Satabank Freeze in Malta Shows Perils of High Risk Global Credit Card Processing

Satabank Freeze in Malta Shows Perils of High Risk Global Credit Card Processing

We’ve had our suspicions that global credit card processing for high risk businesses is slowly becoming more difficult, with banks increasingly firming up KYC requirements and digging deeper into merchant processing histories. Acquiring banks’ collective tolerance for risk simply isn’t what it used to be.

We recently read several news items regarding the freeze of Satabank in Malta, which left a handful of internet gaming merchants scrambling to not only recover the funds they’re owed, but to find replacement merchant account options fast. When the funds of merchants are frozen, there is no way for them to pay out customers, pay debts or pay employees. It usually leads to reputational concerns and much of the time, a failed business. The only positive news to be announced was that those gaming merchants impacted will receive their funds incrementally – over ‘a period of time,’ certainly not fast enough – by the order of the Malta Financial Services Authority.

The Satabank freeze has caused a degree of anxiety among online gaming merchants not just in Malta, but in the European Union. Internet gaming is an annual $1.2 billion industry in Malta – more than 10 percent of the country’s gross domestic product.

Merchants are demanding that Satabank and the MFSA find them a new solution – and quickly. While internet gambling as one of the country’s biggest industries, the MFSA would be wise to do so.

If internet gambling merchants could’ve done it different…

We’ve long advocated multiple merchant accounts for several reasons:

  • To curb volume
  • To cut chargeback rates
  • Lower a merchant’s risk level
  • To have a safety net in the event of a bank shutdown

Being in the high risk global credit card processing space and knowing the volatility of acquiring banks in the current climate, there is no better time than to open an additional merchant account – for the benefits we listed. The merchants impacted by the Satabank closure are in a situation we wouldn’t wish on any merchant: frozen assets preventing them from making payouts to livid customers. Sadly, most internet gambling businesses will not recover.

Where have we seen this before?

It is part and parcel of high risk global credit card processing: Out of nowhere, we’ll receive a deluge of inquiries – telephone calls, e-mails, skype messages – from merchants in the same industry, usually from a similar geographical area. An acquiring bank presents notice to its network of merchants that it will no longer offer services for a particular industry.

We saw it this past summer with dietary supplements merchants, explaining they were given a 30-day notice by a small acquirer and were desperate for a merchant account solution. In the spring of 2015, we received more than 30 inquiries from online pharmacy merchants in Canada seeking payment solutions after a large, well-known bank announced it would cease offering credit card processing solutions for internet pharmacies.

The bank did so with little notice and explanation (we’re fairly certain of the real reasons), simply announcing its decision. Online pharmacies and dietary supplements businesses pose significant risks, some similar to online gambling:

  • Chargebacks: A consumer orders supplements online, but after 4-6 weeks, they don’t have the desired outcome. Unhappy, the consumer files a chargeback, claiming dissatisfaction.
  • Transaction Laundering: Many ‘merchants’ attempt to pass their pharmacy or supplements businesses off as legitimate, when they’re selling products unapproved – and in many cases illegal – by their acquiring bank.

Acquirers simply tire of the risk and loss of revenue

Chargebacks are also rife in the online gambling industry. Consumers figure they’ll play a few rounds of poker or blackjack only to lose a significant sum of money. Within the ensuing days, usually out of guilt, the consumer will telephone his/her credit card issuer and claim that the credit card had been stolen and used fraudulently, that it wasn’t them who made the purchases.

With the frequency of such fraudulent activity steadily rising, acquiring banks have become fed up with the risk and the loss of revenue. Thus, they simply opt to remove the industry from their portfolio.

Global credit card processing – we have the history

Instabill has long been in the high risk global credit card processing space, having planted its roots in 2001 in the industries of online gambling, dating and adult. Having expanded its industry list to more than 80 high risk business types, we’ve found that the key to longevity has been our longstanding partnerships with acquiring banks worldwide that welcome businesses classified as high risk.

Speak with a live merchant account manager about our array of global credit card processing solutions today at 1-800-530-2444.

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