Multi Level Marketing or MLM, is a business system wherein products and services are sold through a network of distributors. Also known as Referral Marketing, Network Marketing or Direct Selling, it is a non-traditional way of doing business which always has room for more people joining in. Amway, Tupperware, Avon are some of the most popular and established MLM business giants.
MLM is a huge business today. The industry that came into existence in the 1950s has been one of the most active industries in the world in terms of member subscriptions for decades now. Be it jewelry, cookware or home products, the MLM industry operates in all types of sectors. Unless you are living under a rock, you’d have encountered an MLM representative at least once.
According to WFDSA, the industry’s sales volume was $189.6 billion in 2017, an increase of 1.6% compared to the previous year. In 2017, 18.6 million people were involved in direct selling in the United States, making it the world’s largest direct selling market.
With amazing stats and numbers to show, the industry is still tagged as High Risk when it comes to financial and banking institutions.
Why is MLM credit card processing risky?
Banks and payment processors are leery of providing merchant account services for MLM business mainly due to legal liabilities, high chargebacks and unpredictable business growth.
– Unlike a lot of merchants that are categorized as risky due to the products/services sold, MLM credit card processing is considered high risk regardless of what they sell.
– The MLM business model is closely related to pyramid marketing which is prohibited, thus creating a legal risk and keeping away payment processors.
– MLM companies have hundreds and thousands of distributors worldwide selling excellent products. Yet, the industry is also plagued by scammers that have turned out to be pyramid schemes preying on unsuspecting distributors and buyers creating an overall negative impression.
– Unexpected and unpredictable growth patterns of MLM businesses are a major factor that processors take into consideration.
– There are instances of small or start-up companies that sell cheap or fake products and services to make quick money. This leads to customer dissatisfaction and ultimately the business is shut.
– The industry also has a reputation of being unlawful with many businesses operating illegally.
– The legal issues associated with MLM lead to excessive chargebacks. Customers demanding refunds or companies getting shut unexpectedly are not unheard of in this industry.
How to obtain MLM Merchant Account Solutions?
While the risky nature of MLM business model has made traditional banks and credit card processors skeptical, merchants may also find certain banks willing to take on their business. But, this MLM Merchant account will come with high expenses and unnecessary application processing fees.
In fact, several processors offer their services to these businesses without proper industry knowledge. And when the business starts to gain sudden high monthly sales volume and growth, the account gets flagged and shut off by these merchant account providers.
A merchant account provider who knows the business nature, risks and trends of an MLM business will be able to provide efficient MLM merchant account solutions to businesses.
In order to increase your chances to get approved for a MLM merchant account,
Ensure that your business follows legal compliance terms and regulations
Ensure a long and positive processing history along with low chargeback ratio
Steps should be taken to prevent fraud and high chargebacks
If you are looking for a MLM merchant account, search for a genuine merchant account provider who will not only offer comprehensive merchant account services but also help a merchant expand and grow their business.