by Matt Mandell - May 1, 2019 - High Risk Payment

The process of opening and on-boarding merchant accounts in Puerto Rico is quite different than in the US. From different providers and standards to tax considerations, there are lots of differences between the business environments of Puerto Rico and the mainland United States that affect the process.

For that reason, it can be challenging for newcomers to open or on-board a merchant account on the island. However, as we learned, it can be done! When a GAM client wanted to moved their operations to Puerto Rico, we learned a lot about navigating the process in a place where the rules and processes were different across the board.

Here, we’ll share everything that going through the process taught us.

Initial Challenges: Learning How Merchant Accounts Work in Puerto Rico

When we were first tasked with moving this client’s account to Puerto Rico, we knew we needed help. But we weren’t able to on-board the account through any of our usual channels, as they weren’t set up to handle it—that even includes resources in Europe and Latin America.

So we took the only route that we had left, and spent countless hours on the phone consulting with experts in the payment industry. These consultants have a combined industry experience totaling hundreds of years, and are the best and brightest in the business. Finally, after long conversations with some of the most knowledgeable and experienced people throughout the space, we were able to figure out how the Puerto Rican system works.

Only then could we engineer a solution for our client…and it turns out, it all started with Puerto Rico’s unique system for credit card processing.

The Unique Debit Network in Puerto Rico

Just about every payment terminal and merchant account in Puerto Rico has an account or pin number associated with it that starts with a zero. This is a function of how the main bank debit network in Puerto Rico was designed. In the US, accounts from brands like MasterCard, Discover, and American Express all have accounts that begin with other numbers.

As a result, payment terminals easily malfunction, because they are not designed to recognize an account number that starts with zero. This complicates business for payment processors. To make matters worse, changes in the tax system began to require daily reporting for taxes, making things even harder for payment processing businesses and merchant account companies.

As a result, most payment processing companies took their business off of the island. Only the biggest ones could manage to stay profitable in the new business environment, making the biggest payment processing companies even bigger and more powerful. With their own account number system unique to the island, now just two payment processing companies essentially control all of Puerto Rico’s payment processing business.

As a side effect, because merchants only have two choices, there is very little competition in Puerto Rico’s payment processing industry. So much control from so few companies results in higher rates for businesses in need of a merchant account, payment processing partner, or POS system.

In Puerto Rico, there are also different tax laws than in the United States. These play a critical role in the process of opening a merchant account there.

Taxes in Puerto Rico

Tax reporting in Puerto Rico works differently than on the mainland U.S. In Puerto Rico, laws require a complex and time-consuming daily reporting process. The island’s Treasury Department also retains a high level of control over smaller aspects of business, so to navigate that influence, we had to look at higher-risk banks to partner with. Even though the charge higher rates, they would be the most adept at wading through all of these factors: the debit network, the tax issues, and the influence of third parties.

We would be charged even more, because we were considered a non-standard, foreign account and there would be more work involved for the bank. But after extensive conversations with many banks and companies, we were finally able to secure a partner.

Final Thoughts

Thanks to this relationship, we are now able to offer our clients underwriting and merchant accounts in Puerto Rico, opening up whole new avenues for business owners looking to open up or move to the island. As a result of going through the process from beginning to end, GAM is also now one of the most knowledgeable firms when it comes to merchant accounts in Puerto Rico. That allows us to bring incredible value to a whole new group of clients.

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