The nootropics industry is gaining popularity again and with it, a demand for payment processing too. A niche member of the nutraceutical family, this market is not unusual to payment providers. What is unusual is the significant volume of merchants who are being declined for merchant accounts in their quest to accept credit card orders online.
Like other nutraceutical sub-categories nootropics is high in risk according to card networks and payment providers. If you want to finally accept credit cards for your products, the following information will show you how.
Nootropics has a reputation problem
Firstly, you should know that some nutraceutical companies are facing a high rate of rejection from payment processors. The industry is in regulatory limbo and incidents of fraud from merchants and customer backlash has not helped. While some online vendors run honest and highly successful businesses, a minority of sellers have created mistrust in the industry. 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 have on them financially.
Successful nootropics merchants build financial history
Most nootropics merchants think that all they need to show is just processing history. While these financial statements are vitally important, you also need to show that you have enough capital to take on unexpected risk. 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 are applying to process $10,000 in monthly sales volume.
A provider wants to know that you have enough capital to back up your business products, inventory and operations like a proper nutraceutical merchant should. Top-selling supplement companies, weight loss tea brands and the like know this. 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 checkout to build up orders, revenue and more importantly, establish good processing.
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 experience the same treatment. Your product descriptions should include a list of ingredients, so customers (and acquiring banks) see 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 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 US, you can review the FDA website to ensure all ingredients in your product can be sold.
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 nutraceutical brands have faced lawsuits and fines for false claims made about their products. If you want to avoid this type of legal debacle, we suggest you perform a website audit of all your content. Remove any misleading statements or claims, because customers and your payment provider(s) can hold you liable.
Too often online merchants purport that their products can perform miracles like improve memory for dementia patients or alleviate the effects of Parkinson’s disease and cancer sufferers. Misleading and reckless statements place you at risk of potential lawsuits. Additionally, it is illegal to assert your products have the ability to 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.
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 creative you provide them or are they creating their own? Have you read any of their email campaign or live website content and does it accurately represent your brand? These are just some questions merchants should consider to curb potential false advertising. It is better to put as many fraud-prevention measures in place to prevent chargebacks. Carefully check referral links so you can verify how online traffic is being sent to you and that your product is marketed properly. The alternative is getting stuck with returned products, and fraud that puts your payment channels at risk of termination.
Presentation is everything
Acquiring banks typically perform due diligence on companies when they consider whether to issue a merchant account. This is why it is so important 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 a declined payment processing relationship. Likewise, the reason payment providers become weary of nutraceutical vendors is because some merchants publish very unclear pricing terms. This can confuse prospective buyers and set them up for a large number of chargebacks.
Ensure to clearly detail specific costs on your order page, as well as in your terms and conditions. Payment providers already frown upon a lack of honesty or clarity about subscription packages. We recommend optional continuity that customers can check off themselves if they want to subscribe. Free or discounted trial subscription offers may not be the best way to scale unless you have six months of processing history and a strong brand. Once you have industry experience as well as solid financials, then try new pricing models.
Many nutraceutical sellers with product rebilling that want to accept credit card orders online are getting rejected. Reasons may vary. But, there’s a lot of risk involved and in light of new MasterCard rules, so providers do not want to be penalized by card networks.
Unfortunately, most startups are not subject to the same rules as companies with several months of processing under their belt. Start with a straight-sale offer and upgrade to a recurring model when you have proven that you can process orders with little to no chargebacks.
Anti-fraud tools make better nutraceutical merchants
As we have mentioned many times here on this blog, a series of anti-fraud tools can be used to support your business. By implementing a few of these solutions, you will lower risk to your business. You will also help curb high rates of chargebacks from putting your merchant account at risk of termination.
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. Some 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 tailored 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 will be seamless, which it should. There are also several gateway tools 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.
This payer authentication is an excellent security measure. Merchants that implement 3D-Secure on their order page overwhelmingly benefit from low fraud rates and fewer false orders. The tool has undergone major changes since its inception to resolve concerns about low conversions. To learn more about 3D-Secure, visit this page.
Do more than just accept credit cards
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. They have secured nutraceutical merchant accounts and ACH processing. Also, we have helped them retain payment processing even 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.