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Fixed Reserve, what is it?

A Fixed Reserve is often requested by acquiring banks to create a buffer in case of bankruptcies, fraud and other incidents where the acquirer may lose money.

Following an assessment of business model, KYC documentation, delivery/order fulfilment period and any additional guarantees made to the customer, an estimation of potential risk is made by the acquirer. Based on this a request is made for the merchant to make an up-front transfer of funds to cover part or all of the perceived financial risk.

Once a transfer has been made, funds are kept in a segregated bank account, with the fixed reserve held for as long as the merchant is trading with the acquirer.