Rolling Reserves

Introduction

Rolling reserves are a financial buffer arrangement between payment processors and businesses. Payment processors withhold a percentage of each transaction a business processes during a specific time period; they keep this amount as protection against potential risks, such as chargebacks, fraud, and other financial liabilities. The agreement terms and a business’s perceived risk level determine the percentage of sales reserved and for how long.

After the holding period, the business receives the reserved funds; this usually occurs on a rolling basis. For example, if the reserve period is six months, the business receives the funds from January in July, the funds from February in August, and so on. As a result, a business should have a constant financial buffer of funds from the most recent transactions to cover any potential issues that might arise.

Below, we’ll cover how rolling reserves work, what types of businesses are best suited for them, their advantages and disadvantages, and more.

CoindPay applies a Rolling Reserve in payment flows involving fiat settlement and card network requirements, ensuring platform stability while supporting scalable merchant growth.

Applicability

Rolling Reserves apply to the following CoindPay payment and settlement models:

• Fiat-in → Stablecoin Settlement ✅

• Fiat-in → Fiat Settlement ⏳

Rolling Reserves do not apply to:

• Crypto-in → Crypto Settlement

• Accounts or channels explicitly exempted under CoindPay risk policies

Reserve Rate

For applicable payment flows, 5% of each successfully processed transaction is retained as a rolling reserve.

The reserve rate may be adjusted by CoindPay from time to time based on factors including, but not limited to:

• Transaction volume and processing history

• Chargeback and dispute ratios

• Settlement channels and payment methods

• Card network and banking partner requirements

Any changes to the reserve rate will be reflected in the merchant dashboard and take effect according to the applicable notice period, where required.

Holding Period

Reserved funds are held for a 3-month holding period to mitigate risks associated with:

• Settlement advances

• Chargebacks

• Refunds

• Payment disputes

The holding period is applied using a monthly bucket model, rather than on a per-transaction timestamp basis.

Monthly Release Mechanism

Starting in the 4th month, reserves are released on a monthly basis during business days, beginning with the earliest eligible monthly bucket.

What do rolling reserves do?

Rolling reserves function as a safety net in payment processing. Payment processors pull them from a business’s processed transactions, not as a penalty but as a precaution. This proactive step creates a cushion to handle unexpected issues, such as chargebacks and fraud. For businesses, rolling reserves can temporarily restrict cash flow and affect how a business handles financial planning and revenue projection. For payment processors, they serve these purposes:

• Chargeback protection: In 2023, Americans disputed over $65 billion in credit card charges. Rolling reserves help businesses and payment processors cover the costs of disputes such as chargebacks and refunds. This helps maintain payment processors’ financial stability.

• Fraud prevention: Rolling reserves deter businesses from engaging in high-risk activities by withholding a portion of funds to cover potential losses.

• Onboarding high-risk or new businesses: For businesses considered high risk because of their industry, product, or minimal transaction history, payment processors might agree to work with them only if they use rolling reserves.

How do rolling reserves work?

Here’s how payment processors withhold and release funds from rolling reserves:

• Setting terms: When a business implements payment processing with a provider, they agree on terms based on the business type, size, industry, and risk factors. These terms include the percentage of each transaction to reserve and the duration for which these funds will be kept before release.

• Withholding funds: The payment processor reserves a set percentage of the business’s daily transactions.

• Holding funds: The payment processor holds the funds for a specific period, commonly ranging from six months to a year. The business and the processor negotiate the length of time to offer the former operational flexibility and the latter protection from potential financial liabilities.

• Releasing funds: After the holding period, the business receives the funds. This occurs on a rolling basis to create a constant buffer of recent funds against sudden financial needs.

• Adjusting terms: The business and the processor can adjust the terms of the rolling reserve based on the business’s evolving financial health and risk profile. This might mean adjusting the reserve percentage in response to the business’s growth and stabilisation or changes in the industry.

