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How To Reduce The Risk To Your Nutraceutical Merchant Account

by Kimberly Baylies on November 2, 2021

Protect your self from the risk of nutraceutical merchant account shut down. In our last article, Nutraceutical Merchant Account Challenges, we talked about the challenges that Nutraceutical companies face in running business. These challenges affect health supplement companies both in a regulatory fashion and from a fraud and chargeback perspective. And they make it difficult for merchants to get and keep a nutraceutical merchant account to accept payments.

That is because these challenges also create increased risk for the banks and processors who would serve the industry. Unfortunately, this leaves nutraceutical business owners with a difficult time getting a merchant account to accept payments for supplements. And they often increase the chance that their merchant account will get shut down.

Today, we’re focusing on ways business owners can reduce those risks and minimize the effect they have on their merchant account. This way, merchants can play an active role in keeping a stable and reliable merchant account open and processing.

Some of the best ways to protect your merchant account from the risks inherent to the industry begin with you and your business culture. Begin by auditing and updating common business processes and philosophies. Then support those efforts through the use of robust software solutions built to address common issues that plague the industry.

Let’s get started…

Watch your Marketing and Health and Benefits Claims

Unfortunately, you can't reduce the inherent nature of Nutraceuticals. They are both heavily regulated and not regulated at the same time. And regulations can differ greatly depending on the type of supplement.

There are regulations around manufacturing, ingredients, pesticide levels, labeling, and benefits and health claims. These all represent an inherent risk for the banks and processors choosing to serve the industry. 

But there is not much a nutraceutical merchant can do about these, except to abide by the rules. And that will go a long way to prove your integrity and reputation. And that will benefit the business with both customers (think chargebacks) and banks. Especially since banks and their shareholders tend to be very concerned with their own reputation and involvement with things that could be potentially brand damaging.

Be careful where you source ingredients and choose manufacturers who abide by FDA Code Part 111 Current Good Manufacturing Practices (CGMPs). Be sure to abide by all FDA regulations, including the Federal Food, Drug, and Cosmetic Act (FD&C), and the Federal Trade Commission Act (FTCA). 

And lastly, be mindful of making strong health claims when describing the benefits of your products. Unsubstantiated claims about products will only lead to increased chargeback filings from unhappy customers. 

Focus on Superior Customer Service and continued CommunicationHow to reduce chargebacks and protect your supplement merchant services from shut down.

Nutraceuticals are very consumer specific. It is virtually impossible to be sure that the product works for every customer or that every customer has a satisfying experience. For this reason, you must make sure that customer service is paramount and that customers have easy access to your customer service. 

Your website and all correspondence should prominently display the customer service email address and phone numbers. The goal is to make sure customers find it easy to reach out to you when they have a problem.

Merchants should also be communicating with customers throughout every step of the buying process. Email receipts and order confirmation should be sent as soon as an order is completed. Updates should be provided throughout the shipping and delivery process. And all correspondence should include customer service information and invite the customer to contact you if there’s a problem.

Most of the time, when customers file a chargeback with their credit card company, it's because it seems “easier” than contacting the merchant. You want your customers to know how to contact you. But you also want them to feel like they’re going to get the help they need when they do. 

Merchants also need to make sure that their merchant descriptor that appears on the customer's credit card statement matches the store's name. One of the highest reported reasons for filing a chargeback is “merchant not recognized”. This happens when your merchant descriptor is a name other than the one used for your store. Your merchant account provider will be able to check on and confirm this for you.

Customer service is the cornerstone of running a successful nutraceutical business. And it is the foundation of every other risk reduction strategy on this list. Chargebacks are one of the biggest risks to your nutraceutical merchant account. And one of the best ways to reduce a customer's propensity for filing a chargeback is by providing superior customer service.

Update Shipping and Tracking Procedures

Clearly display shipping and estimated delivery times on your website and at checkout. This way, customers know what to expect at the time of purchase. Then be sure to provide tracking for all shipments and continue to update customers with delivery updates. This way they can't say they didn't get the product or file chargeback because shipping took too long.

