Posted: by Bronte
Minimize Your Merchant Account Risk in the Nutraceutical Industry
Starting a nutraceutical supplement business is one of those industry types that is misleadingly risky. People take supplements for a range of reasons: preventative care, weight loss, sexual performance, and more. But even considering the prevalence of nutraceuticals among consumers, businesses providing the products have obstacles to overcome in order to stay compliant and grow their business. If you are looking to start a business in this space, there are a few risk factors to be aware of. The first step is knowing them, and the next step is minimizing those merchant account risks. Keep reading to find out how you can protect your business from the risks that plague it.
Nutraceuticals are Hard to Place
Banks and credit card processing companies have a hard time supporting businesses in the nutraceutical supplement industry. Without the proper risk mitigation and a high risk merchant account, it is impossible. Consumable products, especially those using untested ingredients, are difficult to get support for.
Supporting banks and processors have a system to weigh a business’ risk; this is a multi-pronged list with many nuances. For nutraceutical businesses, the top three risk factors that are taken into account are:
- Low amount of regulation
- Misleading claims
- Fraud and chargebacks
Government Regulation is Little to None
In the United States, the Food and Drug Administration (FDA) has no hand in regulating the effectiveness or safety of any nutraceutical products unless it is already having issues once in the market. There is no preventative care taken on their behalf to make sure that it is consumable.
In most cases this does not lead to an issue because nutraceutical supplements manufacturers have no intention of releasing dangerous products. Still, there is no way to accurately predict how a large group of people will react to the mixes of ingredients in the supplements. For example, a consumer may take a supplement with an active ingredient they are allergic to and have a bad reaction. Or, a mix of ingredients in certain supplements may negatively impact people with a pre existing medical condition.
As the FDA is not regulating the production of these products, this could lead to trouble for the nutraceutical companies in the industry. This is a big issue for supporting banks. They do not want to financially back an industry that has no guarantee of viability or of safety.
Misleading Claims for Supplements
While your nutraceutical company may be honest and truthful, the reputation associated with the industry varies. Many believe that nutraceuticals are a scam and promise false results. Even more, this distrust in nutraceutical supplements is widespread – you can find warnings for nutraceuticals in magazines, government sites, and more.
You may be thinking this won’t be an issue for you, as your nutraceuticals company only advertises the truth. However, the industry reputation can be damaging for your business. Banks tend not want to be associated with these businesses, as the industry is known to falsely advertise. Evaluating each business one-by-one takes a lot of time and doesn’t guarantee any return for banks, so instead, many of them choose not to take on nutraceutical supplement companies.
Nutraceuticals Have Chargebacks & Fraud
The distrust of the industry causes an issue with customers, too. Customers may expect a certain result from your product and be disappointed with the outcome. This can cause them to run a chargeback on their credit card or claim that their purchase was fraudulent.
Chargebacks and fraudulent charges occur outside of unhappy customers and unfortunately, the nutraceutical supplements industry is one that is highly vulnerable. Too many of these charges can cause your account to be frozen or even fully removed. Banks don’t want to get involved with businesses highly vulnerable to chargebacks and fraud, as it is looked at as an unnecessary financial risk to them.
Minimize Your Merchant Account Risk
The good news? While you may not be able to eliminate them, you can definitely minimize your merchant account risks. Here’s how.
1. Know your Boundaries
Since there is little to no government regulation, do as much due diligence as you can before releasing your product. Do the research, conduct tests, and consider putting your products through a group trial before selling it on the market. By investing a little more money, you ensure that the mixture of your ingredients will not be harmful to your consumers. As always, there will be unknowns, but try to minimize as much uncertainty and unknown information as possible. That way, you’ll know without a doubt that your product is safe.
Getting this testing may help minimize your merchant account risk. Depending on the supporting bank that takes on your account, providing these documents will show that you are willing to put the time and effort into keeping your customers safe. Doing this with the best high risk payment processor will set you up for success when getting a payment gateway for your business.
2. Take Control of Your Claims
You can’t change what other companies’ advertise, but you can control your own. After ensuring the safety of the product, your next step should be to create advertisements based on the true results. Don’t make claims that have no scientific backing and train your employees to properly articulate the product’s benefits. That way, if a customer is unhappy with the results, you know that you have done your part in being honest with them.
Utilizing customer testimony is a great way to advertise, but also be weary of giving off unsupported impressions of the supplements benefits. Others will put their trust in you and your product when they ready other experiences, so select only the best and use them appropriately.
This may not have a huge effect of whether or not a bank will approve you, but it will definitely make a difference in your business long term.
3. Know the Tactics and Procedures
Unfortunately, minimizing the number of chargebacks and merchant services fraud attempts is challenging. One thing you should do is write strict refund policies. That way if there is a dispute, you already have a policy set in place to handle it.
Additionally, you should install a chargeback protection screener software that will alert you when a dispute or fraudulent charge occurs. That way, you’ll have ample time to handle the charge before a bank gets involved. A reputable high risk payment processor will do that for you and will have seamless ways of integrating it.
Nutraceutical Industry Payment Processing
As you can see, a great way to minimize risk is to sign up for a nutraceutical merchant account that is equipped for high risk businesses. Not only will this help you combat some of the inevitable risks, it will allow you to seamlessly process credit and debit payments while also minimizing your risk.
Taking the next step to minimizing risk factors in your business shows that you are ready to grow and scale your business in a way that is safe for both you and your customers. So do it right with a payment processor that understands your business and what it needs to succeed.