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High Risk Processing for Multi-Level Marketing

In the 1980s and 1990s, the direct selling industry soared with multilevel marketing (MLM) companies selling everything from cosmetics to kitchen tools to lingerie. MLM is when an individual becomes a product distributor and gets paid a commission on the sales made by other distributors he or she recruits.

Before the internet, MLM marketers hosted parties – think Tupperware parties – with friends to display and sell their wares. Now, direct marketers host online parties and invite friends from social media to attend.

Last year, a record 20.5 million people were involved in direct selling in the United States, which was a 1.5% increase from 2015. Last year was the second highest revenue level in direct selling history. Direct retail sales were estimated at $35.54 billion in 2016, according to the Direct Sales Association’s fact sheet.

Despite a growing and lucrative industry, banks don’t want to take a chance on them. Legal risks, potential for excessive chargebacks, and unpredictable growth patterns land multi-level marketing companies in the high-risk category with traditional financial institutions. These risks don’t mean that these businesses can’t process online and mobile payments. They can if they turn to a merchant account provider, like SecureGlobalPay, which specializes in MLM credit card processing. Many high-risk processors charge higher per-transaction fees and impose processing limits on MLM merchants, but providers, like SecureGlobalPay, uses its excellent customer service and custom-made payment solutions to compensate for any drawbacks.

SecureGlobalPay can approve merchant accounts for MLM business within 24 and 48 hours. Additionally, merchants can count on SecureGlobalPay for chargeback management tools, PCI-compliant payment gateways, and fraud filters. MLM credit card processing is simple with SecureGlobalPay. Begin the process now by filling out SecureGlobalPay’s quick and easy online merchant account application today and begin efficiently processing payments.

MLM Credit Card Processing for Many Products

People affiliated with direct selling companies are not only eligible to purchase products at a discount, and resell them at a profit, but the call also sponsor others to sell. According to the Direct Sales Association, 5.3 million people are building independent businesses as direct sellers. Of these people, 800,000 work full time and 4.5 million work part time. To keep businesses successful, they need to securely credit card transactions. Begin the process by applying for an SecureGlobalPay merchant account.

Get a merchant account from SecureGlobalPay for MLM businesses that offer the following products and services related to:

  • Beauty
  • Books
  • Clothing
  • Fitness
  • Health
  • Home Products
  • Jewelry
  • Toys
  • Wine

Almost any product or service could be sold through multilevel marketing, merchants who don’t see their products and services here should contact SecureGlobalPay to discuss payment solutions.

High-risk merchants are SecureGlobalPay’s specialty, working hard to help MLM businesses of all sizes to succeed. Start the process by applying for a MLM merchant account now.

What’s needed to get a MLM merchant account

For MLM credit card processing, merchants must obtain a merchant account. Businesses must begin by filling out SecureGlobalPay’s simple online application. After submitting the application, merchants will need to provide the following items to underwriters:

  • A valid, government-issued ID, such as a state-issued driver’s license
  • A bank letter or a pre-printed voided check
  • 3 months of the most recent bank statements
  • 3 months of the most recent processing statements, if applicable
  • A SSN (Social Security Number) or EIN (Employer Identification Number)
  • Chargeback ratios must be under 2%

Online sites need a secure, fully-operational website with trusted privacy and refund policies.

SecureGlobalPay cannot guarantee any approvals, but it does promise applicants a fair, secure process. SecureGlobalPay is a processor dedicated to helping customers operate and succeed. Apply today and get approved as little as 24 hours and begin processing credit card payments.

What to expect during an underwriter’s review

When underwriters begin reviewing applications, they want to MLM businesses that are law-abiding, reputable businesses. During their thorough reviews, underwriters look for any questionable practices that could financially hurt credit card processors. The problem is that many multilevel marketing businesses are not legitimate, according to the U.S. Federal Trade Commission.

Unfortunately, many products are fraudulently marketed. Underwriters want to ensure companies are selling quality products that aren’t overpriced, have questionable merits, or are dangerous to consumers. These factors increase an MLM merchants risk to credit card processors. Ultimately, they want to know that merchants have a good business model, which won’t result in a high volume of chargebacks.

Underwriters look at merchants’ credit scores, credit card processing history, and bank statements to determine risk. If a business was shut down by another processor in the past or it has many consumer complaints, that will also increase a merchant’s risk. Merchants that carry bank accounts with negative balances, excessive chargeback ratios, and have a history of missing payments or not paying bills also will have a negative impact in the eyes of underwriters.

