Posted by NationalACH on Jul 10, 2017
Nutraceutical Merchant Account

If there were ways to fight aging, promote sexual health or achieve weight loss without surgery or prescriptions, wouldn’t you?

This is the premise on which nutraceutical companies operate – that most people want to improve their health, but may not want to undergo medical procedures or take medicines with chemicals they don’t trust. Despite all that the nutraceutical has to offer consumers—healthier digestive systems, increased energy, essential vitamins and more—nutraceutical companies cannot get approved for a merchant account as easily as other retailers.

Nutraceuticals are considered a “high-risk” industry, and must therefore apply for a high-risk merchant account, with a provider that specializes in high volume processing and industries more vulnerable to chargebacks and fraud. Still, even some high-risk merchant account providers don’t approve nutraceutical businesses for an account, and without a merchant account, your business cannot grow.

So, what exactly are merchant account providers looking for when they assess applications for risk?

Here are some of the risk factors assessed in high-risk merchant account applications, how the nutraceutical industry fits in to those factors and how you can mitigate these risks to get approved for an account and promote the sustainable growth of your business.

Risk Factor: The company’s history

Merchant account providers will consider how long a company has been established. The longer the business has been operating the less risk the merchant account provider will be liable for.

Financial stability and credit will also be considered in a merchant account application. If the business doesn’t have credit, some processors may ask for a personal guarantee. Available finances are also considered in an account’s approval. If a merchant anticipates a high processing volume, or applies for a card processing account, the business should have a substantial bank account in comparison to those volumes.

If the company doesn’t have any processing history, that could also be a red flag for an account application. The longer the company’s history has been in good financial standing and payments have been reliably processed, the lower the risk and the higher chance of an approval for an account.

Finally, underwriters may look at any online reviews or other customer statements on the quality of products and services or the honesty of the business thus far.

What does this mean for Nutraceutical businesses?

Nutraceutical companies are considered to be especially high-risk, even in the high-risk payment processing industry, so you are highly unlikely to be offered a merchant account without a strong processing history and monthly volumes of at least $50,000 a month.

Mitigating the Risks:

Establishing a reliable financial history means lowering your business’ rate of chargebacks. Payments most vulnerable to chargebacks are those made by credit card over the phone, online or in any situation that doesn’t require the physical card. However, accepting these payments is vital to your company’s success, so you will have to be especially cautious of potential chargebacks. To lower risks,

  • Use an Address Verification System – Require your customers to provide the address or zip code associated with the card they use for payment. If the address does not match the card issuing bank’s records, the transaction will not be processed, and the likelihood of fraudulent purchases will be decreased.
  • Require CVV’s from customers – The three four-digit number on the back of most credit cards should be verified as an extra layer of protection against fraudulent transactions. At the very least, proving that the customer gave you a CVV code can help you win chargeback disputes. Plus, CVV verification is free.
  • Manually review any suspicious orders – If any suspiciously large orders are placed, you should manually review them for anything that might suggest a fraudulent purchase. Many identity thieves will use stolen card information on a large purchase, before the rightful owner figures out their card has been compromised. In these situations, you might request that the customer verify additional information, or confirm their purchase as correct, so as not to be hit with a chargeback because of the customer’s mistake or understanding. Customers are more likely to call their bank than to call your business for a refund if something goes wrong with the transaction.
  • Refund initiated chargebacks as early as possible – If you can work out a solution with the customer before a chargeback is processed, you may be able to lower chargeback rates while promoting good customer service. This could also have a positive effect on customer reviews written about you that may factor into your merchant account application!

Risk Factor: The company’s industry

Certain industries pose a consistently higher risk to payment processors and financial institutions than others. Among the lower-risk industries for merchant account providers are most retail products, restaurants, low-volume businesses and beauty products. Industries generally considered to be “high-risk” include adult products, debt consolidation, credit repair, high ticket businesses and businesses that accept a high proportion of card-not-present transactions.

What does this mean for Nutraceutical businesses?

Since nutraceuticals are one of the highest risk industries, there isn’t much you can do about this factor in your merchant account application besides forfeiting your entire business and beginning another in a different, less risky industry. The reason many merchant account providers don’t want to work with nutraceutical companies is in part because of the lack of regulation in the products and the businesses selling them.

Positive customer reviews and honesty in your merchant account application will help you to overcome this obstacle, or at least improve your odds.

