The Challenges of High-Risk Payment Processing for Kratom Businesses



The kratom industry has grown significantly in recent years as consumers turn to this natural product for its potential benefits. However, selling kratom online comes with its fair share of challenges, particularly in the realm of payment processing. Many payment processors categorize kratom businesses as high risk due to regulatory uncertainties, reputational concerns, and the nature of the product itself. Here’s an in-depth look at these challenges and how businesses can navigate them.
Why Kratom is Considered High Risk
- Regulatory Uncertainty:
- The legal status of kratom varies widely across regions. While it is federally legal in the United States, certain states and cities have banned it, and the FDA has not approved it as a dietary supplement or medication. This patchwork of regulations creates significant risks for payment processors.
- Reputational Concerns:
- Due to its association with controversy and debates over safety, some payment processors are hesitant to work with kratom businesses.
- High Chargeback Rates:
- As with other high-risk industries, kratom vendors may experience higher-than-average chargeback rates due to customer disputes or misunderstandings about the product’s effects.
- Lack of FDA Approval:
- The absence of FDA approval means that kratom products must avoid medical claims, complicating marketing and potentially leading to consumer dissatisfaction.
Common Challenges for Kratom Payment Processing
1. Finding a Payment Processor
- Traditional payment processors, such as PayPal, Stripe, and Square, typically do not support kratom businesses due to the risks involved. Many kratom vendors struggle to find reliable processors that are willing to work with them.
2. Higher Transaction Fees
- High-risk payment processors often charge elevated fees to mitigate the financial risks associated with working in controversial industries. These fees can significantly impact profit margins.
3. Rolling Reserves
- Many processors require rolling reserves, where a percentage of each transaction is held back for a specified period to cover potential chargebacks or refunds. This can tie up cash flow, especially for small businesses.
4. Risk of Account Termination
- Payment processors can suddenly terminate accounts if they perceive increased risk, leaving businesses scrambling for alternatives and disrupting cash flow.
5. Compliance Requirements
- Kratom vendors must adhere to strict compliance measures, including providing certificates of analysis (COAs) for their products and ensuring that all marketing materials are accurate and do not make medical claims.
How to Navigate Payment Processing Challenges
1. Partner with High-Risk Payment Processors
- High-risk payment processors specialize in industries like kratom and understand the unique challenges businesses face.
Adaptiv Payments is your solution for high risk kratom payments. Offering instant approval and the best rates, Adaptiv is a great choice for a starting or growing kratom business. Sign up here.
2. Implement Fraud Prevention Tools
- Use advanced fraud detection tools to minimize chargebacks and ensure secure transactions. Many high-risk processors offer these tools as part of their services.
3. Maintain Transparency
- Build trust with customers by providing clear and accurate information about your products. Display COAs, list ingredients, and include disclaimers where necessary.
4. Monitor Chargebacks
- Keep chargeback ratios below the acceptable threshold (usually under 1%) by offering excellent customer service, clear return policies, and detailed product descriptions.
5. Diversify Payment Options
- Consider offering multiple payment methods, such as ACH transfers or cryptocurrency, to reduce dependence on traditional payment processors.
Additional Resources
- American Kratom Association (AKA): www.americankratom.org – A valuable resource for advocacy, legal updates, and industry news.
- FDA Kratom Information: www.fda.gov – Stay informed about regulatory updates and compliance requirements.
Final Thoughts
While kratom businesses face significant hurdles in securing reliable payment processing, the right strategies and partnerships can make all the difference. By working with high-risk payment processors, maintaining compliance, and leveraging fraud prevention tools, kratom vendors can build sustainable businesses in this growing market. As the industry evolves, staying informed and adaptable will be key to long-term success.