Payment Service Providers (PSP) including MasterCard and Visa are applying pressure by freezing transfers of funds on Forex CFD brokers who they say according to news reports are classified as ‘high-risk securities merchants’.
This latest move has many brokers scrambling in panic for alternative payment methods offshore.
The first warning bells sounded in October 2018 last year when several retail providers were banned from using VISA and MasterCard credit cards.
That’s not all…
Visa and MasterCard froze transfers labeling them ‘high risk’ which made it very difficult for them to effectively run their operations, backing them into a corner, with some retail providers not being able or finding it not feasible to garner alternative PSPs.
It started in October last year when the Merchant Category Code (MCC) started to target retail providers, a regulator who addresses credit card networks that identify businesses to be a high risk for chargeback and fraud.
If you are found to be high risk by the MCC, you will not have the ability to process payments by credit card. They are there to protect high-risk merchants from chargebacks that are excessive.
Businesses can check if they are high risk for payment processing purposes on MCC websites by browsing the codes.
Forex industry plagued by regulators
This latest hostile crackdown by the MCC comes after the Forex industry has found itself plagued with more rules and regulations by the Financial Conduct Authority (FCA).
Today, it appears that the PSPs have the power to hold hostage client funds by cutting them off, making it difficult for brokers to keep their head above water as payments are the Achilles heel for retail trading firms.
The fact is…
It has made it extremely difficult for trading firms and has forced them to seek other viable solutions for their operations with some looking offshore.
Offering alternative for depositing or withdrawing funds
Another alternative that brokers are offering their clients is by way of a bank wire transfer.
However, there’s a catch
It is a lot slower and not as convenient as credit cards. There are also reports that some of the brokerages are offering to refund any wire transfer fees that their clients have incurred from depositing or withdrawing money from their accounts.
To top it off…
This latest crackdown by PSPs caught many brokerages by surprise leaving them with few options and no backup plan.
Quite rightly, retail clients are not interested in hearing about the brokerages’ problems and on the other side, brokers are losing business as clients can’t effectively make deposits.
And another thing
This could have enormous consequences for the brokers especially as the retail brokering business is a cutthroat world which could result in many closing up shop.
Needless to say, we can’t emphasize enough the importance of trading with a regulated and authorized broker who has a good reputation and provides a good trading experience for their clients.
One good solution is to open an account with CFD service Plus500. They are highly recommended. They sit on the London Stock exchange and are authorized and regulated by the Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) and by the Australian Securities and Investments Commission (ASIC).
They are still accepting the most common payment methods which include via Visa/MasterCard, Skrill, Wire Transfer and even PayPal.
Here’s another good news…
You can also opt for eToro, the world’s leading social networking provider who provides a unique trading platform. They are safe and reliable and enjoy a good reputation amongst their traders.
They also are fully authorized and regulated by CySEC, FCA and ASIC. They also are still accepting the most common payment methods which include credit and debit cards (Visa, Mastercard, Diner’s Club), China Union Pay, Giropay (Sofortüberweisung), Neteller, Skrill Limited UK, WebMoney, Wire Transfer, Wirecard- Wire and Credit Card, Yandex and PayPal.
There’s 24option, an established broker founded in 2009. They are fully regulated and authorized by the International Financial Services Commission (IFSC) in Belize) and CySEC.
They too are highly respected amongst traders offering a vast array of top-notch services that make for successful and profitable trades.
As of this writing, they are still accepting the most common payment methods that include credit cards, OKPAY, Neteller, Skrill, Perfect Money, Wire Transfer, and some other alternative payment methods.