The Rolling Reserve is a risk-management strategy we employ to help protect our merchants from potential losses that can occur when chargebacks or refunds are processed against their accounts. Without a Rolling Reserve, a high rate of chargebacks could cause your account's running balance to run into the negative. To protect against this outcome, we can temporarily set aside a portion of funds during the settlement process. These funds are held by Trust Payments for a pre-determined number of days and released once this period has expired. The Rolling Reserve acts as a buffer, with the reserved funds acting as the primary source to fulfil chargebacks or refunds processed.
How the Rolling Reserve is calculated
Every business is different and there is no one-size-fits-all approach to calculating the size of the Rolling Reserve needed. Many factors are taken into consideration when establishing the Rolling Reserve (e.g. the sector in which your business operates, how products are delivered, your business model, etc.) but broadly speaking the volume of funds reserved is determined by the perceived level of risk associated with the transactions you process. Or put another way, if chargebacks and refunds are deemed more likely, a larger Rolling Reserve will be needed to ensure you are adequately protected.
Do I need the Rolling Reserve?
During the onboarding process, all merchants undergo due diligence and security screening, and as part of this, we will determine whether a Rolling Reserve would be appropriate to help protect your account. However, not every business will need a Rolling Reserve; you might instead be asked to agree to a Fixed Reserve, which serves the same purpose but instead of being funded by temporarily setting aside a portion of your revenue in a rolling manner, you put a small amount upfront and top this up when needed - you can also optionally agree for the Fixed Reserve to be partially funded from the revenue derived from settlement.
Releasing funds from Rolling Reserve
Funds held in your Rolling Reserve are released once the chargeback liability period determined by the card schemes expires (minimum of 120 days from when the funds were added, but this can be longer depending on your business model).