FAQ Fridays: My Keto Subscription Box Business Was Denied Payments

FAQ Fridays: My Keto Subscription Box Business Was Denied Payments


Q: I launched a keto subscription box business after getting laid off during the pandemic.

My goal was to curate, and offer premium and pre-packaged keto snacks and desserts. I came up with a great business plan and established great relationships with different quality suppliers.

When it came time to find a payment option for my new business I got declined FOUR times. The reasons they all gave me are all pretty vague. All I kept getting was that my e-commerce business has too much risk. In the end I resorted to PayPal.

There are tons of subscription box businesses (Birchbox and Cratejoy to name a couple). I really believe my business has potential and I’m already getting $3000 in sales through PayPal. So why can’t I get accepted for a merchant account to take credit card orders?


A: Subscription box companies are mainstream now so there’s nothing wrong with your business model.

But, it’s hard to become the next Dollar Shave Club or any successful subscription box company overnight.

There are several reasons for why you were probably declined. Some factors that come to mind are the following.


There’s a pandemic going on

I hate to say it, but the Coronavirus pandemic is still a thorn in the side for both e-commerce business owners and payment processors. Subscription box business models carry a lot of liability at a time like this. Many potential customers may opt to pay initially. However, with so much job loss, there’s no guarantee that ongoing payments will be successful. This could lead to high refunds or worse, chargebacks from buyers remorse.

Keep in mind that Amazon has cornered the market for essential items. You’re competing with this massive corporation for keto tastebuds because of the wealth of products they carry. This and the potential for excessive chargebacks is top of mind for a lot of payment providers.

Additionally, many payment gateways are worried about order fulfillment because supply chains have been interrupted. The United States Postal Service (USPS) is working with reduced resources. This also has an impact on e-commerce platforms that rely on this for reasonable shipping costs and meeting delivery deadlines.


No processing history

Since your subscription box business was new it’s likely you had no sales history at the time. This influences your applications. If you don’t show that you are already processing online orders, it’s hard to convince a payment provider to give you a chance.

The good news is that you made it past the pre-launch and launch stage. You’re actually live. And, it’s a good idea you are starting out with PayPal. Some sales are better than none.

Do you already have Stripe or PayPal sales and want to move on to a payment gateway with more benefits? Reach out to our sales team to get started. 

Most subscription box merchants are unaware that merchant account applications involve a hard credit history check.

Poor credit history

Each time a business owner applies for a merchant account, there is a hard credit history check on every director listed on the business. If you have a really poor credit score and overall history, this might have influenced your applications.


Product presentation

Sometimes the way a product is presented doesn’t sit well with acquiring banks or other payment providers. This is more than just having a prototype box on your site for initial orders. You’re selling a service that involves recurring payments and order fulfillment. That is high risk.

Plus you’re selling premium products. So, I’m guessing these are the Chanel snacks of the keto market. And that probably means it’s more expensive, right? I’m guessing you have high price points for subscription to expand your profit margin?

Did you include an incentive with your subscription box service, like an additional product or an upgrade for a higher price? If so, you might want to evaluate that.


All of the above

You said it yourself. You received vague reasons for why you were declined. It could be that several, all of the above or even more factors had an impact on your application for payments. At this stage it makes no sense to reflect on what went wrong. But if you want to improve your payment channel for your e-commerce business, here are a few solutions to explore.


Wait until you make $15,000 a month

Use PayPal for three to six months. Stripe and PayPal are great because the barrier of entry is low. If you start earning around $15,000 in revenue every month, consider applying for a merchant account again.

Download your monthly reports as soon as they become available. Take that processing history from PayPal or Stripe and use that for your next merchant application. It could really work in your favor.

It’s important to note that problems arise as soon as you get a few chargebacks in your PayPal account. This is even worse if your sales volume is really low. Keep in mind PayPal is a low risk third-party payment processor. So, make sure your business is refund-friendly so you can avoid chargebacks getting out of hand.


Focus on overall business curation, not just products

You seem like you invested a lot in the unique products going into your subscription box. You’re probably focusing a lot on your customer base. You’ve probably invested time and thought into what other types of products you can offer, cost-effective shipping options and beautiful box designs. That’s great!

But, who is focusing on your overall online business presentation to the payment providers? Are your subscription offers incentivized? Do you pre-check the box agreeing to terms and conditions for customers on your landing page? If so, you should familiarize yourself on the rules of negative option billing.

What about the transparency of your terms and conditions, and other policies? What is your refund policy? Is it easy for customers to cancel or do you send them on a wild goose chase? These are key website compliance and checkout practices. Review these practices before applying for another merchant account.

How you present your overall business influences your merchant application. Additionally, if you’re working with a merchant services provider, they should be encouraging you to make these modifications to be as compliant as possible.


Outsource your payments woes to a merchant service provider

I understand that e-commerce entrepreneurs are very busy. It’s hard running your own subscription box business, especially during a pandemic. That’s why you should find a merchant services provider to help you with securing a payment gateway.

This business model needs a lot of promotion: from new product incentives to marketing driven by social media influencers and bloggers. This is where a payments expert comes in. If you don’t have time for payment processing issues, this is where it pays to get outside help.

Lean on a knowledgeable and experienced merchant service provider to help you put together the right application. Having a payments advocate in your corner is helpful to navigate the process and even negotiate terms on your behalf.

It sounds like you have a really good monthly subscription box idea. From our experience, we’re confident you will eventually land a merchant account. We’re happy to discuss marketing strategies and give you some coaching for your next merchant account application.

If you’re interested in getting an additional payment gateway for your business, we will be more than happy to help. Email our team today.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.