DirectPayNet

Author: Maranda Moses

  • Nootropics Gain Popularity But Lose Payment Processing Credibility

    Nootropics Gain Popularity But Lose Payment Processing Credibility

    The nootropics industry is gaining popularity again, and with it, there is a demand for nootropics merchant accounts. But unusually high numbers of merchants are being declined for merchant accounts in their quest to accept credit card orders online.

    So what’s the issue?

    Like many other nutraceutical sub-categories, nootropics are considered a high-risk according to card issuers such as Visa and merchant service providers. But the good news is that there are plenty of actions you can take to enhance your chances of securing credit card processing.

    This article will show you how to avoid the most common pitfalls and secure your first nootropics merchant account. But first, let’s take a look at what’s causing the comeback of these so-called “smart” dietary supplements.

    Nootropics Set to Enjoy Rapid Growth During the 2020s

    Nutraceutical business owners in the nootropics space are set to enjoy record growth over the coming years. Recent industry reports suggest that the value of the nootropics market will reach $5.32 billion by 2026. That represents a staggering Compound Annual Growth Rate (GAGR) of 13.2%.

    This industry offers ample opportunity for e-commerce merchants to scale as long as they have the right payment structures in place to accept card payments and other forms of online payments.

    In case you’re unfamiliar with this sub-section of the nutraceutical industry, there is a wide range of so-called “smart” or cognitive drugs and supplements available for businesses to sell online without the need for a prescription. They usually contain ingredients that can boost the memory, enhance creativity levels, decision-making capabilities, and improve overall brain performance.

    With so many people working remotely from home these days, their popularity has soared as home-based workers look to find supplements that provide improved focus and productivity enhancement.

    But business owners looking to scale and grow within this niche often hit roadblocks when applying to credit card processors. So let’s look at why this is the case.

    Did you know that the key to success in the Nootropics space is diversifying your payment options? But how can you make that a reality? Read our Six Must-Do Strategies to Diversify Your Nootropics Payment Processing to find out!   

    The Nootropics Niche Has a Reputation Problem

    Firstly, the reason that so many companies struggle to secure a high-risk merchant account for nootropics is due to the industry being in regulatory limbo. It’s fair to say that incidents of fraud and customer backlashes have not helped either.

    While some online vendors run honest and highly successful businesses, a minority of sellers have created mistrust in the industry by overpromising and underdelivering. Consequently, acquiring banks and other payment providers are less enthused to accept vendors in this business category.

    Nootropics merchants like to use the terms “cognitive enhancer,” “smart drug,” or “magical elixir” for the brain. Regardless, savvy branding does not persuade acquiring banks or other payment providers to approve you for a solution. What providers care about is the potential risk your business may present to them financially.

    With some nootropics merchants claiming that their brain enhancement drugs cure Alzheimer’s, Parkinson’s, and dementia, it’s no wonder why so many financial institutions keep the industry at arm’s length.

    However, there is good news. You can prove to your acquirers and payment processors that you are a legitimate nootropics business worth partnering with for a nootropics merchant account. There’s plenty of items you need to implement. But once you have those in place, you can take advantage of one of the world’s fastest-growing supplement markets and leave your competitors behind.

    Let’s start with building solid financials.

    Successful Nootropics Merchants Build a Solid Financial History

    Most nootropics merchants think that all they need to show is some processing history. While these financial statements are vitally important, you also need to show that you have enough capital to take on unexpected events.

    Hence the reason some acquiring banks request bank statements. Experienced sellers know that they need a solid financial history to show acquiring banks they are stable. For example, having a $15,000 account balance will ease concerns if you apply to process $10,000 in monthly sales volume.

    A payment services provider will want to know that you have enough capital to back up your business products, inventory, and operations like a proper nutraceutical merchant should.

    High-volume supplement companies and weight-loss-supplement brands already know this. That’s why they grow revenue to $15,000 or more before even applying for a merchant account. If they cannot accept credit cards, they use e-checks and ACH at the shopping cart checkout page to build up orders, revenue, and, more importantly, establish good processing.