Most nutraceutical companies provide a monthly membership or continuity refill business model. This is often a point of contention with customers, even though they are the ones who signed up for it. On top of boldly notifying customers that this is what they are signing up for at first purchase, continued communication is a must. Send out recurring billing reminders prior to fullment and billing transactions. Again, include order cancellation and/or postponement information as well as customer service information on the correspondence. 

Not wanting another shipment or not remembering that they signed up for recurring shipments are leading reasons for chargeback filings. 

Revamp your Refund Policies

Would you rather give a refund, or have a chargeback filed against you?Clearly define company refund policies for customers to find on your website and throughout shopping pages. This will help customers understand what their options are before they choose to make a purchase. It will also help to support your argument when fighting wrongly filed chargebacks.

It's also a good idea to formulate a customer-forward refund policy. If you stand by your products it shouldn't be hard. And most times, it is better to give a complete refund than it is to have a chargeback filed. Not only does that just contribute to your high chargeback ratio, but they also cost more money.

And when you provide an unhappy customer with a refund, you may have lost the sale, but you might actually hold on to a happy customer. The future purchases are worth it.

Prioritize Fraud Mitigation and Prevention Software

Robust fraud detection tools built into your high-risk payment gateway bring a high level of protection to online payment transactions. With each transaction, the system is analyzing hundreds of data points to detect anomalies. The system utilizes behavioral analytics along with machine learning AI and advanced proxy detection methods to detect probable fraud. Any potentially fraudulent transaction is automatically “red flagged” for further investigation. 

This allows the merchant more control as well as insight into possible weaknesses in security.

Every business is different, and some may be more targeted by fraud than others. Merchants that experience excessive fraud attempts may want to employ supplementary integrated fraud detection tools. These intuitive tools recognize valid customers while blocking fraudulent networks and individuals. This results in maximized valid sales while reducing fraud losses.

Not only does this help reduce your risk of fraud, but that also reduces your chargeback filings as a result of the fraudulent transactions.

Implement Chargeback Monitoring Solutions

Chargeback monitoring solutions help protect your merchant account from shut down due to high chargeback ratios.

Chargeback management software gives merchants with high chargeback ratios a leg up. The right solution will not only save you time and money, but also help to bring your chargeback ratio down.

Real-time chargeback alerts notify merchants immediately when a chargeback is requested. This gives the merchant time to investigate and contact the customer to try to solve the issue before it is finalized. It also gives the merchant more time to dispute a chargeback filing if during investigation they feel that the filing is fraudulent or unwarranted. And that is very important since there are many deadlines and time is of the essence when working with chargebacks.

Software can help merchants automate many aspects of the chargeback process, including tracking all disputes and representments. It can identify errors in transactions such as double payments and correct before there is a chargeback filed. It analyzes information from multiple data points to recognize patterns in chargebacks and previous customer disputes. 

It also gathers and stores pertinent information that is later used as “compelling evidence” when disputing a chargeback.

Work with an Experienced High-Risk Nutraceutical Merchant Account Provider.

And of course, work with an experienced high-risk merchant service provider, like Bankcard International Group. We specialize in providing payment solutions for high-risk merchants such as nutraceutical and supplement companies. 

The company you choose to open a health supplement and nutraceutical merchant account with will have an effect on your success. That choice will not only dictate your rates and customer support level, it may also affect the reliability and longevity of your merchant account.

An experienced high-risk merchant account provider will be able to provide a merchant account you can rely on. We’ve built strong, transparent banking partnerships with entities prepared to take on the additional risks that the industry brings. We also provide in-house pre-underwriting of your supplement merchant account application. This allows us to detect any “red flags” beforehand, and ensures a complete application.

Because of this, we can increase your chance of merchant account approval and promise reliability over the long term. Nutraceutical merchants won't have to worry about the risk of a merchant account shut down when they work with providers who understand their challenges. 

If you're looking for a dependable and affordable solution to accept payments for nutraceuticals and supplements, we can help. We provide stable solutions, along with robust and continuous customer support. And we’ve been doing it for over 20 years. We have the experience and the solutions you need to ensure your success. 

Call us today and one of our ETA Certified Payment Professionals can customize a solution to your specific needs.  


Topics: High Risk Merchant Account, Fraud Management, Business Tips, Nutraceutical, eCommerce, Subscription merchant account, Chargebacks