If you’re the owner or manager of a business selling dietary supplements, you’re in a tremendously successful industry with great growth prospects. Economic reports indicate that a whopping 77 percent of Americans consume some type of supplement, and the industry is expected to reach revenues of 220 billion USD worldwide by the end of 2022. In fact, revenues from weight loss supplements in the US alone are expected to reach 40 billion USD by 2024. Supplements are a big success story for today’s entrepreneurs, yet banks and financial institutions are still wary of working with the supplements industry. And because of this, supplements business owners continue to have an extremely difficult time getting approved for basic payment processing and merchant services.

Why is it so difficult to get a merchant account for supplements businesses? The answer lies in a number of factors, all of them having to do with financial risks incurred by the banks themselves. However, the good news is that one payment processing company, Zenti, specializes in providing a full roster of credit card and merchant account services for high-risk businesses, including businesses in the supplements industry.  

Why supplements companies are high-risk

If you’re trying to get a supplements merchant account and you’ve already been denied, chances are it’s because you’re in what’s called a “high-risk” industry. These industries are among some of the most lucrative in the world, so the high-risk designation has little or nothing to do with your financial success. Rather, it concerns a number of factors having to do with financial risk — especially for the banks and financial institutions that underwrite credit card processing services.

If you look at the lists of these high-risk industries, you’ll see that they typically have several things in common. For example, some of them require a lot of “card not present” (CNP) transactions, while others deal with items that still have strict regulations and usage limits in the US, such as alcohol or cannabis. Some high-risk industries have a higher potential for fraud and criminal activity, such as adult entertainment retailers and venues, while others involve a higher-than-usual risk for refunds, chargebacks, and cancellations, such as subscription services and travel/transportation companies.

Just to give you an idea of the types of businesses included in this designation, here’s a list of successful industries considered to be high-risk by payment processors:

• Supplement retailers

• Cannabis vendors

• Adult entertainment

• Document preparation services

• Property management

• Pawnshops

• Online dating

• Travel and tourism

• Collectibles/antiques

• Fantasy sports

• Gun retailers

• Privately-owned health/beauty companies

• Subscription billing services

• Pay-day lending services

• Online gambling and gaming

Fortunately for these high-risk industries, Zenti works with payment gateway companies and credit card processors to provide businesses with the processing solutions they need.  By working with a specialist company like Zenti, you can rest assured that you’re getting all the essential payment processing services your business needs, at a fair and affordable price.

Unfortunately, without these services, too many business owners are unable to take debit, e-check, or credit card payments. And if you’re wondering why the supplements industry is on the high-risk list, it primarily has to do with the high rate of chargebacks, and how they negatively affect profit margins.

Why are chargebacks a problem?

“Chargebacks” is an industry term that refers to any type of refund issued on a credit or debit card. It doesn’t matter why the refund was issued; if it’s a return that involves refunded money, it’s a chargeback.

Why are chargebacks such a nightmare for the credit card industry? It all has to do with profit loss. Studies show that the financial impact of high chargeback ratios can be devastating to a business. In 2017, chargeback loss totaled a staggering 31 billion USD, and as remote purchasing becomes more prevalent, these numbers continue to increase every year.

Chargebacks occur for a variety of reasons. Sometimes a customer is simply dissatisfied with the product or service. But often, chargebacks are the result of something called “friendly fraud,” which for business owners, isn’t friendly at all.

“Friendly fraud” occurs when a customer makes a credit card charge, and then later disputes the charge and claims it’s unauthorized. Sometimes, customers commit friendly fraud without intending to be malicious. This often happens when a customer contacts the credit card company without going to the business first to request a refund. In many cases, however, friendly fraud happens because a customer is either acting fraudulently, or is embarrassed by the charge and is publicly disputing it to avoid being caught out. This is an especially common scenario with adult entertainment products and venues, especially if the wrong person happens to see the credit card statement. In recent years, friendly fraud has become so prevalent, eight out of 10 merchants say they’ve seen an increase in friendly fraud type chargebacks, while 31 percent say they’ve had problems in contesting them. Likewise, economic predictors indicate that by 2023, one in every 10 chargebacks will involve friendly fraud.

With supplements businesses, chargebacks — both friendly and not so friendly — often occur because customers decide that the product they purchased simply doesn’t work. This higher-than-normal rate of chargebacks is the primary reason why it’s so difficult for supplements companies to get a merchant account.

In addition to chargebacks, other high-risk factors include:

FDA approval issues

Supplements often aren’t approved by the FDA; and without this government stamp of approval, some banks and financial institutions are reluctant to work with the supplements industry, primarily because of the threat of lawsuits and consumer risk issues.  

