Direct selling companies are dynamic in nature. Financials are in constant motion and the sometimes unpredictable nature business model often puts merchant account providers on edge. This article outlines the top considerations direct selling companies should focus on to ensure a long, healthy account with their merchant account provider.

Applying for a merchant account is similar to applying for a loan

When you apply for a merchant account, you’re company is vetted similarly to one applying for a loan. Banks delve into your financials, projections, business plans, product/service information, compensation information and any outstanding issues. Just like with a loan application, an underwriter will be thorough in researching all aspects of your business, so you should ensure that everything is in order before approaching a bank/processor looking to open a merchant account.

Banks and processors are businesses, too. As such, they are looking for ways to make money and tend to shy away from risky opportunities. Merchant account providers are totally liable for every single dollar processed for 6-18 months, so they are looking to minimize risk as much as possible.

Get a handle on volume and a plan for the future

Direct selling companies often have a high velocity of growth; volume can grow from $20,000 to $100,000 in as little as a month. That’s great news for the company and a red flag for merchant account providers. A main concern for merchant account providers is that there will not be enough product to match the velocity of growth. It’s against major card brand policies and regulations to sell products that do not yet exist, so it’s important to have a stable plan in place to account for high-volume growth. You should track and document your plans for growth and contingencies that demonstrate you’ll be able to deliver on the product side if sales take off. You should have disciplined records of existing and in-production inventory to demonstrate your due diligence to these merchant account providers.

Have a fair commision structure and abide by it

Commissions are often the lifeblood of successful direct selling companies, but they can raise significant concerns from a bank. Your commission structure include fair rates and timely payment. Keep a log of commissions paid on time and show that log to the bank/merchant account provider as evidence of your stability. For direct selling companies that have a commission structure, the best ratio is roughly 40-50% of revenue being paid back to a strong majority of distributors. For example, Nu Skin pays distributors approximately 42% of commissionable sales This balance can put banks’ minds at ease by demonstrating that a) the product is selling, and b) distributors are being paid in accordance with those sales.

Win at customer service

Customer service plays a key role for direct selling companies. Returns are a fact of business; people will be unhappy with your product from time to time. Having a strong return policy in place and knowledgeable, helpful customer service representatives to guide customers through the process can bolster your reputation and reduce chargebacks. It also demonstrates to merchant account providers that you’re operating as a legitimate business with the customers’ best interests in mind. That is the mark of a stable business and can reduce risk in their eyes.

Additionally, chargebacks are costly and can result in the loss of processing privileges. Having good customer service in place and policies clearly articulated on your websites and invoices can reduce disputes that result in chargebacks – and fines and penalties from the card associations.

Many direct selling companies have many or all of these items in place. The hard part can be organizing documentation in a way that makes it appealing to banks and merchant account providers. Working with an expert in the direct selling payment processing space can streamline your application for a merchant account. These professional have a thorough understanding of what banks are looking for from both a positive and negative point of view and can present a strong case on behalf of direct selling companies.

It’s also important to remember that it’s a long-game. Opening a merchant account is just one part of the equation and your company will have to continually focus on maintaining that relationship and ensuring you remain in good standing in the eyes of the merchant account provider. This equates to a full-time job that many organizations are simply not equipped to handle in-house. Those lacking internal resources to effectively manage the merchant account relationships are best-served to seek an outside expert to navigate the complexities and ensure that the account is optimized and that processing is not negatively impacted.

Struggling to establish credit card processing relationships or looking to reduce credit card and ACH fees? Set up a free consultation today and we’ll walk you through your options.

Merchant account termination can happen for a number of reasons and is not rare within the direct selling and MLM industries. If you’ve received a termination notice from your merchant account provider, don’t panic. In some cases, the termination may be preceded by extreme scrutiny of your account by your provider. In other cases, the termination comes seemingly out of the blue by a provider who determines that they can no longer serve your business model or industry.

Regardless of the reasons for termination, there are steps you can take to get up and running again. Losing processing privileges can be daunting, but it is not un-fixable. Re-enabling credit card acceptance can be done if the merchant is willing to get things in order. The following outlines steps to take to begin accepting credit card payments again.

