The number of magazine readers in the US has actually increased since 2012, so there is money to be made with the right business model and acumen. The downside is finding a payment processor willing to partner with you.
This scenario is not uncommon: a magazine subscription business seeks a merchant account, applies, spends hours talking with a salesperson from a provider, and has the application rejected by the underwriter at the end of it all. The reality is that the ability to take online payments for magazine subscription businesses is hard to come by. As a recurring billing business model, this type of business makes banks and other merchant services providers nervous. That said, there are viable options to take online payments for a magazine subscription business if you understand a few key things.
Why are Magazine Subscriptions High Risk?
There are several reasons that this kind of business is considered high risk. In order to find a payment provider so you can take online payments for a magazine subscription business, you’ll need to understand what they are.
- Higher rates of chargebacks: One of the reasons that subscriptions are seen as high risk is because they attract a much higher level of fraudulent chargebacks. A chargeback occurs when a customer disputes a charge to a credit card company and a bank takes money from the merchant and refunds it to the customer. It’s meant to protect the customer, but can be abused in so-called “friendly fraud.” That means that it’s difficult for merchants to successfully challenge chargebacks. More chargebacks means greater loss of funds for both merchants and providers, so payment providers tend to steer clear of industries with high chargeback rates.
- The long-term fulfillment question: Long-term fulfillment refers to the time between when a payment is processed and when the product is delivered to the customer. The more time that passes between the sale and when the product is received, the higher the risk. A longer fulfillment period gives customers more chances to cancel or initiate a chargeback, so anything with a subscription automatically carries a higher risk because the fulfillment duration is so long. That includes magazines.
- Online recurring transactions: Magazine subscriptions that charge online payments have a risky structure. Sometimes, online customers simply don’t understand or realize they’ve purchased a subscription with recurring billing. When they see the charge on their credit card bill, they think it’s fraud. This causes them to them to file a chargeback. As discussed above, the chargeback system is designed to protect consumers, so you may have a tough time getting that chargeback reversed if you’re an online merchant. Being clear about when and how often you’re charging your customers can help you reduce the risk of customer misunderstandings and find a payment provider who will take payments for a magazine subscription business.
- MOTO (Mail Order/Telephone Order): Even though younger generations are embracing ecommerce, there are still many customers who want to place their orders by phone or email. If your magazine subscription business accepts MOTO orders, this also contributes to its risk score. Although ordering over the phone or by mail might feel more secure to customers, payment providers still consider it a card-not-present (CNP) transaction. CNP transactions are all seen as high-risk because of the possibility of both fraud and buyer’s remorse. Payment processing accounts take a risk with every transaction, so anything that increases the possibility of a chargeback or refund is seen as risky.
How to Take Online Payments for Magazine Subscription Businesses
There may be extra hoops to jump through to take online payments for magazine subscription businesses, but there are service providers willing to help. Though it’s true that many standard providers will be wary of this kind of business, there are payment providers that specialize in high risk businesses, including recurring billing models and those that accept MOTO. Working with these providers has advantages: they have tools to combat the specific problems that magazine subscription businesses face. These providers work with sponsor banks who are comfortable underwriting higher risk businesses and can integrate specialized fraud and chargeback mitigation technology.
If you want to take online payments for a magazine subscription business, find an expert provider with years of experience in supporting high risk merchants. They’ll have the resources to mitigate risk without compromising on security and service. That way, you can stop worrying about your payment processor and get back to your business!