How multiple rolling reserves drive PSP’s efficiency

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How multiple rolling reserves drive PSP’s efficiency

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In the world of payment providers, every merchant matters. Being a dependable financial partner means being flexible, reducing risks, and building solid relationships. Multiple reserves help achieve these goals.

Let’s explore how this innovative feature empowers PSPs to serve their merchants better while driving mutual success in the payments industry.

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What are rolling reserves?

Before diving into our new feature's details, let’s quickly recap what rolling reserves are.

Rolling reserve refers to a percentage of a merchant's funds temporarily held back after each transaction. It acts as a safety net to cover potential chargebacks or disputes.

The rolling reserve isn’t a commitment but an optional measure by the merchant service provider for self-protection.

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The more merchants a PSP has, the more financial risks it may incur. Accordingly, there’s a need for multiple rolling reserves, varying in duration and transaction percentages.

Multiple reserves: flexibility in action

Traditionally, when facilitating transactions, PSPs employ a one-size-fits-all approach, reserving a fixed percentage of the amount for a predetermined period. However, this model may not always align with merchants' varying needs and circumstances. Multiple rolling reserves offer a solution by allowing PSPs to allocate different percentages of the total amount for different durations.

Imagine a scenario: a merchant receives a $100 payment. Instead of locking the entire sum for a uniform period, PSPs can now divide it strategically. For instance, they may reserve 20% for a month and 50% for two days. This division ensures the merchant gains prompt access to a portion of the funds promptly while retaining a reserve for PSP requirements. Thus, $50 becomes available to the merchant after two days for immediate expenses, with the remaining $20 held for a month to secure the PSP’s long-term financial stability.

How does it work?

Previously, our PSP clients were limited to creating a single rolling reserve per invoice. However, recognising the importance of offering more flexible financial arrangements for merchants, we’ve introduced a new feature that allows for the creation of multiple reserves within a single invoice.

Each piece of reserve is automatically calculated as a percentage of the transaction and unreserved accordingly at the specified time.

Let’s say a high-risk merchant requires a substantial reserve of 30%. Instead of holding the entire amount, you can use multiple reserves and allocate 10% for 10 days, another 10% for a month, and an additional 10% for six months. This granular approach strikes a balance between your financial security and convenience for the merchant.

Here's another example of how reserves can be distributed:

The number of reserves per invoice is unlimited.

How can your PSP benefit from multiple reserves?

The loyalty and satisfaction of your merchants form the bedrock of a successful PSP business. Discover the advantages that multiple reserves can bring to your service offerings.

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Optimised cash flow

With greater control over reserve allocations, PSPs can contribute to improved cash flow control of merchants without compromising their financial stability.

For instance, you can allocate a smaller percentage for short-term reserves to cover immediate expenses while setting aside a larger percentage for longer-term reserves. This approach ensures that merchants have access to the funds they need when they need them without tying up excessive amounts in reserves.

Flexibility in operations

By offering customisable reserve options, PSPs enable merchants to adapt their financial strategies to suit changing circumstances and market conditions. This operational flexibility also ensures that PSPs maintain liquidity while meeting their financial obligations.

Strong partnerships

Tailored reservation strategies showcase PSPs' commitment to understanding and meeting merchants' unique needs, fostering trust and collaboration. This dedication strengthens partnerships and lays the foundation for mutually beneficial relationships. Prioritising merchants' success and offering personalised support drive shared prosperity in the industry.

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