    Pay Attention to Ingredients, Licenses, Agreements, and Fulfillment

    Government bodies that regulate food and drugs require an ingredients list to accompany ingestible products. Nootropics are ingestible and therefore are subject to the same treatment. Your product descriptions should include a list of ingredients, so customers (and acquiring banks) can see that you are fully transparent.

    Successful merchants also retain copies of licenses, agreements, and order fulfillment contracts to show their payment providers. It’s important to know what is in your products, where they come from as well as shipping methods and delivery delays.

    Additionally, banned, sinister and uncontrolled doses of substances can put your provider in violation of government rules and regulations. Therefore, remove questionable inventory items before selling them to buyers. Violating these and other rules might effectively terminate your merchant account. Most countries have a regulatory body with lists on their websites that can be searched for banned ingredients. For example, in the United States, you can review the FDA website to ensure all your product ingredients can be sold.

    Avoid Making False Claims in Your Marketing Materials

    In a perfect world, customers would be responsible for their decision to buy your product, but that doesn’t stop government agencies from taking action against you. Some nootropics brands have faced lawsuits and fines for false claims made about their products.

    If you want to avoid this type of legal attention, we suggest performing a thorough website audit of all your content. Remove any misleading statements or claims. Otherwise, customers and your merchant services provider(s) can hold you liable.

    Too often, online merchants claim that their products can perform miracles like improve memory for dementia patients or alleviate the issues suffered by people living with Parkinson’s disease and cancer. But making isleading and reckless statements like this will put you at risk of potential lawsuits, and acquiring banks won’t entertain your merchant account application any further.

    Additionally, it is illegal to assert your products can heal severe medical conditions. Exaggerated claims should be withdrawn and never be associated with your nootropics business. Lastly, clinical trials must be performed on your product before you can make specific claims.

    Keep a Close Eye on Your Affiliates Selling Your Products

    Affiliate marketing is an excellent channel for attracting new prospective customers to your products. Operating an affiliate program to sell your nootropics can have big benefits for increasing traffic. However, be aware of exactly how your affiliates are marketing your products.

    There is no time like the present to perform an audit on your program. Are affiliates using the marketing materials you provide them with, or are they creating their own? Have you read any of their email campaigns or live website content? Does it accurately represent your brand? These are just some questions merchants should consider to curb potential false advertising.

    Carefully check referral links to verify how online traffic is being sent to you and that your product is marketed properly. Sever ties with those over-promising the properties of your nootropic products. The alternative is getting stuck with returned products and rampant chargebacks from customers that put your payment channels at risk of termination.

    Presentation and Communication is Everything

    Acquiring banks typically perform due diligence on companies when they consider whether to issue a merchant account. This is why it’s vital to put your best business face forward. A quality website makes an impression on the people assessing your products. An order page that provides clear pricing and description is also favorable.

    Therefore, having a shop with six out of 10 products missing or phony testimonials can result in an instantly-declined nootropics merchant account application. Likewise, the reason payment providers have become weary of nutraceutical vendors is because so many have unclear pricing terms. This can confuse prospective buyers. This is another reason for the mounting chargeback ratios in this industry.

    Ensure to clearly detail specific costs on your order page, as well as in your terms and conditions. Try to avoid subscriptions if you can. But if you insist on pursuing the rebilling model, allow customers to “opt-in” if they want to subscribe.

    Free or discounted trial subscription offers are seen as a red flag by debit and credit card issuers. This is another cause of declined payment processing applications. With new MasterCard rules surrounding free trials, providers do not want to be penalized by card networks and often steer clear.

    Ideally, build up six months of processing history and develop a strong brand. Then, once you have industry experience and solid financials, you can try new pricing models. If you’re a recent startup, start with a straight-sale offer and upgrade to a recurring model when you have proven that you can process orders with few chargebacks.

    Anti-fraud Tools Make Better Nutraceutical Merchants

    As we have mentioned many times here at DirectPayNet, implementing a robust set of anti-fraud tools can protect your business. By implementing a few of these solutions, you will lower risk to your business. You will also help curb the threat of high chargeback ratios from putting your merchant account at risk of termination.

    So let’s take a look at what some of these measures are.

