Subscription Box Merchant Accounts

If you’re in the subscription-based business, you already know it: Your business has likely been considered high risk by merchant account services, meaning that you may have trouble accessing the financial services you need.

This can create major problems for business owners managing any eCommerce platform, as it may make it difficult – if not outright unaffordable – for you to be able to conduct business using the financial services that other industries are able to access.

As a result of these difficulties, you have to identify a merchant service vendor that can help your business grow. Ideally, the vendor that you find should have years of experience in helping other high-risk merchant services prosper.

They should also have experience working with numerous other subscription box companies and other startups.

We know that processing subscription and recurring payments comes with unique needs. We’ll work with you to find merchant services to help you grow, no matter which kind of subscription-based model you fall into.

• Subscription boxes
• Newspapers and magazines
• Lifestyle and product discovery boxes
• Software
• Video and music streaming platforms

Why Your Subscription Box Service is Classified as High Risk

It may seem difficult to understand from the outside, but many subscription-based businesses are classified as high risk because of the series of factors that can make using ACH services more expensive for them. These include:

• High levels of “card-not-present” transactions. This means that the credit charge is charged despite the owner and the physical card not being present for the transaction. These can cause issues for processors on multiple levels. First, it creates a higher risk of fraud for the processor, meaning that they may ultimately have to reverse the charge and get hit with chargeback fees. Second, it increases the possibility that the card will have already been canceled, resulting in additional time, hassle, and fees for all parties involved.
• High levels of chargebacks. A chargeback is what happens when a payment is returned to the original owner. This is high in the subscription universe because individuals will often cancel their subscriptions, forget that they want to cancel their subscription and seek to have their fees refunded, or forget that they made a subscription purchase in the first place. Other marketing factors within the subscription box business – like marketing plans that give a certain amount of subscription for free before the charges kick in – also lead to higher-than-average levels of chargebacks.
• Subscription boxes are often given to or for others, leading to a subscription model having less control than other businesses over their product. As a result, individuals may seek to have their subscription canceled, leading to chargebacks. 

This is a large challenge today, considering the sheer amount of subscription box services that are available. Previously, subscription-based services had been largely limited to media consumption, including things like newspapers and magazines. These days, that has changed Subscription services now include many types of products, grooming services, software development, a slew of entertainment and electronic products, and more. The rise in all of these companies has meant that they need more access to financial services than ever before, but these services are not always easy to come by. Thankfully, there are some things that you can do on your end that can reduce these risks and help make accessing financial transactions more affordable. These include:

• Ensuring that you are providing excellent customer service. Doing so can keep your customers happy with the product and services you provide. This, in turn, can help to ensure that they never cancel a payment and force a chargeback.
• Make sure that you are clear with your customers about what they will be charged when they will be charged, and when they can cancel and still expect to get a refund on something that they purchase. Setting terms of service and coming to an agreement on account terms can help to ensure that your customers are happy, that your business operations are transparent, and that you can minimize the overall level of chargebacks. 
• Make your business name as clear as possible on all bank and credit card statements. This prevents confusion when it comes it credit card processing. It also minimizes the risk of a customer canceling a payment because they believe it is fraudulent. 
• Take advantage of anti-fraud and security tools that can prevent fraudulent charges and result in a chargeback.
• Work with your merchant account service provider to ensure that you are taking advantage of their tools to prevent chargebacks. Every vendor will have a different suite of products available that can limit chargebacks, and you should make sure that you speak with your merchant account vendor to ensure that you are taking advantage of whatever services they offer in this regard.

How Can an Experienced Merchant Service Provider Help?

Simply put, all of the preparation in the world cannot totally mitigate the risks that are inherent in the subscription-based model. As such, you need to work with a vendor who knows this industry and understands your need. This means that you have to find a vendor who has years of experience in helping businesses obtain their subscription box merchant account. Ideally, you should find a vendor who also works with businesses that take advantage of subscriptions and help to process payments, thus providing services unique to your needs, including:

