1. PayPal Reserves and Types of the Reserve
Reserves are amounts kept in a Merchant’s PayPal account to protect from potential financial risks such as payment reversals from refunds or disputes.
PayPal uses the three following Reserves types:
PayPal can use all of the above Reserve types. In some cases, if the Merchant has a monthly transaction volume limitation, revenues exceeding the threshold volume will also be transferred to the Reserve.
2. PayPal creates different Reserve types
Notes: Generally, Reserves act as “deposits” for PayPal to protect buyers if the Merchant’s account has problems. Typically, the riskier the business activities, the larger such deposits. Reserves amounts help PayPal accounts run more stably.
Businesses who intend to process large volumes on PayPal can do PayPal Underwriting to set up a Reserve, increase account stability, or register for PayPal Pro service. Contact Global Link Asia Consulting for more information on how we can support you.
3. PayPal determines Reserve amounts
In general, Reserves applied to Merchant accounts depend on the following:
- Risk of the Merchant’s business lines and products
- Strength of transaction history between the Merchant and PayPal
- Merchant’s personal/business credit history
- Merchant’s chargeback/refund requests
- Rate of complaints/disputes from the Merchant’s buyers
- Number of pre-order products or services (advance orders)
- Delivery times
Businesses can find out more from PayPal’s User Agreement or contact Global Link Asia Consulting now to be consulted on their business risks from the perspective of payment gateways like PayPal. With such information, businesses can select the most suitable payment gateways and optimize international cash flow.
Generally, PayPal Reserve or Reserve amounts in the Merchant’s account will help PayPal settle potential financial risks. Although these “deposits” reduce the business’s available balance, this feature helps PayPal support high-risk businesses such as Dropshipping, POD, or software businesses that other payment gateways may refuse to support.
Contact the experienced consulting team at Global Link Asia Consulting now for more detailed answers.