If you want to play in the high-risk space in merchant services, you’d better know your reserve terminology inside and out. And you should also understand what’s reasonable and what’s not when an ISO requests a merchant reserve.
Remember, an ISO is requesting to hold a reserve to minimize its financial risk. If they’re requesting a reserve, it should make sense given the financial risk they are exposing themselves to. That risk can vary based on the:
☑️ Business owner’s personal credit
☑️ Business type
☑️ The financial health of the business itself
☑️ Timeline between payment acceptance and service/product delivery
☑️ Processing history
𝗨𝗣𝗙𝗥𝗢𝗡𝗧 𝗥𝗘𝗦𝗘𝗥𝗩𝗘
A merchant must put up a lump sum of money to be held in reserve before they even start accepting payments. This is common for future delivery merchants with a long timeline between payment acceptance and delivery, but can also come into play for other scenarios.
𝗥𝗢𝗟𝗟𝗜𝗡𝗚 𝗥𝗘𝗦𝗘𝗥𝗩𝗘𝗦
A set percentage of each merchant deposit is withheld in reserve and then automatically released after a set amount of time.
𝗖𝗔𝗣𝗣𝗘𝗗 𝗥𝗘𝗦𝗘𝗥𝗩𝗘𝗦
A set percentage of each merchant deposit is withheld in reserve, but not automatically released. Instead, the balance accrues until a set limit is reached.
To be a true advocate for your merchant services clients, study these terms carefully so that you know exactly what an ISO is expecting from your merchant. And if something doesn’t make sense to you, don’t be afraid to ask your ISO to provide justification for their reserve requirement.
What’s Considered a Fair Revenue Share in Merchant Services?
What is considered a fair revenue share on merchant residuals? There’s no hard and fast formula. But consider revenue share a sliding scale that depends on these factors: 👉 The
