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Commonly used payment methods:
The MENA region is a diverse and complex market, with a range of payment methods that vary from country to country. However, there are several payment methods that are commonly used across the region, including credit/debit cards, e-wallets, bank transfers, and cash on delivery.
Credit/debit cards remain the most popular payment method in the region, with Visa and Mastercard being the most widely accepted. However, there has been a rise in the usage of e-wallets, such as PayPal and PayFort, which offer users a secure and convenient way to make payments online.
Bank transfers are also a commonly used payment method in MENA, particularly in countries like Saudi Arabia and the UAE, where online banking is widely available. Finally, cash on delivery remains a popular payment option in the region, particularly for e-commerce transactions.
MENA is a significant market for high-risk merchants, with many businesses operating in industries such as online gambling, adult entertainment, and cryptocurrency trading. According to a report by Grand View Research, the global high-risk merchant market size was valued at USD 4.4 billion in 2020, with a projected CAGR of 10.3% from 2021 to 2028. The MENA region is expected to be a key driver of this growth, with increasing demand for payment solutions in high-risk industries.
The MENA region has seen a surge in the number of payment service providers over the past few years. These PSPs offer merchants a range of services, including payment processing, fraud detection, and risk management.
Some of the most popular payment service providers in the MENA region include:
PayFort: Based in the UAE, PayFort offers a range of payment solutions, including credit/debit card processing, e-wallet payments, and bank transfers.
Telr: Headquartered in Singapore, Telr provides payment solutions across the MENA region, including in Saudi Arabia, the UAE, and Egypt.
Checkout.com: With offices in Dubai and Cairo, Checkout.com offers merchants a range of payment processing solutions, including credit/debit card processing and e-wallet payments.
PayTabs: Based in Bahrain, PayTabs offers merchants a range of payment processing solutions, including credit/debit card processing, e-wallet payments, and bank transfers.
High-risk merchants face a range of challenges when it comes to finding a payment solution in MENA. These challenges include:
Higher payment processing fees: High-risk merchants may be subject to higher payment processing fees due to the increased risk associated with their business.
Lengthier application process: High-risk merchants may face a longer and more rigorous application process when applying for a payment solution.
Higher chargeback fees: High-risk merchants may be subject to higher chargeback fees due to the increased risk associated with their business.
Cash reserve requirements: Some payment service providers may require high-risk merchants to maintain a cash reserve to mitigate the risk associated with their business. There are three types of cash reserve requirements: capped reserve, rolling reserve, and upfront reserve.
Volume caps: Some payment service providers may place volume caps on high-risk merchants to mitigate the risk associated with their business.
Additional technical requirements: High-risk merchants may be required to meet additional technical requirements, such as advanced fraud detection systems, to mitigate the risk associated with their business.
Being on the TMF / MATCH list: High-risk merchants may find it difficult to obtain a payment solution if they are on the Terminated Merchant File (TMF) or MATCH list. These lists are used by payment service providers to identify high-risk merchants who have had their accounts terminated in the past.
According to a report by PayTabs, payment processing fees for high-risk merchants in MENA can range from 3% to 10% of the transaction value, depending on the industry and the level of risk associated with the business. This is higher than the fees charged to low-risk merchants, which typically range from 1.5% to 3% of the transaction value.
While higher payment processing fees can be a burden for high-risk merchants, it is important to remember that payment service providers are taking on a higher level of risk by working with these businesses. By charging higher fees, payment service providers can mitigate some of the risk and ensure that they are able to provide payment solutions for high-risk merchants in the long term.
For high-risk merchants in MENA, the risk of chargebacks can be particularly high due to the nature of their businesses. For example, merchants in industries such as online gambling or adult entertainment may be more likely to experience chargebacks due to customer disputes or fraudulent activity.
To mitigate this risk, payment service providers may charge higher chargeback fees to high-risk merchants in MENA. These fees can vary depending on the payment service provider and the level of risk associated with the business. According to a report by PayTabs, chargeback fees for high-risk merchants in MENA can range from $25 to $100 per chargeback, depending on the industry and the level of risk associated with the business. This is higher than the fees charged to low-risk merchants, which typically range from $10 to $50 per chargeback.
Cash reserve requirements are often imposed on high-risk merchants in MENA by payment service providers as a way to mitigate the risk associated with their businesses. These requirements can be a significant burden for high-risk merchants, as they tie up cash flow and can limit the merchant’s ability to grow their business.
There are three types of cash reserve requirements that payment service providers may impose on high-risk merchants in MENA:
Capped reserve: This is a fixed amount of money that the merchant must maintain in a separate account. The amount is usually calculated as a percentage of the merchant’s monthly sales volume. For example, a payment service provider may require a high-risk merchant to maintain a capped reserve of 10% of their monthly sales volume.
Rolling reserve: This is a percentage of the merchant’s sales that is held in reserve for a specified period of time, usually 90 days. The reserve amount is released back to the merchant after the period has ended. For example, a payment service provider may require a high-risk merchant to maintain a rolling reserve of 10% of their sales volume for 90 days.
Upfront reserve: This is a lump sum payment made by the merchant upfront to the payment service provider. The amount is usually calculated as a percentage of the merchant’s projected sales volume. For example, a payment service provider may require a high-risk merchant to make an upfront reserve payment of 20% of their projected sales volume.
Cash reserve requirements can be a significant burden for high-risk merchants in MENA, as they tie up cash flow and can limit the merchant’s ability to grow their business. However, these requirements are often necessary for payment service providers to mitigate the risk associated with working with high-risk merchants.
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.
Chargeback and Fraud History: High-risk merchants must provide information about their chargeback and fraud history, including the number of chargebacks and the reasons for them. PSPs and Acquiring Banks want to know how the merchant manages chargebacks and fraud and how likely they are to occur in the future.
Technical Requirements: High-risk merchants may be required to use specific software or hardware to process payments. For example, online gambling merchants may be required to use a specific type of gaming software that is certified by the regulator.
Reserves: High-risk merchants may be required to maintain a cash reserve, which can take the form of a capped reserve, rolling reserve, or upfront reserve. These reserves help PSPs and Acquiring Banks mitigate 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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