1. Do your homework – MLMs and direct selling merchants may have an inkling as to why their merchant account was terminated, but it’s important to get all the details about the termination from the original merchant account provider. As for a written, official statement that includes the details and also inquire as to whether you or your business was added to the Terminated Merchant File (TMF). These facts may be scary, but they are necessary and you will have to be upfront about them when courting a new processing partner.
2. Track down your statements – You’ll need to supply at least 6 months of processing statements to your new processing partner. Try to obtain your statements from the terminating processor as soon as possible and download the records from your online portal if you are able to before you lose access
3. Make a list and check it twice – Put together a list of high risk payment processors with whom you’d like to partner. There are plenty of merchant account providers that fit this bill, so you should make sure that your list contains those that offer features aligned with your business’ unique needs. You can view common considerations here. After termination, it is highly unlikely you’ll be able to obtain processing privileges from traditional payment processors, and that’s fine. Understanding your limitations can work to your benefit.
4. Transparency is king – Be honest, responsible and accountable when approaching new processing partners. Don’t try to hide details about your business or your processing history. At this stage, it’s very important that you find the right processing partner, so it’s better to be turned away upfront rather than sign on with a processor that will terminate you again 6 months down the road. Provide complete and accurate information so that any potential partnerships get off on the right foot and build trust. Building trust can also help you get the best rates possible.
5. Get organized – There is going to be a lot of paperwork to fill out and it could be beneficial to hire a digital payments advisor or merchant services expert to aid you in the process. Underwriting high-risk merchant accounts is like a tight-rope walking act. There must be balance between regulations, banking relationships, compliance and business objectives and it all requires a ton of paperwork. Get it done right and be prepared to be scrutinized.

Having your merchant account terminated can be very scary; it’s a threat to your business’ existence, but it is not irreparable. By getting organized, having patience and being totally transparent, you can get your MLM or direct selling business back on track.

The biggest obstacle to finding a new high risk merchant account provider is the time commitment. Many MLMs don’t have the resources to expend on the full-time job of researching, data collection and vetting it takes to build a new merchant account relationship. Fortunately, there are professionals that specializing in working with MLM and direct selling companies who understand the ins and outs of the industry and have long-standing relationships with merchant account providers both domestically and internationally.

Not sure where to start? Contact us today to get a free consultation – we’ll discuss your business model and your unique needs in a processing partner.

The Multi-Level Marketing (MLM) industry is under the microscope right now and 2016 was a rocky year for organizations that operate as MLMs. In July, the Federal Trade Commission (FTC) forced health & wellness MLM Herbalife to pay $200M, restructure and provide greater transparency.

In May, the H.R. 5230 bill was unsuccessful in limiting the FTC and its ongoing prosecutions of direct selling businesses. The list goes on when it comes to challenges MLMs face in today’s highly regulated atmosphere.

The ability to process payments effectively is the lifeblood of any business, and this ability is largely hindered for MLM companies. Considered “high risk” within the credit card industry, these companies often face extreme difficulties in obtaining – and keeping – merchant account. This is largely due to the nature of the MLM business — unpredictable and often volatile growth patterns, legal risks like those mentioned above, and the potential for chargebacks.

That said, not all hope is lost. There are payment processors that cater to this niche industry and understand the complex business model better than traditional merchant account providers. Some high risk processors may charge higher transaction fees or impose processing limits, though some also cater to this group with tailored customer support and products designed for the MLM market.

Navigating through the red tape can get sticky, and it’s recommended that you work with a digital payments advisor who has long-standing relationships with these specialized merchant account providers. No matter how you go about searching for the right merchant account provider for your MLM business, you should take the following into account:

Transparency – The best payment processing partners offer MLMs transparent, low-commitment partnerships. Be wary of partners that require extensive application and set up fees. Partners that are interested in a mutually beneficial, long-term relationship will aim to provide the most affordable service and transparent pricing.

Customized Payment Gateway – Your processing partner should have a robust gateway that is tailored for MLM’s distinct needs. This includes tokenized payments, recurring billing capabilities, domestic and international processing, customer vault and load balancing (routing transactions through multiple merchant accounts to minimize declines).

Virtual Terminal Capabilities – MLMs have unique business needs, including the ability to process payments from anywhere. Look for a merchant account provider that enables integration of virtual terminals and mobile payments as part of the processing platform, which can allow your MLM to process payments from trade shows, sales seminars and other events.

High Risk Products – In addition to baseline processing features, your processing partner should provide products designed for MLM businesses. This may include the ability to connect with multiple banking partners and offshore partners, anti-fraud tools, chargeback monitoring and management solutions and centralized account management that can access multiple business units from one online dashboard.

Exploring every processing avenue and potential partner can be time consuming and expensive. This is a big obstacle for MLMs who are often growing at record paces and where there is low ability to deviate resources away from the core business. Working with a Digital Payments Advisor that has expertise in merchants services for MLMs and who has establishing banking and processing partnerships can be the most efficient route.

Not sure where to start? Contact us today to get a free consultation – we’ll discuss your business model and your unique needs in a processing partner.