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Software selling merchant accounts and payment gateways

03 March 2023
Written by Libby James
Libby James is co-founder, director and an expert in all things merchant services. Libby is the go-to specialist for business with more complex requirements or businesses that are struggling to find a provider that will accept them. Libby is regularly cited in trade, national and international media.
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    Understanding the High-Risk Nature

    Software selling is often deemed high risk by acquiring banks for several reasons, including the prevalence of card-not-present transactions, historically higher chargeback rates, restrictions based on merchant location, and limitations on processing payments worldwide.

    Expert Guidance for Merchant Services

    If you’ve faced declined merchant account applications or termination from existing providers, rest assured that navigating high-risk card processing, especially in software sales, is a common challenge. While one rejection doesn’t seal your fate, exploring alternative avenues beyond mainstream payment providers may be necessary.

    Application Process for Payment Processors

    Before submitting multiple applications, it’s crucial to assess if your software business aligns with the criteria set by payment processors. Understand the complex considerations based on business type, trading location, and currencies. Enlist the help of a non-biased broker if needed to streamline the application process.

    Credit Card Processing and Terms

    Upon application submission, the chosen bank’s underwriting team evaluates your business to determine whether they’ll handle card processing. Successful applications result in presented terms, including potentially higher rates and fees. Managing the risk involves considerations like rolling reserves, and periodic switching of banks is recommended for favourable processing costs.

    Instant Approval Challenges

    Due to the high-risk nature of software selling payment processing, instant approval merchant accounts are not readily available. Banks require adequate time for thorough underwriting, which can take up to ten working days. To mitigate risks of termination, consider having more than one merchant account as your business expands.

    Selecting the Right Payment Gateway

    Given that most card payments for software sales occur online, choosing the right payment gateway is crucial. Consider aspects such as security, chargeback and fraud management, integration capabilities, support for recurring payments, and coverage for international transactions

    Security: Prioritise payment gateways with high PCI DSS compliance ratings for enhanced online transaction security.

    Chargeback and Fraud Management: Choose gateways that assist with managing chargebacks, particularly crucial in high-risk industries.

    Integration: Ensure seamless integration with your merchant account and website provider, and consider additional integrations for efficiency.

    Recurring Payments: If your software business operates on a subscription model, opt for gateways that support recurring payments.

    How Merchant Account Solutions (MAS) Can Help

    Merchant Account Solutions (MAS) specialises in navigating the complexities of high-risk industries, providing tailored solutions for software selling businesses. Our experts guide you through the application process, ensuring compliance and optimal payment processing. Learn more on how MAS can help on our Merchant Services page.

    When selling software, it’s important to choose the right payment processing company. This choice affects your transaction fees and how you handle credit card payments, including American Express and Apple Pay. Whether it’s for one-time purchases or recurring charges, the right processor makes real-time payments smooth and secure.

    Look for a company offering competitive monthly fees and transparent pricing. Avoid high setup fees and focus on firms that support mobile payments and various products and services. It’s also wise to consider your business banking needs and how they align with the payment processor.

    By following these steps, you can navigate the complex world of payment processing with confidence. For more tips and advice, don’t forget to check. 

    FAQs

    Why is software selling considered high risk?
    Software sales involve a high number of card-not-present transactions and historically higher chargeback rates.
    Can I get instant approval for a software selling merchant account?
    No, instant approval is typically unavailable due to the high-risk nature, requiring thorough underwriting.
    What documents are required for a payment processor application?
    Directors/shareholders ID, proof of address, certificate of incorporation, business address proof, and six months transaction history.
    How can a non-biased broker help in the application process?
    Brokers can provide guidance on suitable payment processors and assist in navigating the complex application process.
    Why are recurring payments important for software businesses?
    Recurring payments are essential for subscription-based software models, ensuring a steady and predictable revenue stream.
    What is a rolling reserve in credit card processing terms?
    A rolling reserve is a portion of funds held by the acquiring bank to mitigate the risk associated with high chargeback rates.
    How often should I switch banks for processing costs?
    Switching banks every couple of years is advisable to explore more favourable processing costs.
    What should be considered when choosing a payment gateway for international transactions?
    Ensure that the payment gateway covers your business location and currency for effective processing of international transactions.

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