5 common questions about payment gateways

28 April 2017

Business Insight

When choosing a payment gateway to process your payments online you may find yourself with a few questions. Here we answer a few of the most common ones.


What is a rolling reserve?

Sometimes payment processors require merchants to keep a certain percentage of money processed in the account for a period of time. This is called a rolling reserve and it is a risk management strategy.

Take the example of a 5% rolling reserve kept for three months. If you made 10,000 euros in January, you would keep 500 euros in your account until April. This money belongs to you, it is just kept in the account to protect your account from going into debt in the case of chargebacks.  

Anytime you sell online, there is a chance of a chargeback. A chargeback happens when a customer disagrees with a charge because it is unauthorised or the service or product was not as expected. If the customer’s bank agrees with the chargeback request, it will then request that the money be refunded from the merchant’s bank account. You can learn more about this process here.

Without a rolling reserve, there is the risk that unexpected chargebacks could drain the account and leave the merchant in debt.


What is a transaction descriptor?

A transaction descriptor is the description which appears on a customer’s bank statement to describe an online payment. You will not always be able to personalise this because often payment gateways offer a generic descriptor. Sometimes you can pay extra to get a personalised descriptor. If you are a merchant and your transaction descriptor is not personalised, it is useful to communicate this information to clients so they are not confused by the charge.


What is an aggregated merchant account?

Sometimes payment processors have one merchant account for all the customers. This means that the set-up for the merchant is quicker and this option will often be cheaper than having a dedicated merchant account. The descriptor will be the same for everyone as the payments are all being processed from the same pool. Of course the merchant still has an account with the payment processor, it is just for the payment processing that everything is coming out of the same account with the same descriptor.


Why does a merchant have to provide ID and other documents?

Payment establishments and banks have to respect government anti-money laundering and counter-terrorism financing programs. In order to do due diligence, your payment gateway will likely request some information for you.


Why are some industries not eligible for certain payment gateway offers?

Some industries tend to get more chargebacks than others. These include online dating, tickets  and recurring payments, among others. If your business is in an industry with a higher average of chargebacks you may find that you are ineligible for certain commission rates or offers. This is simply because the higher risk of chargebacks makes your business turnover less sure. You may just need to negotiate with a payment processor to find an offer adapted to your industry.