Risk Factor: The company’s business model

The following business models cause merchants to be denied standard-risk merchant accounts by most providers and often have to open a merchant account with a high-risk payment processing specialist. Nutraceutical companies may have to prove their financial stability in other ways to make up for the added risk for these reasons:

  • Continuity billing – These billing plans are often at risk of chargebacks or dissatisfied customers when customers forget they agreed to pay for a monthly service, or didn’t realize they were signing up for one when they initially provided their payment information. There have also been lawsuits brought against companies who use continuity billing models without presenting these terms clearly to customers, resulting in the model being known for risk.

Continuity billing models that use free trial offers as incentive for a customer to sign up, the customer may not be aware he is going to be charged for a product or service in the future. These kinds of offers are at risk for chargebacks. Identity thieves may also use a stolen card number for a free trial, leaving the merchant and cardholder unhappy when the times comes to charge the card.

  • Deferred billing – The longer the time period between service and payment, the higher the risk associated with that payment. This billing model makes merchant account providers wary, especially if the deferred payments are also high-ticket transactions. If a merchant cannot fulfill their financial responsibilities, the merchant account provider is expected to do so.
  • MOTO transactions – Any card payments made without the card’s physical presence are at a higher risk for fraud and chargebacks. There are tools available to prevent fraudulent transactions, but no preventive measure is 100 percent effective.
  • Direct response marketing – Direct response marketing strategies are also at risk of fraudulent transactions and chargebacks. If customers aren’t sure what they’re paying for, or how much their card will be charged, they are more likely to initiate a chargeback. Fraudulent transactions are also more likely because direct response merchants accept a high proportion of card-not-present payments, and these are always at a higher risk of being fraudulent.
  • Multilevel marketing – If a multilevel marketing company places too much emphasis on recruitment rather than sales, this business model can collapse, leaving merchant account providers with financial liability.

What does this mean for Nutraceutical businesses?

Nutraceutical companies, before applying for a high-risk merchant account, should make sure their business is transparent, focused on customer service and committed to preventing fraud.

Transparent terms and conditions protects your company from potential lawsuits, as the Federal Trade Commission is working harder to protect consumers from shady businesses and unclear payment schemes. Customers should clearly agree to your terms and prices by clicking an “I agree” box or some other measurable action. Your prices and any future payments should be clearly disclosed in understandable, consistent language.

And excellent customer service protects your company from negative reviews, even in cases of fraud beyond your control and misunderstandings between your customer and your business.

Finally, fraud prevention should include CVV verification and careful order monitoring. With a high-risk merchant account provider, preventing fraud can become more effective. But during the application process, it’s important to show a commitment to lowering risk of fraud, to improve your financial risks, and customer protection.

Accepting ACH payments with a merchant account will also help decrease chargebacks!

Risk Factor: The company’s products and services

As with high-risk industries, some products present a higher risk for merchant account providers, including e-cigarettes, (legal) marijuana, pornography and, the topic of this post, nutraceutical products.

Nutraceutical products are risky for merchant account providers and consumers because the industry lacks regulation. Unlike pharmaceutical businesses, which are regulated by the Food and Drug Administration, nutraceutical products are not as heavily regulated as other consumable products.

What does this mean for Nutraceutical businesses?

Nutraceutical businesses need to build trust with their customers through customer service, realistic advertising and quality product. Merchant account providers that have reason to believe your products are not safe will deny your application.

Unfortunately, some customer dissatisfaction is inevitable, partly because of a confirmation bias. Here’s an example of what that looks like:

Your customer has been trying to lose weight for many years, to no avail. She doesn’t believe nutraceutical products work, even when her friends have used them successfully. She thinks if they really worked, they would be more popular or prescribed by doctors etc. She tries your product anyway, and after a couple weeks, she still hasn’t lost weight. Perhaps this could be due to zero other behavioral changes (like increased exercise or a somewhat monitored diet), or because she expected your product to produce a miracle result in a short span of time. Either way, she was right about your product (so she believes), and she will make sure others know it too.

There isn’t much you can do about this type of situation, except acknowledge that it will be unavoidable sometimes, and do your best to guide your customers in the use of your product as best you can. You will have to find a balance between realistic expectations for your consumers and optimism in what they can accomplish for their health.


If you are growing your nutraceutical company, you will need a high-risk merchant account. The risks of the industry can be mitigated, through your efforts and through the help of a reliable merchant account provider. Until you are approved for an account, make sure to focus on your commitments to lowering risk and providing an honest product through transparent business operations.