Understanding Rolling Reserves in Payment Processing

Understanding Rolling Reserves

Rolling reserves are a critical component of payment processing, especially for high-risk merchants. This article explains how they work and why they're necessary.

What is a Rolling Reserve?

A rolling reserve is a percentage of each transaction held back by the payment processor as a security deposit against potential chargebacks, refunds, and fraud losses.

How Does It Work?

For example, with a 5% rolling reserve and 90-day holding period: if you process ₹1,00,000 in a day, ₹5,000 is held in reserve and released after 90 days.

Why Is It Necessary?

Rolling reserves protect both the payment processor and the merchant ecosystem by ensuring sufficient funds are available to cover disputes, reducing overall risk in the payment chain, and maintaining healthy cash flow for the platform.