Fraudulent activity

It’s an unfortunate fact that the supplements industry has its share of “snake oil” vendors, and one scam company can affect the reputation of dozens of honest businesses selling effective and trustworthy products. As a result, some financial institutions are reluctant to provide backing to the supplements industry.

And speaking of backing, why is it so important, and exactly how are banks and financial institutions involved?

Underwriting and how it works

“Underwriting,” which is merely a fancy term for backing, is an essential part of credit card processing. In order to successfully process payments, merchant account companies are underwritten by the nation’s major banks and financial institutions. It’s similar to a business loan, in that banks are only willing to give backing to businesses and industries that don’t pose a high financial risk. These risks include factors already discussed, such as high chargeback rates (which cut down on profits), reputational issues like high levels of fraud, or strict federal regulations on product usage or distribution. All of these are red flags to financial institutions, and are prime reasons why merchant accounts for supplements businesses are so hard to get.

Now that you know why you can’t get payment processing, it’s time to talk about how you actually can get it, including what you need to do, and how you can be proactive in reducing risks for your business.

Reducing chargeback rates

There are lots of ways you can be proactive in reducing chargeback rates for your supplements business. Here are just a few:

Give complete, accurate product descriptions 

When customers feel that products don’t meet expectations, they return them. You can try to prevent this by providing full and detailed descriptions of each product, with honest explanations of what it can and can’t do. There’s a fine line between underselling and overselling, and if you can keep to that line, you can create a successful product description.

Give accurate pricing information

No one likes getting sticker shock. If customers know exactly what they’re paying and how much they’re getting for their money, they’re less likely to request a refund.

Include lots of photos

When it comes to product descriptions, a picture really is worth a thousand words. People like to see what they’re getting before they buy it, and in this e-commerce age it’s especially important to provide lots of images of products and labeling, as well as videos on how to use supplements properly.

Provide full disclosure on your return policies

Be completely clear about your return policies, and make sure they’re written clearly so customers can understand them.

Offer alternative solutions

If one nutritional supplement product doesn’t work, talk to the customer and offer an alternative product as a replacement. Sometimes this can help you prevent the profit loss that comes from having to issue a full refund.

Provide great customer support

Customers appreciate great customer service almost as much as they do a good product. Be sure that someone is on hand to answer customer calls and emails about product use, safety concerns, and other issues. By offering fast, friendly, and helpful communication, you can go a long way toward preventing unnecessary refunds and returns.

Another way you can provide great customer service is by offering a full roster of online payment and billing options for your customers. And the only way you can provide these essential services is by having a merchant account.

Advantages of a merchant account

As a provider of supplements and probiotics, you depend upon a certain level of customer loyalty and retention. A Zenti merchant account can help you provide the kinds of services your customers want, plus the tools you need for streamlining your business operations. Here are some of the advantages of a merchant account for supplements businesses:

Multiple payment options

Studies show that 90 percent of consumers prefer having a variety of payment options for their purchases — so much so, in fact, that not having these options can actually impact their purchase decisions. With a high-risk merchant account, you’ll be able to offer a full roster of payment methods for your customers, including credit card, debit card, and e-check payments.

Payment tracking

As an entrepreneur, you don’t want to spend your life bookkeeping; but tracking down missing or problematic payments can take up hours of your working day. With a merchant service provider, you’ll be able to instantly track payments every step of the way, from point of sale to processing and approval.

E-check convenience

No one likes to deal with bounced checks, but a merchant account can provide you with the option for convenient e-check payments, so you’ll never have to track down a bad check again.

Billing tools

Manually sending out invoices isn’t just a headache; it’s also risky, because it can lead to all sorts of clerical errors. With a merchant account from Zenti, you’ll have the tools you need for automatic invoicing and billing, on a schedule that suits your business needs.

How Zenti can help

When looking for a high-risk merchant account specialist, you’ll want to find one that works with your particular industry. You’ll also want to make sure that they offer a full roster of payment options and convenient management tools, plus secure payment protection and affordable fees.

As a leading payment processing specialist for high-risk industries, Zenti offers all the affordable payment solutions you need for your supplements business. In addition to convenient credit, debit, and e-check payment options, Zenti can provide you with billing and invoicing tools to streamline your business operations, plus tracking tools and security protocols (like encoding and encryption) so you can monitor payments and keep your accounts safe and secure.  

If you’re ready to take your supplements business to the next level, contact Zenti to learn how we can help you get the payment processing services you need to increase sales, boost ROI, and retain customer loyalty and satisfaction.