Multi-level Marketing

Why Multi-level Marketing (MLM) businesses are considered High-Risk?

Potential for Chargebacks and Fraud

  • Aggressive sales tactics and false promises can lead to dissatisfied customers
  • Dissatisfied customers may demand refunds or file chargebacks
  • Chargebacks and refunds can be costly for the MLM company


High Rate of Turnover

  • Many MLM distributors are recruited with the promise of quick riches
  • Distributors may not be prepared for the amount of work required to succeed
  • High rate of attrition can be difficult for the MLM company to manage


Complex Compensation Plans

  • MLM companies often have compensation plans that are difficult for consumers to understand
  • Confusion and frustration can increase the likelihood of chargebacks and refunds
  • Complex compensation plans can also lead to legal issues and regulatory scrutiny


While MLM companies can offer great income opportunities, they are considered high-risk merchants when it comes to selling online due to their potential for chargebacks, fraud, high turnover, and complex compensation plans. As a result, it is important for MLM companies to work with payment processors and fraud prevention services that understand the unique risks associated with their business model.

Mitigation measures for Multi-level Marketing (MLM) merchants to reduce risks when selling online

  • Implement Ethical Sales Practices: MLM companies should avoid using aggressive sales tactics and false promises to recruit new distributors or customers. Instead, they should focus on building a strong reputation based on honest and ethical business practices.

  • Provide Adequate Training: MLM companies should provide comprehensive training to their distributors to ensure they understand the products and compensation plans. Adequate training can reduce the likelihood of confusion and frustration, which can lead to chargebacks and refunds.

  • Monitor Distributors’ Sales Practices: MLM companies should monitor their distributors’ sales practices to ensure they comply with ethical and legal standards. Companies can use software tools to monitor social media and online sales channels.

  • Use Reliable Payment Service Providers: MLM companies should work with payment service providers that specialize in high-risk merchants. These providers can help prevent fraud and chargebacks and provide secure payment processing.

  • Have a Clear Refund Policy: MLM companies should have a clear refund policy in place and communicate it clearly to customers. A clear refund policy can re

Being a high-risk merchant vs. a regular merchant

  • Higher payment processing fees
  • Lengthier application process
  • Higher chargeback fees
  • Cash reserve requirments:
    • Capped reserve
    • Rolling reserve
    • Upfrom reserve
  • Volume caps
  • Additional technical requirements
  • Being on the TMF / MATCH list


Check out our knowledge hub to learn more about what processing fees, application process, chargebacks and cash reserve requirements or TMF / MATCH list mean. 

Other risk factors?

There may be other risk factors as to why you as a Multi-level Marketing (MLM) merchant are classified as a high-risk merchant, such as:
  • Accepting subscription-style payments

  • Being on the Member Alert to Control High-Risk Merchants, or MATCH list — a list managed by Mastercard that monitors merchant behavior, like chargeback history

  • High average transaction sizes

  • High sales volumes

  • Highly regulated industries

  • International sales

  • Large number of card-not-present transactions

  • Little to no business experience

  • Long fulfillment time frames

  • New or poor credit scores

  • Past fraud or illegal activity

As high-risk Multi-level Marketing (MLM) merchant how to find a payment provider?

It takes effort for businesses to secure a payment processing partner when they are considered high-risk but it is definetly possible to find the right payment solution if you focus on:

  • Maintaining healthy cash levels. Most processors would like to see a healthy cash level in your business bank account. 
  • Try to reduce chargebacks. There could be a number of factors behind the soaring number of chargebacks in your business. Whatever the reasons may be, you can always analyze them and try to reduce your chargebacks.
  • Be transparent. Disclose all materials and relevant information during the application process. Payment processors may ask you for very detailed information about your business and finances. Be open, honest, and transparent.
  • Keep your documents ready. This could mean having six months of bank statements and a few years of tax returns. That said, each processor has its own set of requirements so make sure to check them.
  • Follow the guidelines of your payment processor. When you apply for a high-risk payment solution, besides your business needs, the risk the payment solutions provider takes also matters. So, be flexible and see if there are things you can do to reduce your risk by discussing with them and following their recommendations.

Our Platform will find the right payment solution for your business

Our biggest differentiator? 

We provide payment solutions for merchants with a 90% Succes Rate by Algoritmic matching and pre-KYC onboarding in each industry and region globally.