How to open an MLM merchant account?
Multi-level marketing is wrapped in myths and misconceptions. Given the high rate of chargebacks and a high-risk business model, it definitely got a bad rap. Nevertheless, giants like Avon or Amway have a sky-high annual revenue. Thus, don’t let the risks to throw you off. Take a look at this article to find out what documents to collect and what steps to make to open an MLM merchant account.
What is MLM?
Multi-level marketing, or MLM, is a form of direct sales in which independent representatives sell products or services from a company to an end consumer. The business model of MLM is a pyramid selling. What that means is you are getting the commission from the sales of those people you recruited yourself. The MLM boomed in the late 1980s and skyrocketed with the advent of the internet. From toothpaste to furniture to lingerie, the range of wares offered is as diverse as possible. In the XX century, the MLM merchants used to throw parties to display their goods. Now, they organize webinars and invite friends from social media to attend.
Top three examples of the MLM global companies in 2018
Take a look at this list to understand better what MLM business model is:
- Amway. The corporation specializes in home, beauty, and health products. The revenue of Amway in 2018 exceeded the point of $8.6 billion
- Avon. We bet you have a girlfriend who is or was into it. From lipsticks to shampoos, Avon is one of the cheapest and most profitable cosmetics sellers in the word. The company’s revenue in 2018 was $5.7 billion.
- Herbalife. The global corporation that develops and sells dietary supplements. Herbalife operates in 94 countries through a network of approximately 3.2 million independent distributors. The annual revenue of Herbalife in 2018 reached the point of $4.40 billion.
Why is MLM considered high-risk?
Marketing and business agencies are presumed to be high-risk. As a result, the majority of traditional banks refuse to process them. Moreover, not all the PSPs want to mess with MLM as well. Excessive chargebacks, unpredictable growth patterns, and a high rate of failure are to blame. Talking about MLM, chargebacks are the most complicated part. Why the banks and PSPs are so afraid of MLM’s high rate of chargebacks?
Whenever a business transcends a 2% chargeback ratio, credit card companies, like MasterCard or Visa, impose a fine on processors. And that’s not what they want.
Imagine, an MLM merchant having 100 sales per month. If he has four chargebacks per month, it automatically turns into 4% of chargebacks — too high risk for an ordinary PSP. At PaySpace, we know how to regulate the level of chargebacks by using special banking schemes. You might also be interested in how to open an escort merchant account.
Take a look at three things an MLM needs to be legal:
- A quality product or service;
- Income is earned off sales of products or services;
- The focus is on purchases, not recruitment alone.
Range of documents to open an MLM merchant account
Take a look at the basic set of document to open an MLM merchant account:
- Certificate of incorporation. This document proves that your company is a legal entity. Typically, state governmental entity or corporation issues a certificate. From three days to two months, the duration of obtaining a document varies from country to country. Keep it in mind when applying for a merchant account.
- Certificate of Incumbency (or similar document).
- Copies of valid passports with visible bearers signatures for all company officers and owners.
- Application. Handing over a filled merchant application form is a must. It helps PSP to understand the company’s structure, turnover, and geo-preferences.
Website requirements to open an MLM merchant account:
To open an MLM merchant account, you have to make sure that your website contains the following:
- Privacy Policy Page;
- Terms & Conditions Page;
- Name of the company in the footer;
- Contact us button with an email and phone number;
- Deposit & Refund Policy Page;
- Visa and Mastercard logos (in case you offer them as payment methods).
What are the most popular MLM services
Here is a list of the most popular MLM services in 2018:
- Beauty
- Books
- Clothing
- Fitness
- Health
- Home Products
- Jewelry
- Toys
- Wine
What payment methods MLM merchants prefer
The most popular credit card payment methods for MLM merchants are:
- Visa
- MasterCard
- JCB
- Discover
- Diners
Conclusion
To sum up, opening an MLM merchant account is a tough but achievable goal. Thanks to the help of PaySpacelv, you can start accepting payment and grow your business hassle-free. Collect the documents mentioned above. Apply our recommendations for your website. Whenever everything is lined up, nothing will stop you from running the MLM business easily. Feel free to reach us out during any stage of your way.
