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.