To illustrate, let’s say a business sells a product for $100 and has a 10% rolling reserve with a 90-day period. The processor withholds $10 from a purchase and places it in reserve. After 90 days, if no chargebacks or issues occur, the business gets back the $10.

Accumulation

1. A qualifying transaction is successfully processed.

2. The applicable reserve amount is calculated based on the current reserve rate.

3. The reserve is allocated to the corresponding monthly reserve bucket.

Release Schedule

Each monthly reserve bucket is released after completing the 3-month holding period.

Example: This ensures a predictable and transparent reserve release cycle.

Transaction Month	Release Month
December	April
January	May
February	June

What types of businesses are best suited for rolling reserves?

Rolling reserves are ideal for these types of businesses:

• High-risk businesses: Rolling reserves can manage risks for businesses operating in industries with higher chargeback rates – such as travel, gaming, telemarketing, and subscription services – or businesses selling products or services that are prone to disputes or returns, such as electronics, luxury goods, and online courses.

• New businesses: Payment processors might require rolling reserves for startups or businesses with little to no processing history until they establish a track record of successful transactions.

• Businesses with financial issues: Processors might require rolling reserves as a risk mitigation measure for businesses with poor credit ratings or financial instability.

• Businesses with high transaction volumes: Rolling reserves can benefit businesses that process large volumes of transactions by providing ongoing protection against potential chargebacks or fraud.

• Seasonal businesses: Businesses with substantial sales fluctuations throughout the year might find rolling reserves helpful because the reserve amount adjusts with their transaction volumes.

• International businesses: Rolling reserves can provide additional protection to businesses handling cross-border transactions, which might face higher chargeback risks because of currency fluctuations, shipping issues, or cultural differences.

Advantages and disadvantages of rolling reserves

Rolling reserves create advantages and disadvantages for businesses. Here’s how they can affect businesses:

Advantages

• Access to payment processors: High-risk businesses or those with limited credit history can improve their chances of obtaining merchant accounts by opting for rolling reserves.

• Building trust: Businesses can demonstrate their financial responsibility to payment processors through rolling reserves, which can then result in benefits such as lower fees and higher processing limits.

• Chargeback protection: By using rolling reserves as a safety net, businesses can cover the costs of chargebacks and refunds without depleting their working capital.

• Forced savings: Rolling reserves function as a forced savings mechanism, setting aside funds for unexpected expenses or future investments

Disadvantages

How long should you hold rolling reserves?

Here are some factors that can determine the ideal duration for holding rolling reserves:

• Industry risk: Industries with higher chargeback rates – such as travel, gaming, and adult entertainment – might require longer reserve periods (180 days or more) to cover potential disputes. Businesses in low-risk sectors might have shorter reserve periods (30–90 days) because of the lower likelihood of chargebacks.

• Business history: Businesses with limited processing history might have longer reserve periods until they establish a strong track record. Businesses with a proven history of low chargeback rates and good standing could be eligible for shorter reserve periods.

• Chargeback time frames: The standard chargeback time frames set by card networks (e.g., Visa, Mastercard) often influence the length of reserve periods. These time frames can range from 45 to 120 days.

• Payment processor policies: The payment processor will set the terms and conditions of your agreement. Some processors offer flexibility or negotiable terms.

Reserves begin releasing in the 4th month after the transaction month, on a monthly basis.

Does lower transaction volume affect reserve release?

No. Release schedules are determined by time-based buckets and are independent of future transaction volume.

Purpose and Compliance

Rolling Reserves are maintained to:

• Mitigate settlement and liquidity risks

• Comply with card network and banking gateway requirements (e.g., Visa, Mastercard)

• Protect both merchants and the CoindPay payment ecosystem

This approach aligns with industry-standard risk practices adopted by global payment service providers.

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Account Closure

Merchants and developers are requested to provide at least 30 days’ prior notice before account closure.

Upon closure:

• New reserve accumulation will stop

• Existing reserves will continue to follow the standard holding and release schedule

• Subject to no outstanding disputes or chargebacks, remaining reserves will be released after the applicable 3-month holding period