Understanding payment processing for nutraceutical, supplement, and other high-risk companies.
In this article we break down the steps to ensuring secure and streamlined payments for high-risk merchants.
The nutraceutical and supplement industry has become a powerhouse, driven by rising consumer interest in health, wellness, and preventative care. With 77% of Americans taking at least one supplement daily, the industry generated $158.6 billion in revenue in 2023 according to the Council for Responsible Nutrition and is predicted to continue surging for the foreseeable future. The explosive growth is fueled by a post-pandemic focus on immunity and wellness, a health-conscious, digitally savvy aging population, and the convenience of e-commerce—offering supplements delivered directly to consumers’ doors, often within hours.
This rapid expansion brings unique challenges, especially since nutraceutical and supplement companies are classified as high-risk businesses. Successfully navigating the complexities of payment processing—managing chargebacks, ensuring compliance, and mitigating fraud—requires customized solutions built around your business. Let’s dive into the current state of the industry, strategies to overcome high-risk obstacles, and steps you can take to optimize your payment systems while protecting your bottom line.
Why Are Nutraceutical and Supplement Companies Considered High-Risk?
Operating in the nutraceutical and supplement industry presents unique challenges that contribute to its high-risk categorization. Businesses in this sector face scrutiny from payment processors, regulators, and consumers, creating a complex environment where maintaining smooth operations requires navigating significant obstacles. Below, we explore the key challenges these businesses encounter and why payment processors often classify them as high risk.
High-Risk Challenges
Consumer Skepticism and Disputes: The industry faces ongoing scrutiny from consumers who are cautious about product efficacy and wary of misleading claims. Many nutraceutical and supplement products lack FDA verification, leaving customers reliant on company-provided information. Unrealistic marketing claims can lead to dissatisfaction, refund demands, and chargebacks when products fail to meet expectations. Post-pandemic, rising consumer interest in immunity-boosting and wellness products has fueled demand, but it also places pressure on businesses to deliver consistent, verifiable results.
Evolving Regulations and Marketing Restrictions: Regulatory frameworks, enforced by agencies like the FDA and FTC, require businesses to navigate complex and often ambiguous standards. From advertising restrictions to labeling requirements, businesses must tread carefully to ensure compliance. Overpromising in marketing materials can lead to both legal consequences and customer backlash. These regulatory demands are resource-intensive and require constant attention to stay ahead of changing guidelines.
Dependence on e-commerce: The rapid rise of e-commerce has expanded market opportunities, enabling businesses to reach a global audience. However, it has also introduced new risks, such as exposure to fraudulent transactions, card testing, and cyberattacks. These risks can erode consumer trust and create operational challenges, especially for businesses without robust fraud prevention measures in place.
Special Risk Factors
Unregulated Claims: Many products are not FDA-approved, and customers may dispute charges if they feel misled by unclear or exaggerated health benefit claims. This lack of verification increases the likelihood of disputes and chargebacks.
High Chargeback Rates: Subscription models and free trial offers, common in the industry, often lead to customer dissatisfaction and disputes. Forgotten subscriptions or unclear terms can result in chargeback rates exceeding the industry threshold of 1%, jeopardizing merchant accounts.
Fraudulent Transactions: Online sales expose businesses to fraud risks, including card testing and unauthorized transactions. Fraud not only inflates operational costs but also harms a company’s reputation with payment processors.
Regulatory Compliance: Adhering to strict regulations for advertising, manufacturing, and labeling requires meticulous attention. Non-compliance can result in fines, product recalls, and reputational damage, further complicating operations for small and medium-sized businesses.
Solutions for (better) Payment Processing
At National Processing, we specialize in providing high-risk merchant accounts tailored to the unique needs of nutraceutical and supplement companies. Here’s how our solutions address key pain points:
1. Fraud Prevention and Chargeback Management
We offer industry-leading fraud prevention tools that analyze transaction data in real-time to detect and block suspicious activities. Our chargeback management system helps businesses respond to disputes effectively, minimizing losses and protecting your bottom line.
2. Flexible and Transparent Pricing
We understand that high-risk industries often face inflated fees. National Processing provides customized pricing structures that ensure fairness and predictability, helping you maximize your revenue while reducing costs.
3. Seamless Payment Integration
Our solutions integrate easily with eCommerce platforms and POS systems, streamlining transactions for both online and in-person sales. With a single API, businesses can accept payments across multiple channels without incurring high development costs.
4. Secure and Compliant Processing
We prioritize PCI compliance to safeguard sensitive customer data and ensure your operations adhere to industry standards. This not only protects your business but also fosters customer trust.
5. Advanced Analytics and Reporting
Access transparent reporting tools that provide insights into payment trends, chargebacks, and customer behaviors. These insights empower you to make data-driven decisions and optimize your business operations.
Grow with National Processing
Thriving in the booming nutraceutical and supplement industry isn’t without its headaches, but that’s where National Processing comes in to save the day. We specialize in turning “high-risk” into “high-reward” with smart, tailored payment solutions. From swatting away fraud and chargebacks to seamlessly integrating with your e-commerce or in-store systems, we’ve got your back. Oh, and those inflated fees you’ve been grudgingly paying? We can fix that too.
Ready to grow your business without all the drama? Let us help you stay secure, compliant, and ahead of the game. Reach out today—we promise we’re more fun than your last merchant processor.
