Many onshore banks or processors consider certain types of business models to expose the bank or processor to higher levels of risk. Some of these business types include: travel merchant accounts, adult merchant accounts, pharmacy merchant accounts, telemarketing merchant accounts, internet merchant accounts, and many more. As a result of the high risk classification, merchants often obtain an offshore merchant account since they can not obtain a merchant account from a bank onshore for credit card processing.

The banks consider an account a high risk merchant account based on the potential for excessive chargebacks, returns, possible legal violations for selling the type of services or products, financial liability that the bank or processor will incur for processing for the merchant, or bad publicity towards the bank for accepting certain types of businesses.

Definition

Onshore Processing - Processing Banks who are based in the United States. These Processors will process for businesses who are largely based in the United States. Depending upon the processors guidelines and how they have structured their protocols will depend on a merchant getting an account with that processor, especially if the merchant is considered to be High Risk to the Processor.

Offshore Processing - Processors who are based outside the United States. The most popular locations for Offshore Processors are the Carribbean, Canada and the UK. These processors are more leniant about High Risk Processing than domestic processors.