What is a rolling reserve – and why is it important for my business?

A rolling reserve is a reserved amount, typically a percentage of your income, meant to help you with refunds to your own customers and protect you against fraud. 

The reserved amount is held back for a period of time that can vary. Depending on your acquirer, the holdback can vary from daily to monthly payouts, depending on your agreement. Within this period, the acquirer will have handled fraud and potential chargebacks in an automatic flow, to make sure you don’t have to manually do it afterwards and to limit your financial risks. The acquirer has a very important role in your approval for receiving and accepting credit cards and other payment methods. They are therefore a key partner for your webshop’s success and revenue flow. Read more about acquiring in the blog post ‘What is Acquiring’

How does a rolling reserve work?

A rolling reserve account works by holding back a percentage of a business’s revenue for a specified period of time as a form of security for an acquiring bank or a payment processor. This percentage can vary depending on the agreement between the business and the payment processor, but typically ranges from 5% to 10%.

As an example, if a merchant’s rolling reserve is set at 10% for a period of 90 days, then 10% of their daily transaction volume will be held by the payment processor for 90 days. After the 90-day period, the rolling reserve amount will be released to the merchant. A high percentage of rolling reserves are commonly used in high-risk industries, such as gambling or adult entertainment, but they can also be used by any merchant with a high volume of transactions or a history of chargebacks.

When a rolling reserve ends, the funds that were held by the payment processor are released back to the business, either in a lump sum or in multiple installments. Once the funds are released, they can be used by the business for any purpose, such as investing in growth opportunities or paying expenses. It is important for businesses to carefully track the end of their rolling reserve period and ensure that they receive the full amount of funds that were held back by the payment processor.

How rolling reserves affect your business and cash flow

Rolling reserves can be beneficial for businesses in several ways, such as:

• Risk Management: Rolling reserves mitigate potential losses due to chargebacks, fraud, or other risks associated with credit card payments, protecting the financial interests of payment processors, or acquiring banks.
• Cash Flow Management: Rolling reserves assist businesses in managing their cash flow by setting aside a portion of revenue for future rolling reserve payments, aiding in budgeting and financial planning.
• Liability Coverage: Rolling reserves provide merchants with sufficient funds to cover liabilities such as chargebacks or refunds from credit card transactions, offering a buffer against unexpected financial obligations and protecting the business from financial strain.

In some cases, having a rolling reserve in place can improve a business’s creditworthiness. It demonstrates that the business is willing to work with payment processors to lessen risks and maintain stable cash flow, which can be seen as a positive indicator of financial responsibility.

Streamline your rolling reserves with Billwerk+

We know that the payment industry is very complex and that it can be tough to meet all the requirements that are needed to set up a payment gateway with the right acquirer. But we can help you make the process easier. Billwerk+ is acquirer independent, which is unique in the payment industry.

We have collaborations with several acquiring banks and can help you find the best agreement for your business needs (register now for free or check out our partner banks on our acquirer page). 

What you need to be accepted for payments in your e-commerce

To be able to accept payments you will need a merchant acquiring account. Before you can be approved for such an account, your website needs to fulfil some requirements. You need to display:

• Privacy Policy
• Product / Service description
• Refund and shipping conditions
• Customer service and contact information
• Information about the company and its location
• Terms and conditions in compliance with EU consumer law
• Payment card logos of the payment cards you are accepting
• If your business offers subscription services, terms and conditions for subscriptions
• The name of the descriptor for the product or service, that will appear on your customers bank statement after they have paid you