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How to open nutraceutical merchant account?

How to open nutraceutical merchant account?
Business Development Specialist
Yuliia Mamonova

Nutraceutical merchants often face difficulties finding reliable payment solutions. The NUTRA business model and high rate of chargebacks are to blame. Some payment service providers (aka PSPs), however, have banking partners that offer quality nutraceutical merchant accounts. Check out our first-hand insights and list of documents needed to open the NUTRA merchant account.

What is NUTRA?  

NUTRA is an abbreviation for Nutraceutical or Nutritional Supplements. The scientific definition of NUTRA is any product derived from food sources with extra health benefits in addition to the basic nutritional value found in foods. From your morning milkshake proteins to herbal teas, NUTRA stands as a large segment in the health niche. 

Why is NUTRA considered to be high-risk?

There are two main reasons why NUTRA ranks among high-risk businesses. The first one is the poor quality of products. They might be damaged, not appropriately packed or not delivered at all. That, in turn, inevitably leads to chargebacks. Another reason is rooted in various criminal schemes NUTRA merchants use to grow their revenue. What do they do? Let’s shape it as a story. 

Meet John; he is the owner of an e-store that sells diet pills. Once, out of the blue, John’s company goes bankrupt. He is desperate, so he sells his client base [with all the credit card numbers] to his friend Luke who also runs a diet pills e-store. Now Luke can charge those people without informing them [most NUTRA payment gateways do not have a 3D secure, read, mobile verification]. Luke does so and ships his diet pills to the new clients. Some customers turn a blind eye while others report to the banks. Once again, chargebacks are not far behind. 

Another scheme is when a merchant offers a product for $1. People take the bait and do not notice the tiny inscription at the bottom of the page saying that they will have to pay $299 more next month. Everyone is happy up until the client realizes that he got caught. Feeling cheated and betrayed, he files for a chargeback

 Are you still surprised by the fact that banks are afraid to process NUTRA? We doubt. Anyway…

How to open a nutraceutical merchant account in 2019

Find a reliable PSP. This is the only solution for succeeding in the NUTRA business. Looking for a bank on your own is a lost cause. The good news is some PSPs are already partnering with acquiring banks that process high-risk companies. The bad news is they demand a wide range of documents to make sure that merchants are not going to commit unlawful activities. 

List of documents needed to open a nutraceutical merchant account:

  • Certificate of Incorporation;
  • The label of contents;
  • Local documents as per company jurisdiction which displays company directors and owners; 
  • Utility bill/Bank statement/Rental agreement under corporate names proving company location;
  • Agreement with the nutraceutical supplier (if you are not a manufacturer);
  • Valid ID copies for all company directors and owners.

 Besides collecting all the documents one should follow the following six steps:

Six steps one should make to open a nutraceutical merchant account:

1. Create a proper label of contents.

Nutra has nothing to do with pharmaceuticals. These two niches have different purposes and demand a different business approach. An appropriate label of contents is a must. All the ingredients must be screened so the PSP could make sure that a product contains no pharmacy/illegal or dangerous substances/prescription drugs.

2. Prepare free samples.

Under Visa and MasterCards rules, PSP can require free samples of your NUTRA product. Once again, they do so to make sure you are not going to sell pharmaceuticals.

3. Avoid deceptive marketing.

Upon review of the URL, PSP will make sure that there are no misleading marketing posts. Omit statements like “this…. can heal/cure/prevent…”. Do not post Before/After pictures in case the relevant agencies/labs haven’t examined your product.

4. Clarify the trial period of your product.

Is there a free trial offered? Under what terms? All the information should be listed on your website. This step is a must to minimize the risks of chargebacks in the future.

5. Clarify your sales GEO.

There are no prohibited jurisdictions for NUTRA sales. The tax evasion, meanwhile, plays a vital role. For example, a merchant sets up a nutraceutical company in the UK. He gets all the products shipped from the Hong Kong factory. His sales, however, are targeting the US market only. Such schemes are breaching tax laws and merchant location regulations of VISA & Mastercard.

6. Provide a shipping policy page on your website.

Some items in your catalog might be prohibited in specific countries, regions, or states. All the brand restrictions should be listed on the site of yours to get processed by a PSP.

Top 3 most frequently asked questions about nutraceutical merchant account

1. NUTRA merchants would unanimously choose credit cards. Why? 

Recurring billing is to blame. Customers receive products on a monthly basis, and the credit card is charged automatically. The roots of this go back to the specificity of nutraceuticals. From diet pills to buds, customers/buyers take the majority of them as a 3 to the 5-month course.  

The most popular credit card payment methods for NUTRA are:

  • Visa
  • MasterCard
  • JCB
  • Discover
  • Diners

2. Does one need a multiple retries option to sell NUTRA?

The answer is yes. NUTRA merchants look for the multiple retires option. A customer might not have enough money on his card to purchase a product in a certain packaging. With multiple retires option, a merchant can still charge him and send a smaller pack of what he offered. Besides, without 3D secure technology, the customer won’t be asked to verify the purchase via mobile. Hence, the multiple retries maximize the possibility of a splurge

3. What is an average check amount for this niche?

$49 dollars is an average check amount for the NUTRA niche. Not only such amount is attractive to clients but banks. The deal is, clients are less likely to file on a chargeback if the price of the product was low. 

Hopefully, getting started with a nutraceutical payment account now seems like a challenging but clear task. Take it one step at a time and feel free to contact our payment gurus anytime you feel like some information is missing. Good luck with business endeavors.

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