• Confirm customer authorizations for current and future charges at any payment gateway or checkout. This also includes online payment options, including apps Stripe or PayPal. A payment processor should have the appropriate tools in place to ensure that the credit card charges that are made through your business are legitimate ones. They should also work to confirm that future charges – charges that will always occur with a subscription box business model – are authorized. This may mean that they deploy their own tools in order to prevent potential inaccurate charges, or that they work directly with the customer and business, on an as-needed basis, in order to confirm the veracity of charges.
• Confirming customer identity. A common source of fraud – and the resulting chargebacks – is that the owner of the credit card did not authorize the charge. These are fairly common with high-risk merchant accounts and the apps that support them. A good payment processor can help to confirm the identity of the cardholder, confirming that the owner is, in fact, the person making the charge. This can enhance the ability of your business to provide excellent customer service while also limiting chargebacks. 
• Chargeback protection. Chargeback protection is an added service – one managed by certain vendors or payment plans – that can ensure that you are protected against paying added fees for chargebacks. Obviously, the specifics of each plan will vary, and depend on both the vendor, service, and nature of the chargeback. However, an experienced merchant service provider can help you manage an array of plans and ensure that you pay the lowest amount possible in your chargeback fees. 
• Scalable services and pricing. At the end of the day, the last thing your business can afford is purchasing services that you don’t need or paying more than you can afford. A good vendor should ensure that you are paying as low as possible in fees. Furthermore, they should offer packages that are customized for your unique business needs, not their profit margin. This means that you should be able to mix and match products and services in a manner that can help protect your business interests. 

A Full-Service Company

When your subscription-based business is finding a vendor, you have to find one that does more than just fraud and chargeback prevention. this means that you have to find a business that offers a comprehensive array of services designed to help your business grow and thrive. You need merchant services that can deliver in many other areas, including:

Payment Processing

Payment processing, of course, is the crux of any merchant provider program. There is no way that you can ever work with a vendor who is not able to run support for collecting payments, and one that does so at a reasonable fee. However, all payment merchants are not created equal, and you have to be sure that any vendor you use is able to process your payment and deposit them with your financial institution in a timely manner. You also have to make sure that the payments you receive are accurate, that the security around the processing is robust, and that your financial services provider is able to help you create accurate records for these payments

However, you need a vendor that can do more than just collect payments: You need a vendor who can collect payments regardless of the method in which they are collected, meaning they have to be able to process subscription payments that are either online, in a physical location, or via a mobile device. They must be able to handle credit card processing solutions and help you process things like eChecks. Furthermore, the payments should arrive quickly, have low fees, and have a fee structure that best suits your needs. 

In instances where you are collecting payments over multiple services and in multiple locations, an additional issue arises: What sort of security protections is your merchant services vendor taking? This becomes important in the event that there is a data breach, or someone is able to access your customer’s payment information. It should go without saying that you want to work with a vendor that takes the most possible caution with this invaluable information.

Products

The amount of products offered by a merchant services vendor is also deeply important, as you are looking for a company that is full service and can handle a variety of your business needs. These include:

• Equipment. Do they provide you with the POS device? How would that POS device integrate with your existing accounting and inventory software? Is customer support available for the equipment if you have questions about how to use it? How about how it will work when it breaks? Can they give you a free quote on equipment purchase or repair? 
• Integration of processing. If you manage a subscription-based service, chances are good that you are going to be using multiple different systems to track your sales, inventory processing, accounting, and more. This means that you need a processor who can integrate your merchant services into various systems. As such, before making any final commitment on financial services, you need to check with your processor and make sure that they are capable of managing this integration. 
• Discount processing. In some cases, you may have discounts to offer. This may be the case for new customers, loyal customers, customers who have coupons, customers who find your business via a certain website or sale, or more. This huge array of possible discounts means that your merchant account services provider has to be nimble enough to process all of these potential discounts, they reintegrate them with your system. 
• Gift cards. Gift cards are very common for subscription-based services, as your business may go out of its way to use them in order to attract new customers and encourage your customers to essentially be your salespeople. This means that your accounting services have to be able to process these gift cards and provide you with analytics on what cards are being used in order to better determine how you can concentrate and improve your marketing efforts.
• Loyalty programs. Subscription services are all about building customer loyalty, and that means that loyalty programs that reward customers with discounts or additional products can be a huge way of creating a financial incentive that encourages customer retention. Again, your merchant account processing service must be capable of managing this data, processing loyalty discounts, and providing you with information in a meaningful way. 

Services

When it comes to subscription box processing, other services are also critical in addition to managing the actual processing of your payment. For example:

• Can your merchant services processor help you gain access to other financial markets? Do they assist with underwriting?  Can they be of help if you are looking for capital expansion, or if you are looking to grow your business?
• Can they provide you with discounted access to ATMs if you need them? If you have a physical location that has a subscription-based model, can they physically provide you with ATMs, and help you manage those services? What about if you need to make cash withdrawals – does your merchant service processor give you preferred or discounted access to a line of ATMs?