    Chargeback Protection Services

    All high-risk merchants should procure this type of support. These networks are experts when it comes to chargebacks. They alert merchants when buyers contact their banks or if the potential to request a chargeback is high. Knowing which customers are putting you at risk is beneficial to your payment processing. Companies such as Ethoca and Verifi offer this service.

    Fraud Analytics Software

    There are several high-quality fraud analytics solutions on the market. Find the software best suited to your business model, industry, and transaction needs. Request demos from providers to learn how implementation could be advantageous. Likewise, seek counsel from your tech team to determine if integration could be seamless, which it should be.

    There are also several payment gateway tools, such as the Address Verification Service (AVS), that can be activated to beat some obvious fraud. Make sure to review the options already available to you. A reliable payment processor such as DirectPayNet can help navigate the rules you can add to protect your business from unwanted fraud and chargebacks.

    3D-Secure 2.0 (3DS2)

    This payer authentication is an excellent security measure. Merchants that implement 3D-Secure 2.0 (3DS2) benefit from lower instances of fraud and chargebacks. It works by assessing dozens of real-time data points to evaluate whether a transaction is genuine or not.

    Crucially, it also requests additional authentication from the customer, in the form of identifying information such as a fingerprint or a code sent to their mobile device. This extra layer of security shifts the burden of chargeback proof from the vendor to the customer. Lastly, it’s been a legal requirement on orders processed with the EU since the 1st January 2021. So make sure you have it in place if you operate in Europe, or you could end up in hot water.

    If you’re worried about conversions, it’s essential to note that the tool has undergone major changes since the first version, and now customers never have to leave your website to complete a purchase. To learn more about 3DS2, visit this page.

    Secure Your Nootropics Merchant Account with Help from the High-Risk Payments Experts

    DirectPayNet has over a decade of experience in the payments industry. We have assisted merchants that sell anti-aging creams, vitamins and supplements, detox kits, diet and weight loss programs, and nootropic products.

    With our expert support, those merchants have secured nutraceutical merchant accounts and ACH processing to help them scale their businesses even faster.  We have also helped them retain payment processing even when faced with the threat of high chargeback numbers.

    Let’s help you get the support you need. Email us today to find a payment solution for your nootropics business.

  • FAQ Fridays: How Do I Reduce Credit Card Declines At My Checkout Page?

    FAQ Fridays: How Do I Reduce Credit Card Declines At My Checkout Page?

    Q: I have too many credit card declines in my online business. Since 2019 I’ve been operating an online electronics store. I do pretty good numbers – about €150K a month and 1.12% chargebacks. But with the holiday shopping season coming, I need to fix this pesky problem fast!

    Last year my store had about 63% approval rate on our customers checking out from my cart. This year has been putrid. My business is now trending 54% approvals and so far for October the numbers keep getting worse. Most of the reasons are “issuing bank decline” and “insufficient funds”, then there’s others like “transaction not permitted”.

    Can you provide additional insight so I can help my electronics store approve more orders and reduce my credit card declines?

     

    A: Thanks for your question. There are a variety of reasons credit card declines happen at a checkout. It really depends on a few factors.

    Let me first explain the meaning behind those decline messages. The “issuing bank decline” is a common reason seen by online merchants accepting credit cards. It’s a vague response, but essentially the customer’s credit card issuer is telling you that they are not allowing the transaction.

    Visa or Mastercard, or the customer’s bank could be limiting large purchase amounts (for example, selling a drone for €1050). Or, the purchase doesn’t fit the customers regular buying habits. As a result, the order is declined. Therefore, transactions over certain limit may be deemed suspicious by the cardholder’s bank and blocked.

    The bottlenecks could also be because your customer’s bank is preventing orders from your merchant category code (MCC). The electronics category is known for being high risk so some banks are cautious to approve orders from this type of business. In any case, you may want to advise your customers to call their bank or credit card company to permit the transaction. Also, ensure you charge in USD if your merchant account is in Europe but you’re selling to Americans. This helps bypass currency exchanges.

