The Nutraceutical Industry Often Struggles with Merchant Accounts to Accept Credit Cards.
Recently, for instance, one of the world’s largest acquiring (or processing) banks shut down their entire portfolio of nutraceutical merchant accounts leaving thousands of legitimate domestic and international nutritional supplement manufacturers without a means to service their customers. Having a merchant account provider who understands your industry, is stable, and has the power of multiple banking relationships is essential to the success of any nutra product. If you are looking for a new or better nutraceutical business merchant account or are simply tired of having to get a new account every 6 months, read on.
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Why are Nutraceuticals Targeted as High Risk Merchant Accounts?
First lets look at why the nutraceutical industry is considered high risk for accepting credit cards. To keep it simple there are 3 main categories that cause the nutraceutical industry to labeled as High Risk for merchant services.
Nutra Merchant Accounts and Chargebacks.
The nutraceutical industry, unfortunately, has a history of a high chargeback ratios which deters acquiring banks from working with nutra merchant accounts. The chargeback system was originally designed to protect consumers from credit card fraud or product misrepresentation. The nutra industry has a relatively high amount of chargebacks simply due to the highly diverse category it encompasses and its most commonly used business model. The nature of the nutraceutical sales cycle often utilizes marketing that offers “free” samples followed by automated shipments and recurring billing. If the recurring payments have not been properly disclosed or if the business makes it difficult to cancel their subscription then the consumer will have the card issuing bank fight the charges. Additionally, there is often times a fine line between marketing and creating inflated consumer expectations. If a consumer is dissatisfied or feels misled once again they will have their Credit Card company charge the merchandise back to the merchant. Finally, some nutraceutical manufacturers have poor or outsourced customer service making it difficult for consumers to manage their accounts, get additional information, or return products which once again can trigger chargebacks. Managing your nutraceutical’s chargebacks and keeping the ratio low through good disclosures, customer service, and of course quality products will make getting and maintaining a merchant account much easier as well as increase your profit margins.
Neutraceuticals are Monitored by Vague Legal Guidelines.
Another consideration that deters most banks from working with Nutraceutical businesses is that there are vague or misunderstood legal guidelines. Underwriters have the job of screening new merchant accounts for fraudulent or illegal products and to protect the bank from financial and legal risk. Unfortunately, the nutraceutical industry falls into a grey area and has often been used as a front to distribute and sell illegal products, such as hallucinogens, before the DEA has a chance to recognize and flag them. When this does happen the acquiring bank is often left with a large liability. Additionally, many nutraceuticals are distributed on an international level meaning that there is little control over ingredients and claims. This history combined with the fact that most nutraceutical accounts do not have the endorsement of the FDA means that (to an underwriter) it is possible the products are based on unfounded claims. Thus, another reason for Nutraceuticals to be placed in the High Risk/High Chargeback category.
Nutraceuticals tend to be High Volume Merchant Accounts
Successful Nutraceutical manufacturers tend to have high volumes of credit card transactions (over $200,000/month). You would think that processing banks would like that since they are making money based on credit card sales volume, however, underwriters look at it as even more exposure to liability when combined with the industry’s chargeback history and vague legal issues.
So How do you find a Nutraceutical Merchant Services provider you can count on?
The best way to find a reliable, reputable, and fair High Risk Merchant Service provider who is happy to work with your industry can be a challenge. All too often, unfortunately, it seems that their lofty promises are met with failure, incredibly high rates, and high pressure sales representatives. In order to find a quality high risk processor simply ask questions like:
How long have you been in high risk merchant services?
How many Domestic and how many International banks do you work with?
Where are your international banks located?
How often will I receive deposits?
Do you offer 24/7 service centers?
If your nutra business works on an international level make sure to ask if they have the ability to work and convert multiple currencies?
Not only should your representative be able to answer those questions without hesitation but do so professionally.
Looking for a Nutra Merchant Services Provider That You Can Count On?
Bankcard Brokers has long standing relationships with some of the world’s premier Tier 1, 2, and 3 acquiring banks. Their worldwide network and partnerships offer multi-currency options, a security team that specializes in monitoring high risk merchant accounts to help protect your business while significantly reducing your chargeback ratio, and a friendly team of certified payment professionals.
Bankcard Brokers will not only get your nutraceutical merchant account approved but set it up so that you can depend on it for years to come. Stop worrying about finding a new account every 6 months or having to manage multiple payment providers Guardian will do it all for you!professionals to make worrying about your merchant account a thing of the past!
Update: We now have more options for processing payments! Not only can we provide you with a reliable merchant account, but we now have NEW options for processing payments outside the Visa/MasterCard Network- Call now for more information!
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