payment service providers (PSPs) industry in Asia is rapidly growing, and there are several major PSPs operating in the region. These PSPs offer a range of services that enable businesses to accept and process payments from customers. Some of the main PSPs in Asia include:
Alipay: Alipay is a digital wallet owned by Ant Group, a subsidiary of Alibaba Group. Alipay is one of the largest PSPs in Asia and is widely used in China. Alipay enables users to pay for goods and services online, in-store, and via mobile apps.
WeChat Pay: WeChat Pay is a digital wallet owned by Tencent Holdings, the parent company of WeChat. WeChat Pay is widely used in China and enables users to make payments online, in-store, and via mobile apps.
Paytm: Paytm is a digital wallet and payment gateway company based in India. Paytm offers a range of payment solutions for businesses, including payment gateways, recurring payments, and subscriptions.
GrabPay: GrabPay is a digital wallet owned by Grab Holdings, a ride-hailing and delivery company operating in Southeast Asia. GrabPay enables users to pay for goods and services online, in-store, and via mobile apps.
GoPay: GoPay is a digital wallet owned by Gojek, a ride-hailing and delivery company operating in Southeast Asia. GoPay enables users to pay for goods and services online, in-store, and via mobile apps.
UnionPay: UnionPay is a payment card issuer and payment gateway based in China. UnionPay is one of the largest card issuers in the world and has a strong presence in Asia.
High-risk merchants in Asia face several challenges when it comes to finding payment solutions. High-risk merchants are those that operate in industries that are considered high-risk due to factors such as the potential for chargebacks, fraud, or regulatory issues. Some of the challenges faced by high-risk merchants in Asia include:
Higher Payment Processing Fees: High-risk merchants often pay higher payment processing fees compared to low-risk merchants. This is because payment service providers (PSPs) consider high-risk merchants to be a higher risk of chargebacks and fraud.
Lengthier Application Process: High-risk merchants may face a longer and more complex application process when applying for a merchant account or payment processing solution. This is because PSPs need to conduct additional due diligence to assess the risk associated with the merchant.
Higher Chargeback Fees: High-risk merchants may face higher chargeback fees compared to low-risk merchants. Chargebacks occur when a customer disputes a transaction, and the merchant must refund the payment. High-risk merchants are considered a higher risk of chargebacks, and PSPs may charge higher fees to cover the risk.
Cash Reserve Requirements: PSPs may require high-risk merchants to hold a cash reserve to cover the risk of chargebacks or fraud. There are different types of cash reserve requirements, including capped reserve, rolling reserve, and upfront reserve. These requirements can tie up a significant amount of the merchant’s capital and impact cash flow.
Volume Caps: PSPs may impose volume caps on high-risk merchants to limit the amount of transactions they can process. This can limit the merchant’s ability to grow their business and generate revenue.
Additional Technical Requirements: High-risk merchants may be required to meet additional technical requirements when integrating with PSPs. These requirements can add to the cost and complexity of integrating with the PSP.
Being on the TMF/MATCH List: The Terminated Merchant File (TMF) or Match list is a database of merchants who have had their merchant accounts terminated by a PSP. If a merchant is on the TMF/MATCH list, they may have difficulty finding a new PSP to work with.
Payment processing fees in Asia can vary depending on several factors, including the payment method, transaction volume, and merchant risk level. For high-risk merchants, payment processing fees are often higher compared to low-risk merchants. This is because payment service providers (PSPs) consider high-risk merchants to be a higher risk of chargebacks and fraud.
The payment processing fees for high-risk merchants in Asia can range from 3% to 10% per transaction, depending on the PSP and the type of payment method used. For example, credit and debit card transactions may have higher processing fees compared to bank transfers or digital wallets.
Chargeback fees for high-risk merchants in Asia can be significantly higher compared to low-risk merchants. This is because payment service providers (PSPs) consider high-risk merchants to be a higher risk of chargebacks and fraud.
Chargebacks occur when a customer disputes a transaction, and the merchant must refund the payment. High-risk merchants are considered a higher risk of chargebacks, and PSPs may charge higher fees to cover the risk. Chargeback fees for high-risk merchants in Asia can range from USD 20 to USD 100 per transaction, depending on the PSP and the industry.
PSPs may also impose chargeback thresholds for high-risk merchants, which limit the number of chargebacks a merchant can receive before the PSP takes action. If a merchant exceeds the chargeback threshold, the PSP may suspend the merchant’s account or impose additional fees.
Cash reserve requirements for high-risk merchants in Asia are a common practice among payment service providers (PSPs). Cash reserve requirements are designed to protect PSPs against the risk of chargebacks and fraud associated with high-risk merchants. High-risk merchants are those that operate in industries that are considered high-risk due to factors such as the potential for chargebacks, fraud, or regulatory issues.
Cash reserve requirements can take several forms, including capped reserve, rolling reserve, and upfront reserve. The type of cash reserve requirement used will depend on the PSP and the merchant’s risk level.
Capped Reserve: A capped reserve requires the merchant to hold a fixed amount of funds in a reserve account. This amount is typically a percentage of the merchant’s transaction volume, and the cap is set by the PSP. Once the cap is reached, the merchant is no longer required to hold additional funds in the reserve account.
Rolling Reserve: A rolling reserve requires the merchant to hold a percentage of their transaction volume in a reserve account. The funds in the reserve account are held for a specific period, such as 90 days, before being released to the merchant. As new transactions are processed, a percentage of the funds are added to the reserve account.
Upfront Reserve: An upfront reserve requires the merchant to deposit a percentage of their transaction volume in a reserve account before they can start accepting payments. The funds in the reserve account are held for a specific period, such as 180 days, before being released to the merchant.
High-risk merchants face additional requirements when seeking a Merchant Identification Number (MID) with a Payment Service Provider (PSP) or Acquiring Bank. These requirements are in place to mitigate the additional risks associated with high-risk industries. Some of the specific requirements that high-risk merchants must fulfill are:
Detailed Business Information: High-risk merchants must provide detailed information about their business, including their business model, industry, and target audience. PSPs and Acquiring Banks want to know as much as possible about the business to assess the level of risk involved.
Financial Statements: High-risk merchants must provide financial statements, including balance sheets, income statements, and cash flow statements. This information is used to assess the financial stability of the business and its ability to manage chargebacks and refunds.
Compliance with Industry Regulations: High-risk merchants must comply with all relevant industry regulations and standards. For example, online gambling merchants must comply with the regulations set forth by the Gambling Commission, while adult entertainment merchants must comply with age verification requirements.
Volume Caps: High-risk merchants may be subject to volume caps, which limit the amount of transactions they can process in a given period. This is done to manage the risk of chargebacks and fraud.
Being on the TMF/MATCH List: High-risk merchants must not be on the Terminated Merchant File (TMF) or the Member Alert to Control High-Risk (MATCH) list. These lists contain merchants who have been terminated by a PSP or Acquiring Bank due to chargebacks, fraud, or other reasons.
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