Introduction:
As an online health practitioner or supplement seller, having a reliable and smooth payment system is essential for running your business. However, not all payment systems are created equal. Many practitioners use Stripe, a popular payment aggregator, without understanding the key differences between aggregators like Stripe and traditional payment processors—and why Stripe sometimes withholds funds or shuts down accounts. This article will break down those differences and help you make more informed choices for your business.
Related Blogs
1. What is Stripe (A Payment Aggregator)?
Stripe is a payment aggregator, which means it collects payments on behalf of many different businesses under a single merchant account. Instead of creating a unique account for each business, Stripe operates with an umbrella account, making it easier for small and medium-sized businesses to accept payments quickly and without extensive underwriting.
-
Key Benefits:
- Fast setup and approval process.
- No need to apply for an individual merchant account.
- Simplified fee structures.
-
Downsides:
- Less control over your transactions.
- Higher risk of account holds or terminations.
2. What is a Payment Processor?
A payment processor, on the other hand, works by providing you with an individual merchant account. Each business undergoes an underwriting process, allowing the processor to understand your business, risk profile, and payment needs. Payment processors act as intermediaries between your business, the customer’s bank, and the card networks (like Visa or MasterCard).
-
Key Benefits:
- Customization for your business needs.
- Greater stability and less likelihood of unexpected holds.
- Tailored fees based on your risk level and transaction volume.
-
Downsides:
- Longer setup and approval process.
- More paperwork and verification required.
3. Why Stripe Withholds Funds or Shuts Down Accounts:
One of the most frustrating experiences for online health practitioners and supplement sellers is having funds withheld or accounts shut down by Stripe. Here are some common reasons why this happens:
-
Risk Assessment: Stripe uses algorithms to assess the risk of your business. If you're selling products or services deemed "high risk" (such as health supplements, peptides, or certain holistic treatments), Stripe may freeze funds or terminate your account due to perceived regulatory or chargeback risks.
-
Chargeback Rates: If your business experiences a higher-than-average chargeback rate, Stripe may see this as a sign of potential fraud or instability. Chargebacks happen when customers dispute charges, and high chargeback rates can trigger account reviews.
-
Business Type Misalignment: Stripe may shut down accounts if they determine that your business doesn’t align with their accepted categories, particularly if you're operating in areas with unclear legal frameworks (such as supplements, peptides, or alternative health treatments).
-
Sudden Spike in Sales: A sudden influx of sales can trigger an automatic review of your account. Stripe may hold funds as they investigate whether the spike is due to suspicious activity or legitimate business growth.
4. How Payment Processors Handle These Issues Differently:
-
Personalized Underwriting: Payment processors typically require a more in-depth review of your business during the setup process. While this takes longer, it means the processor understands your business type from the start, leading to fewer unexpected account holds or shutdowns.
-
Custom Risk Management: Payment processors often offer customized risk management tools and have teams that can directly work with you to reduce chargebacks and other risks. This personal approach means you can work proactively to prevent account freezes.
-
Clear Communication: With a dedicated account and support, you often get clearer communication and guidance on how to maintain compliance with industry regulations, preventing misunderstandings that might lead to account terminations.
5. Which is Right for Your Business?
-
When Stripe is a Good Choice: If you're just starting out and need a quick, easy payment setup, Stripe might be ideal. It's great for businesses with low-risk products and a straightforward transaction process.
-
When to Consider a Payment Processor: If you're in a high-risk industry like health supplements or holistic health, or if you're scaling rapidly and need a more stable payment system, working with a payment processor may save you from future headaches. A payment processor can provide a more personalized approach, ensuring long-term stability for your business.
Conclusion:
While Stripe is a convenient option for many, it comes with its risks, particularly for online health practitioners and supplement sellers who may be classified as high-risk. Understanding the differences between payment aggregators and processors can help you choose the best option for your business. If you're experiencing frequent account holds or terminations with Stripe, it may be time to explore dedicated payment processing solutions that better align with the unique needs of your business.
Related Blogs
Comments