Do you run a business that sells herbal products, dietary supplements, or other kinds of nutrients direct to consumers?…And did you know that banks consider nutraceutical companies to be “high-risk” and often refuse to open nutraceutical merchant accounts? Read on to find out why, and how you can ensure smooth transactions and growing revenue in your own business.
Nutraceuticals: a high-risk industryThe nutraceutical market was worth almost $72 billion in 2017 (last report) and is expected to almost double in size to over $133 billion by the year 2023. It’s a fast-growing industry with an increasing demand for new products. And while the majority of the market is still dominated by large, multinational corporations, there remains plenty of room for smaller e-commerce merchants to enter the market.
That applies both if they choose to introduce their own line of products or to retail existing merchandise. Nonetheless, banks consider it to be a high-risk industry and are hesitant to open new nutraceutical merchant accounts. The reasons for this high-risk label are numerous. The industry is still fairly unregulated.
Even though FTC regularly makes a show of cracking down on businesses that use wild claims about their products or hide harmful ingredients from consumers, in truth these cases are few and far in between. This means that the risk of getting caught for selling nutraceuticals that don’t perform as advertised, or that can be harmful to consume, is very low. Often, the massive revenues are enough to offset the risk, because they can cover a fine and still leave the producers with profit.
On the other hand, this type of activity does leave many companies open to litigation. Ironically, this does not work to balance the risk and actually enhances it. Finally, the industry is subject to many chargebacks from consumers. This happens when the consumers regret their purchase or when they sign up for a recurring subscription but want to discontinue it. All these factors make nutraceuticals to be considered very high risk by both banks and mainstream payment processors like PayPal or Square.
This makes it difficult if not impossible to open nutraceutical merchant accounts with them. And on the off-chance that you do get an account from, say, PayPal, they are likely to shut it down with no warning – especially if you get any chargebacks. If losing your sales does not sound bad enough, they can also freeze any funds you have in their account. Getting your money released is often an uphill struggle that can easily take weeks.
Alternative paths to nutraceutical merchant accountsYou can still secure the cash flow of your nutraceuticals business – you just need to look for a high-risk merchant account. A high-risk merchant account is designed to accommodate the high-risk profile of the nutraceutical industry. It won’t get shut down because of refunds, chargebacks, or threats of litigation. You can sleep soundly at night, knowing your business will still be making sales and processing credit card payments in the morning.
Instead of constantly worrying about your accounts, you can finally focus on growing your business. At 5 Star Processing, we specialize in high-risk merchant accounts. We have worked with many nutraceutical businesses to help them scale profitably thanks to our low payment processing fees. And to make it easy for you to secure your business, we offer a very fast approval process for your new nutraceutical merchant account.