    Electronics store owner learns ways to lower the instances of credit card declines at checkout

    You may benefit from having a second payment processor. An additional gateway allows you to “cascade” declined transactions. Therefore, a backup solution to ensure there are no bottlenecks and to try to recoup some of your issuing bank declines can actually help increase your conversions at checkout.

    The message “insufficient funds” is one of a few obvious reasons for credit card declines (along with “expired card number”). It’s also a popular reason for especially now during the Coronavirus pandemic. Spending habits have changed significantly. Many people are low on available credit because they’re in debt and out of work. Things are so bad for some consumers that they are unable to make their minimum payments.

    Want to see more credit card decline code explanations? Check out our blog “Monetize Your Traffic! Understand Transaction Decline Codes & Raise Revenue By 10%” parts 1 and 2.

    Unfortunately, the consumer must make a credit card payment for a more reasonable credit utilization ratio. Or, they can ask their issuer for a credit limit increase. Until then merchants like yourself will have to find other ways to collect payment. As an example, some merchants are allowing their customers to pay in instalments and charging the card number for smaller dollar amounts.

     

    Cross-border sales create friction

    Since you’re in Europe we’re assuming that’s a sizeable part of your target audience. However, if you’re selling to other countries outside your region, that could be why you’re seeing more declines. It is harder for Europe-based bank to approve credit card sales from outside the EU (especially the US and Canada). International debit card transactions have an even poorer success rate. That’s because typically, customer’s bank only approves local transactions on debit.

    Unfortunately, there’s a lot of friction between the technological infrastructure of EU banks and financial institutions from other regions around the world. This creates problems for merchants like yourself. Your sales will still see more declines even when the authorized user has entered all the correct billing address and other card information, like the CVV on the back of card.

     

    Recommendations to reduce credit card declines

    The following are recommendations we often make to our clients with high credit card declines which result in lower approval ratios. Hopefully they will be of use to your electronics store.

    First pull a report and sort all declined transactions from the last 90 days in a spreadsheet to identify the most popular reasons. Next, you can start to apply a remediation plan for each decline reason. For example, if insufficient funds accounts for 25% of declined orders, you might want to offer payments by instalments. Or, attempt to rebill the prospective customer within 5 days in case more is credit available sooner than a month later.

    In the case of issuing bank decline reason, it’s best to engage potential buyers during the sales journey. The last thing you want is for them to abandon your shopping cart at the final decision stage. If possible, include a customer support phone number, link to an FAQ, add disclaimer or use intuitive responses during the sales journey for why a new credit card order was rejected.

    This is a chance for you to let them know they can easily make a phone call to their bank to permit the credit card transaction. Or, perhaps they need to be alerted that their card has an old expiration date and needs to be replaced.

    More than anything, make sure that your electronics e-commerce site is secure. A potential buyer should feel comfortable knowing they’re putting sensitive card details and contact information with a trustworthy vendor. We advise all merchants to be PCI compliant and you should do the same. Make sure SSL certificates are up to date. Put trust symbols on your order page to ease buyers’ concerns about security. And, if possible, encourage visitors to create an online account before they purchase so security is at the forefront. Don’t forget to make strong passwords and 2-factor verification mandatory to curb identity theft incidents.

    We hope these strategies work for your online electronic store. If you need more insight, feel free to reach our support team.

    Do you have a question for our FAQ Fridays segment? Email DirectPayNet and let us know how we can help you avoid mistakes. Send your question to our team here.

     

    • FAQ Fridays: My Payment Processor Has Website Compliance Requests

      FAQ Fridays: My Payment Processor Has Website Compliance Requests

      Q: Hello! My high-end electronics and gadgets online store processes 30,000 euros a month. That is the maximum sales we can accept. So, recently I applied to a second payment processor to take more orders.

      If I get approved I will have more room for more sales, as I have limited cap at my current processor. But, the new provider I applied to just told me that I can’t be approved for this account unless I update my website.

      They’re asking me to put my business address, my phone number and even remove some products from my catalogue. I don’t want to do that for personal reasons.

      As a result, they’re not allowing me to accept credit card orders through them if I don’t make these changes, because my website isn’t compliant. How is this possible when my first payment processor never asked me for any of these requests whatsoever?

