Payment Processing

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Payment processing. A necessary historical overview: Before the Internet era and the emergence of online balance checking for credit cards, there were three types of organisations involved in card payments:

Card schemes that issued cards to banks and equipment for reading them. These were VISA, MasterCard, American Express and some others.
Banks that issued credit cards to their customers under the control of the schemes and carried out debit/credit operations among themselves using databases and financial guarantees of the schemes.
Various business companies – clients of banks, who received money from their customers with a long delay to special merchant accounts in their banks.

In the 1990s, with the development of the World Wide Web, it became possible to check payment card balances “online”, and banks began issuing the first debit cards (before that, cards were only “credit”). At the same time, groups of specialists, taking advantage of the lack of legislation in the field of online payments, began to create their own electronic currencies. These companies were essentially Internet banks, but in fact operated outside of banking legislation. And there was a need to give a name to such activities, the term “Processing” appeared, as an abbreviation for “Credit Card Processing”. Server rooms with billing servers began to be called “Transaction Processing Clearinghouses”, and companies that provided processing services began to be called “Payment Processors”.

Rates for Connecting Partner Payment Systems (Connection to Our System is Always Free)	For Trading Virtual Goods Worldwide	For Trading Physical Goods in the Russian Federation	For Trading Physical Goods in EU Countries
Simple Connection of a Website to a Partner Payment System or Bank: • Broad distribution of requests to processors and banks (over 50 providers); • Selection of the offer with the lowest commission; • Preparation of the initial set of documents; • Conducting negotiations with counterparties; • Consulting on integration with payment systems.	299 € Payment Gateway Setup	370 € Payment Gateway Setup	199 ~ 970 € Depending on initial data
Aggregated Solution for Minimizing Commissions and Taxation with the Maximum Number of Payment Options: • Broad distribution of requests to partner processors and banks (over 50 providers); • Implementation of a tax minimization scheme • Creation of legal entities (1-4 depending on the complexity of the scheme); • Finding payment solutions with the lowest commissions and the maximum choice of options; • Preparation of initial documentation; • Conducting negotiations with counterparties; • Consulting on integration with payment systems.	1770 € One legal entity, account, processing / bank	~3700 € 2-3 legal entities, accounts, processing / bank + 999 € Tax planning services (development of activity scheme)	2499 € One legal entity, account, processing / bank, complex connection
Optional: • Preparation of agreements between holding companies and offer agreements with end payers; • Protection of intellectual property rights for software products, domain names, etc.; • Obtaining licenses for conducting activities; • Opening accounts in offshore banks.	According to standard rates or by agreement

Processing Centre

Legislation. Licensing. Relationships with banks.

Over the past 15 years, most countries have developed legislation governing online card processing. Typically, this is a set of rights and obligations called a PSP/IPSP License (Internet Payment Service Provider License). The cost of such licenses and the opportunities they provide vary from country to country. However, an IPSP usually allows companies, if they have agreements with banks that are members of VISA and MasterCard (and have the appropriate PSP license for bank processing), to initiate the clearing procedure, i.e. debiting money from one account and crediting it to another.

In addition to various PSP and IPSP licenses, there are also regulatory documents from regulators that define the general rules of the game in the global card payments market. The most extensive of these documents is the “Card Acceptance and Chargeback Management Guidelines” from VISA.

With the development of the electronic payments market, many large processing systems have created their own banks. However, most processing companies are still “pure processors” that have built processing centres and entered into agreements with several banks at once. This gives them certain advantages and at the same time is their weakness – they do not own the money. The way classic credit card processing works is illustrated here.

Plastic Card Processing

Capabilities of “Pure Processing”

Processing companies have an advantage over banking institutions in that they are not subject to banking regulations and are not bound by any specific policies or obligations to depositors. As a rule, such “processors” work simultaneously with several banks, taking advantage of the features of each, which ultimately results in a smaller commission size for the merchant. Their second advantage is the ability to work with electronic currencies, which an ordinary bank cannot do.

The processing of bank cards without “offshore” control (especially offshore) is much less “transparent” for various regulators and controllers than Internet acquiring in prestigious banks. This feature allows it to serve “Super high risk” clients, sometimes also ironically called “Hard to place merchants”. To work with such “special” clients, operations are used to substitute the merchant class, replace replicas, “dilute” payments, payments “to oneself” to reduce the percentage of chargebacks, as well as other tricks. Today, when working in conjunction with some Asian banks, such processing can even hide the facts of fraud by connected “black merchants” from VISA. Of course, the cost of processing in such organisations is much higher, and the interaction itself is associated with significant risks.

Types of processing systems

As you can see, card processing is divided into three types: “white”, “grey” and “black”:

Absolutely law-abiding “white” processors are, as a rule, residents of the EU and the USA. They work with low-risk businesses of companies paying all taxes in prestigious jurisdictions. The cost of connecting to such payment systems is minimal, and the procedure itself is available to everyone. Unfortunately, taxes in prestigious jurisdictions do not allow them to compete in terms of commission size with the second class of providers.

The “grey zone” includes firms registered in various offshore, low-tax jurisdictions and some countries in the Asian region. These are normal companies, differing from “white” ones in that they are ready to negotiate the servicing of almost any business, including the sale of pharmaceuticals, “dating” services, adult sites and other high-risk classes. The difficulty in negotiating with such companies is that they are not ready to communicate on “slippery topics” with clients “from the street”. Communication with them on “difficult connections” requires personal contacts, reputation, and sometimes guarantees from a representative. But, as a rule, this is the best choice in terms of price/quality ratio.

As for “black processing”, they solve the problems of processing payments of any, even frankly illegal businesses. For technical reasons, this kind of activity cannot be carried out independently without the participation of the bank that opened the account, so they always work in conjunction with the latter. As a rule, these are odious offshores and Chinese banks. Due to the huge turnover and risks in this area, such structures are deeply conspiratorial and it is almost impossible to “get out” to their representatives on their own. And even if it is possible to establish cooperation, there is a high probability that the processing will be “closed” along with the entire amount of the “hold”. However, work in this area is possible.

Our Payment Processing Services

Our processing centre maintains an extensive network of counterparties worldwide. This has enabled us to establish close relationships with numerous international and offshore processing companies and banks. At the client’s request, we select payment systems and connect to them on the most favourable terms. We provide the following services to our clients:

Selection of a processing centre offering the best terms
Transferring businesses to operate under a tax-free offshore scheme
Selection of an offshore processing company for a new business model
Conducting connection negotiations
Transferring businesses to offshore zones for tax optimisation
Legal and IT audit of international online projects
Establishment of proprietary processing centres (licensing, servers, integration)
Obtaining processing licences for companies and banks
Consulting on any issues related to obtaining processing services

We connect all merchant categories and assist in implementing the most complex billing schemes, such as outgoing payments to individuals, mass micropayments, or setting up e-currency exchange points. Our company is interested in fulfilling both one-time orders and conducting market research and supporting your business in the long term in the areas of legal, tax, marketing, and IT consulting. We are always happy to assist you. Please contact us.