The more red flags against MLM merchants, the greater risk to a processor and a decrease in the chances that a merchant account will be approved.

MLM businesses that want to increase their chances of approval should:

  • Accrue a substantial sum of money in the bank
  • Pay off outstanding bills and debts
  • Encourage a principal in the business with a stellar credit history to apply for the merchant account

Most importantly, businesses should handle anything that looks suspicious before allowing an application to go before an underwriter. In the end, smart merchants will want to avoid merchant account limits, such as lower rolling reserves and caps on higher processing volumes.

Fraud leads to excessive MLM chargebacks

Every multilevel marketing company isn’t law-abiding. In fact, the industry has a reputation for being unlawful.

If a person makes money based on the number of people they recruit and the sales made to them, the MLM business is likely a pyramid scheme, according to the U.S. Federal Trade Commission. Pyramid schemes are illegal and cause many people to a large chunk of money. Unfortunately, many products and services in this industry are fraudulently marketed and illegal activity is rampant in these businesses.

Due to the potential legal issues, MLM merchants are prone to chargebacks. It is not unusual for these types of businesses to close unexpectedly or customers to demand refunds and chargebacks because products and services are fake, useless, or ineffective. A time-tested and traditional tip-off to a pyramid scheme is any business plan that rewards new distributors more money for recruiting new sellers than selling products to the public. Vague company descriptions, constant reminders that the company is legitimate, and a lack of products are services are red flags that a company is a pyramid scheme.

Knowing an MLM is legit

The Pampered Chef and Avon are good examples of MLM businesses. These companies have been established for years, have good reputations, and a social buzz. Those are some of the key items to look for when trying to determine if a MLM is legitimate.

Distributors should be willing to answer all questions and not seem like they are engaged in anything questionable. Look out for fake references paid by the company or distributor that lie and claim they successfully earned money with the businesses. Also, distributors should be open and honest about refunds. Those that are short on details or focus more time on getting new people to join the business are bad signs.

Excessive chargebacks hurt credit card processors

Credit card processors can get hit with thousands of dollars in financial penalties per merchant when MLM merchants have excessive chargeback ratios. Whenever a business exceeds a 2% chargeback ratio, credit card companies, such as MasterCard and Visa, can fine processors if they continue to do business with the problematic merchants.

When ratios rise to 3% or more, merchants are no longer profitable for credit card processors, leading them to shut down high-risk merchant accounts. If a merchant has 100 transactions and four chargebacks in a month, the business has a 4% chargeback. Therefore, margins of error are small for merchants and they must take the necessary action to avoid chargebacks.

Beat MLM Chargebacks

Great customer service can put a dent in excessive chargebacks. Customers are less likely to dispute credit card transactions when merchants appear responsible and transparent. Customers listen and reconsider when merchants offer quality products, good customer service, a good refund policy, and express a willingness to listen to their problems.

Electronic receipts and customer satisfaction surveys are good ways to keep customers happy. Many chargebacks are a result of customers not remembering or recognizing transactions when they review their credit card statements. When a receipt is emailed to a customer, it should include the merchant’s contact information, email address, and billing support phone number. A receipt will remind the customer of the purchase, so there are no surprises.

Sending a customer satisfaction survey email immediately after a purchase or some time before customers receive their credit card statements also can prevent chargebacks. Survey results not only could a merchant’s customer service department, it also gives a business another opportunity to remind customers about transactions.

Credit card transaction disputes also can be limited by having 24-hour customer service support. If a customer can live chat with a representative, the employee could offer a full refund or come up with another solution that prevents the person from disputing a charge.

Reducing chargeback ratios can be the difference between running or closing a business.


Multilevel marketing merchant categories

The United States and other countries, including the United Kingdom, assigns four-digit numerical Standard Industrial Classification (SIC) codes to businesses. These codes identify the primary purposes of these businesses.

Direct selling businesses often exclusively fall into the 5963: Direct Selling Establishments SIC code.

Visit the United States Department of Labor to view a complete SIC list.

Federal statistical agencies classify establishments, which are used to collect, analyze, and publish statistical information about similar types of businesses, uses a list of six-digit numerical codes known as the Northern American Classification System (NAICS). The data gathered is used to determine the way the businesses impact the economy in the U.S.

Multilevel marketing and direct sales businesses exclusively fall into the

454390: Other Direct Selling Establishments NAICS code.

Visit the United States Census Bureau’s Northern American Classification System to view the complete NAICS code list.

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