      I’m thinking I might just decline and go somewhere else. But, I heard good things about high-risk processor and they have really good rates. What should I do?

       

      A: Thanks for your question. Website compliance is a necessity when selling online. We’ve already written about it extensively here.

      All online businesses must undergo underwriting and follow rules in order to be approved to accept credit card orders on their website. As you know, credit card and customer data is very sensitive information. If that gets in the wrong hands someone will be held liable. I don’t think you want that responsibility.

      Furthermore, some payment service providers or PSPs can accept more risk than others. So, if you’re being asked to remove a product, it’s because it violates your provider’s lists of acceptable items that can be sold.

      The reason the card companies ask for various rules and regulations to be followed is to reduce the level of liability. Part of limiting liability from a PSP’s end is screening merchants, which can include a few things.

      For example, an acquiring bank or other payment provider may perform checks on you as an owner. They may look into your credit history, any other businesses you own, as well as the contents of your website. The application process can also include vetting your company’s and residential physical location.

       

         

        Card companies and PSPs alike want the customer user experience to be safe and seamless when they transact online. Consumers need to know who they’re buying from. It’s an experience similar to when a customer buys from a physical store. The functionality of your website should be extremely secure and super simple. The language cannot mislead potential buyers, because you could get into trouble with consumer groups and federal government agencies.

        It sounds like your first PSP may have not done all their due diligence. Or, perhaps you made changes along the way and they were not verified for website compliance. This could be problematic down the road, but we’ll get to that in a moment.

        Your second high-risk payment processor is asking for more website compliance changes, because these are rules that must be followed so you don’t get on Visa and Mastercard’s bad side.

        You’re a high-risk merchant. The opportunity to accept credit card orders is harder than for other traditional business models. This means you kind of have to follow the rules or you don’t get the opportunity to trade online with their help.

        Here’s a snapshot of some website compliance requests the card networks have:

        • Displaying your company’s legal names, addresses and phone numbers in your footer so customers can easily identify you
        • Having Visa and Mastercard logos on your home page and at checkout
        • Clear product descriptions and pricing
        • Clear list of ingredients in any ingestible or topical products (e.g. like food, skin creams, oils, supplements)
        • A clear refund policy description in your terms and conditions page
        • A clear privacy policy and terms and conditions page

        And that’s not all. There’s more website compliance requirements a merchant may need to undergo depending on their business category.

        This all may sound really boring, but it’s part of the process for accepting credit card orders online. Your first payment processor may have not fully reviewed your website. Or, perhaps you made changes and they haven’t reviewed your content as of late. If your first payment processor signed you up without proper vetting and underwriting, that doesn’t mean you’re off the hook.

         

        Consequences of not adhering to website compliance

        A lot of these providers simply sign up merchants for an account then allow them to process orders. However, one or two months later you may get the request to update your website. And that may affect your business if you don’t comply with those belated website compliance requests. This could result in serious inconveniences or account suspensions.

        Being non-compliant could result in a suspended merchant account and your funds being held. Therefore, if you don’t have a backup, you will need to hold off on taking online orders until you make the updates. (Many Stripe and PayPal merchants can attest to the hassles that come with a frozen account.)

        In another non-compliant scenario, your payment provider could withhold your money until you finally do make the changes. If you rely on those funds to buy goods, you’ll have a difficult time with restocking your store.

        Finally, a non-compliant website plus chargebacks could spell big trouble. If Visa and Mastercard notice you’ve had consecutive months of risk and high chargeback rates, you may be shut down entirely. It’s bad enough that your terms of service didn’t include a refund policy or that your phone number was disconnected. High chargeback rates only makes the situation worse.

        As a website owner, you need to decide. Do you want to follow the rules at the beginning before your business goes live? Or do you prefer get screened later after you’re already processing and making money?

        My recommendation to you would be to adhere to your second PSP’s requests and make the upgrades before you go live with processing more orders. You said yourself, that the rates are good. Why deny your business the opportunity to scale?

        Do you have a payment or business question for our FAQ Fridays segment?

        Email DirectPayNet and let us know how we can help you avoid mistakes. Send your question to our team here.