Nutraceuticals are on the rise globally. This huge vertical often includes businesses such as wellness products, beauty powders, performance boosters and dietary supplements. However, one of the areas that in the industry that is most challenging is payment processing. The majority of card networks and acquiring banks consider nutraceutical merchants to be high-risk.
Nutraceutical merchants frequently work in an industry characterized by very individualized results, such as performance, wellness and beauty. Naturally, this leads to a range of customer expectations, irregular usage patterns, and misunderstandings regarding timeliness or results. Customers can file disputes or ask for refunds if these expectations aren’t fulfilled, even if the goods was supplied just as promised. Chargebacks, including friendly fraud, are more likely to happen when usage, results and billing are not clearly defined.
Businesses that rely on recurring transactions, such as those with free trials or less clear cancellation procedures, have a greater risk profile. If these models are not properly handled, they may result in a larger volume of disputes. A simple lack of awareness that they’re still being charged can lead many customers to challenge re-billing charges out of confusion.
As a result, nutraceutical merchants and their larger payment stakeholders typically face:
- Elevated chargeback ratios
- Heightened regulatory oversight (from bodies like the FTC and FDA)
- Difficulty and hesitation from PSPs to onboard without any pre-dispute tools in place
In this environment, handling chargebacks for nutraceuticals is crucial to maintaining a high-risk merchant account’s viability, scalability, and profitability, it’s not just about compliance.
Top Chargeback Triggers in the Nutraceuticals Industry
It can be difficult to handle the various chargebacks that might happen in the nutraceutical industry, especially when businesses scale or expand their billing systems. Supplements and health items, in contrast to one-time tangible goods, are sometimes entangled in an array of varying expectations, ongoing billing and customer uncertainty.
The following are a few of the most typical chargeback triggers and subscription billing disputes:
“Didn’t receive product”
Caused by shipping delays, missed tracking scans, or poor fulfilment visibility.
“Unrecognized charge”
When customers don’t recognize the merchant name due to unclear or generic billing descriptors.
“Cancelled but still billed”
Occurs when users believe they ended a subscription, but charges continue due to confusion or poor cancellation workflows.
“Didn’t work as expected”
A frequent issue in health and wellness, where outcomes can vary between individuals and expectations may not always align.
“Scam” complaints
Arises from unclear advertising, free trial conditions or product claims that didn’t meet expectations.
Friendly fraud
In which a consumer makes a valid purchase but disputes it anyway, is frequently the result of these problems. Reasons can be as simple as a customer changing their mind or regretting the purchase.
Understanding these triggers is essential for PSPs, Merchant Aggregators, and PayFacs in order to safeguard high-risk portfolios and assist merchants in proactively lowering chargebacks in the health supplement industry.
Key Tactics and Tools for Nutraceutical Payment Processing Success
Supplement merchants need to accomplish more than just increasing conversions if they want to grow in the nutraceuticals sector. They need to be prepared to deal with chargebacks in a proactive manner, particularly for business models that rely heavily on subscriptions. This entails implementing a strong suite of chargeback prevention solutions that are tailored for merchant accounts that pose a high risk.
Here are six proven tactics or tools to reduce disputes and protect revenue:
1. Ethoca and Verifi CDRN Alerts
Chargeback Alert services act as early warning systems. Ethoca and Verifi notify the payment provider and/or merchant when a client files a dispute with their bank, preventing it from turning into a formal chargeback. By doing so, the merchant can resolve the issue and prevent a hit to their ratio and potential damage to their MID by either issuing a refund or contacting the customer directly to resolve. This real-time intervention is crucial for high-risk verticals such as nutraceuticals.
2. Rapid Dispute Resolution (RDR)
Going one step further, RDR Alerts automatically refund high-probability or low-risk disputes according to pre-set rules. Merchants can protect their chargeback ratio automatically and adhere to card network guidelines by not wasting time and money challenging predicted chargebacks (such as “cancelled subscription”).
3. Clear Billing Descriptors
Making sure your billing descriptor is brief, brand-consistent, and recognizable is an easy fix for confusion that can occur. Customers who are confused and fail to recognize charges on their statement can be a source of many disputes. Customer trust is increased and “unrecognized charge” issues are decreased with a clear descriptor.
4. Transparent Checkout Flows
Clearly stating recurring billing terms, free trial limits, refund policies, and delivery expectations will help you avoid legal problems and allegations of being a “scam.” This lowers “product not as described” chargebacks and protects you from legal liability.
5. 3D Secure 2.2
Including 3D Secure 2.2 (3DS) in your checkout process allows for liability shift and cardholder identification, which is particularly helpful for transactions that are conducted internationally and online. It can sometimes ensure that you are not held financially liable for many chargebacks that are based on fraud, even though it won’t stop all of them.
6. Recurring Billing Management
Make it simple for customers to stop or cancel their subscriptions. It has been proven that having a cancel option prominently available in emails or account dashboards lowers the number of post-trial disputes. Chargebacks are frequently the direct result of friction in cancelation flows, particularly in recurring payment models.
Together, these tools create a resilient foundation for nutraceutical merchants and help PSPs confidently support this high-growth, high-risk vertical.
How PayShield Helps Nutraceutical Brands Stay Compliant and Grow
Influencer marketing, aggressive sponsored acquisition and free trial offers are common ways for nutraceutical firms to expand quickly. When chargebacks begin to accumulate, however, this quick expansion may pose a significant downstream risk. Even a slight increase in dispute volume can cause companies to surpass Visa or Mastercard thresholds and be identified by card networks as high-risk merchants, leading to fines, reserve holds, or even the whole loss of MIDs.
PayShield offers the essential infrastructure required for nutraceutical businesses to maintain compliance as they grow. Our software integrates directly with Verifi and Ethoca Alerts, as well as Verifi Rapid Dispute Resolution (RDR) Alerts, to automate high-volume dispute management. This helps businesses safeguard their ratios without using up internal resources. Enabling merchants to provide refunds or take pre-dispute action prior to a chargeback being formally reported.
In order to avoid fraud, PayShield offers 3D Secure 2.2 and our Transaction Risk API to enable real-time fraud detection and risk analysis. This empowers merchants to stop fraudulent transactions before they get processed and cause revenue loss.
In addition to these protections, PayShield allows for greater customization with rules that can be changed to meet the particular requirements of high-risk businesses. Merchants can use selective refund logic by defining thresholds according to product type, order value or subscription length. This degree of control is not only beneficial but also necessary for high-growth nutraceutical brands to function securely inside the payment ecosystem and steer clear of compliance events that could kill their business.
Summary
Are you a merchant aggregator, PayFac, or a high-volume nutraceutical brand?
Chargebacks are nothing new in the supplement and health industry. Many of the disputes that occur in this market are predictable and avoidable, ranging from subjective product outcomes to recurring billing problems. However, they soon pile up and reduce margins if not put up correctly.
Smarter payment infrastructure is the first step towards reducing chargebacks in the nutraceutical vertical. This involvesputting in place transparent billing procedures that eliminate misunderstandings at their origin, managing subscriptions in a way that provides customers visibility and control, and utilizing Chargeback Alerts to stop conflicts before they become chargebacks.
PayShield provides the means for merchants and their suppliers to accomplish this on a large scale. Our technology is specifically designed to safeguard income in high-risk situations, with features like automated RDR flows, high-volume alert management, 3DS authentication and configurable rulesets.
Needing help with payment performance disrupted by refunds, disputes and “product didn’t work” claims? PayShield can help. Contact us here to learn how we can save your business’s revenue.
