Why Payment Processors Withhold Funds – And how  Nexxtap mitigates this

For many businesses, quickly accessing their funds is essential for maintaining cash flow and sustaining daily operations. However, some payment processors unexpectedly withhold funds, leaving merchants frustrated and financially strained. While these holds are often justified as risk management measures, they can sometimes feel arbitrary and unfair. At Nexxtap, we believe in transparency and fairness, ensuring businesses have access to their money without unnecessary delays.

Why Do Payment Processors Withhold Funds?

Risk Management

Payment processors often hold funds as a precaution to maintain a low-risk profile. If a dispute arises or a transaction is reversed, they use withheld funds to protect themselves and their customers. While this practice is meant to safeguard financial security, it can significantly impact a merchant’s cash flow.

Suspicious Activity

If a processor detects irregular transaction patterns, it may flag a merchant account for potential fraud. Transactions that deviate from typical business behaviour, such as a sudden spike in sales or multiple high-value purchases from unfamiliar customers, can lead to temporary fund holds while the processor investigates.

High-Risk Transactions

Certain transactions, especially unusually large purchases, are considered high-risk. Payment processors may impose holds to verify their legitimacy, fearing fraud or unauthorised transactions. Unfortunately, this cautious approach can delay payments for legitimate businesses.

Excessive Chargebacks

A high chargeback rate can signal potential fraud or customer dissatisfaction. To mitigate risk, processors may withhold funds from businesses that experience frequent disputes, even if they operate legitimately. This practice can be especially harmful to small businesses that rely on steady cash flow.

Compliance Issues

Merchants must comply with payment processing regulations and contractual agreements. If a business fails to meet these requirements, whether due to missing documentation or policy violations, processors may impose holds until compliance issues are resolved.

Breaking Contract Terms

Violations of a merchant processing agreement—such as exceeding transaction limits, misclassifying business activities, or failing to meet service requirements—can result in withheld funds. Payment processors use these measures to enforce their terms and conditions.

Reserve Accounts

Some processors require merchants to maintain a reserve account, where a portion of funds is held as a financial safety net. While this practice is agreed upon in initial contracts, businesses often find themselves unable to access their full revenue, impacting financial planning.

Nexxtap: A Better Payment Solution

Unlike traditional payment processors, Nexxtap does not withhold funds for arbitrary reasons. We understand that businesses rely on quick access to their earnings, and our approach prioritises transparency, security, and fairness.

• No Unjustified Holds - Your money should be yours. We don’t impose unnecessary delays in accessing your funds and clear funds in 1 business day.

• Fair Risk Management - We implement robust fraud prevention measures without penalising legitimate businesses.

• Clear Compliance Guidelines - Our straightforward terms ensure businesses know exactly what’s required to maintain smooth transactions.

• Thorough Onboarding - Nexxtap properly vets and verifies it's merchant's before issuing credentials. This ensures that merchant's are properly onboarded, allowing us to clear funds quickly into the merchant's bank account of choice. 

With Nexxtap, businesses can process payments confidently, knowing their funds are secure and accessible when needed.