With high chargebacks, continuity billing and excessive friendly fraud cases, it is not surprising that nutraceutical merchant processing is considered higher risk for traditional banks and payment processors.
Nutraceuticals products are fortified food products that supplement diets with nutrients as well treat or prevent diseases.
But despite providing medical benefits, nutraceuticals are not regulated by the U.S. Food and Drug Administration and so are not subjected to the stringent measures used to approve pharmaceutical drugs.
Since nutraceutical products are sold through outlets that have little government oversight, the end results of using these products remain largely unknown.
This has opened doors for dodgy companies to flood the market with substandard products and unsubstantiated claims.
Even though the U.S. government does not regulate nutraceuticals like the pharmaceutical industry, some established companies have taken it upon themselves to give credibility to their products by carrying out independent tests.
Some common nutraceutical products include:
- Dietary supplements
- Dietary Fiber
Get a Nutraceutical Merchant Processing Account
Merchants are expected to submit the following documents to kick-start their underwriting process:
- Valid government issued identity card
- Employee identification or social security number
- 3-6 months business account statements
- 3-6 months of payment processing statements
- 100% functional website with an integrated shopping cart
- Voided check from business account
How Nutra Merchant Accounts are Processed
Once an application is received, the underwriting team gets to work.
The first thing the nutra industry underwriting team does is to appraise the products being sold as well as review the website and marketing materials to verify the claims made.
The team will also confirm if the nutraceutical business has adhered to rules and regulations as well as legally followed due process.
Nutraceutical merchant processing history is also an important part of underwriting procedures with plenty of attention given to chargeback ratios.
If chargeback rates are low, it is a good thing, however, if chargebacks are high, they significantly dim your chances of getting a high-risk nutraceutical merchant account approved.
To properly move forward, reasons must be given on why there are so many chargebacks and what is being done to nip them in the bud.
Make sure you have a sizable amount of money in your business bank account before submitting your application too.
We need this to validate the processing volume that you asked for in your application form.
Furthermore, it shows you have enough financial resources to operate your business and cover unforeseen chargebacks that will inevitably come when you open a nutraceutical merchant processing account.
Nutra Merchant Accounts & Chargebacks
Most people who purchase Nutra products are looking for fast fixes and once they see that the products do not work, they want their money back.
And since Nutra products are not supported by clinical studies or scientific evidence, merchants get a lot of kickback from chargebacks.
Some nutraceutical processing merchants offer long term free trial periods to build credibility for their products.
This is to give customers confidence by telling them they can opt out anytime they want, even though they have provided cardholding information.
However, this does not stop customers from still initiating chargebacks.
Most of these buyers forget the terms of the agreement and only remember when they see subsequent charges, after the free trials are over on their credit card statements.
Other times, buyers’ remorse sets in and customers inform their banks to initiate a chargeback and falsely claim the product “did not deliver,” as promised.
This is known as friendly fraud and is a chargeback usually initiated when buyers want their money back and also want to keep the product for free.
Nutraceutical Merchant Processing – Keep Chargebacks Low
Here are some ways high-risk nutraceutical merchants can keep their chargebacks low.
First, ensure your refund policies are clearly displayed on the homepage of your website, telling customers to get in touch with you and not their issuing bank if they want a refund.
When a customer contacts you, refund the money back with no questions asked. If you feel the customer’s claim is suspicious, still issue a refund. This can very easily be done with a virtual terminal.
When high-risk merchants stand their ground and refuse to issue refunds, it hardly changes anything. It actually makes things worse.
Chargebacks give plenty of power to customers. Customers can easily get in touch with their issuing banks and dispute transactions.
So refunding a customer’s money without any hassles is one of the easiest ways of protecting your account, before things spiral beyond your control.
Second, always use a clear-cut description of your items on an email receipt so that customers can easily identify what they purchased on their credit card statements.
Include a number or email address for them to easily get in touch with you if they have any questions about a transaction.
In addition, frequently emailing buyers helps to keep a lid on unnecessary chargebacks.
Send your customers follow up emails thanking them for their business. Tell them about promotions and new products.
Encourage buyers to always get in touch with customer service if anything is on their mind. It is important that you build a relationship with your customers and make them feel guilty about initiating chargebacks behind your back. Using a nutraceutical merchant processing CRM like Limelight or similar will help you better manage and communicate with your clients.
Another way you can fight chargebacks is by using an early warning chargeback service that is directly integrated into your payment gateway.
This type of service, when properly monitored, will help notify a merchant when a customer has lodged a dispute with their issuing bank or card company.
Oftentimes, merchants have no idea why customers have initiated chargebacks until there are deductions from their business accounts.
With these chargeback services, a merchant gets an early warning and can quickly issue a refund before it becomes a chargeback.
There are also some card brands that offer iron-clad 3DS (3-D Secure) programs with an additional security layer at checkout. This helps to minimize chargeback risks too.
Using a reputable high-risk payment processor gives you the best chance of opening a nutraceutical merchant processing account.
Ensure that the provider is transparent, impartial and accessible. Make sure they have strong banking connections and have provided similar services for other merchants in your industry.
Once you have narrowed your options, consider what these providers are offering you.
Chargeback protection, fraud protection and other preventive measures are important if you are looking for business longevity.
When accepting payments, avoid the risk of trying to increase your nutra merchant processing volume or scale your business too quickly. Use alternate merchant accounts and intelligent transaction routing if you have to. This will help reduce your chargeback ratios and also help keep your processing relationships in check.
Never be satisfied with a nutraceutical merchant account provider offering you reduced fees or the best rates, it clearly shows they do not have your best interest at heart. Nutra processing is mostly about redundancy and chargeback management. Make sure you ask questions about these items as the longevity of your business depends on it.
Allow SecureGlobalPay to advise you on what your best move should be when accepting credit cards and debit cards in the nutraceutical industry.