The market for e cigarettes and vapes is colossal and still growing rapidly.
That makes it a highly attractive business venture for merchants of all sizes including the tobacco majors, all the way to start-ups, both retail and online vendors.
One drawback you must overcome in order to grow the business is the difficulty in obtaining a merchant account for sales of that product category.
Without the ability to accept credit and debit card payments, either in-store or online, no business will get very far these days. Consumers expect payment to be fast and easy.
Here we explain how to quickly acquire a high-risk tobacco merchant account and high risk e cigarette merchant account.
Why are electronic cigarettes and vapes considered a high risk business?
There are 8 main reasons why banks treat the e cigarettes business with caution:
- Regulated industry – The FDA treats these products in the same way as regular tobacco products
- State and national law compliance – Not only are the rules different in most every country, but also across most US states
- Fear of litigation – Because they are so new, nobody knows for sure that they will not cause health problems through prolonged usage
- High volume – Consumer demand is extremely strong and it is very likely that some businesses will grow to high transaction levels very quickly
- Chargebacks – Vendors often depend on third party fulfillment centers, which may experience delays that eventually lead to customers raising chargebacks concerns without contacting the merchant
- Lack of market knowledge – Because the industry is so new, there is still not enough widespread knowledge about how it operates.
- Inexperienced business owners – Many vendors are new to the business and do not have any significant payment processing history
Good news – electronic cigarette vendors can obtain a merchant account
Many banks, card issuers and payment processors prefer to handle only regular low risk business types. However, there are a few merchant service specialists catering to e cigarettes and vaping sellers all over the globe.
They continually access the market and specific industry types, while adding the additional risk prevention factors into their fees and charges but are more than happy to welcome electronic cigarette vendors.
This opens up the market for entrepreneurs who see the opportunity and have the desire to carve out a piece for themselves. It truly is a game changer for the smaller business person should they be interested in pursuing this vertical.
It also opens up the whole online e-commerce channel for those with a website.
Whether you need a website shopping cart or a physical credit card terminal, this type of merchant account is the solution you have been looking for.
Transactions where the buyer is not present also include mail order and phone orders. Being able to capture this business with an electronic cigarette merchant account builds revenues.
What is different about a high risk e-cig merchant account?
The most important benefit is that banks and payment processors that provide these special merchant accounts have a good understanding of the industry.
This is important because they have built a profile of what it’s like to be a vendor and what challenges are likely to arise with customer satisfaction.
They will also have drawn up a fraud risk profile for the industry. This is especially relevant because it’s such a new branch of commerce.
Every type of business attracts its own brand of fraud and electronic cigarette sales are considered to be especially at risk.
In addition, extra care is taken to prevent sales to minors. This is done using an Age Verification Process that card issuers insist upon for electronic cigarette merchant account payments.
Transaction charges are often much higher than for low-risk merchant accounts. That is natural when the costs of doing business are also higher – reflecting the higher levels of risk.
Applications are always examined more closely than for low-risk businesses. Underwriting tends to take much longer than for standard low risk retail. Again, this is the least you would expect in order to help minimize loss for card issuers, banks and merchants alike.
What happens if I sell electronic cigarettes with my existing merchant account?
You will almost certainly be in breach of the terms and conditions of the account, which will inevitably lead to suspension and even having your funds frozen for a period of time until things get sorted out.
By selling any e cigarettes and products or accessories related to e cigarettes, you immediately raise the risks of doing business successfully and therefore will be charged a premium to run those transactions, at least until you have a proven track record.
Merchant account providers are very particular when underwriting higher risk accounts. Breaching their terms and conditions, risks costing them extra money, losses, etc and is not a good idea.
How to get an electronic cigarettes merchant account
If you are a startup or have an established business with a trading history, then you are well on the way to a successful application. All online businesses should have a fully functional website prior to submitting to underwriting.
Additionally, you will also need valid government-issued ID such as a driver’s license, passport or similar when applying.
Applying for a merchant account is free and you can usually expect a status in 2 to 3 business days, sometimes longer depending on the specific business type and region you are conducting business in.
Find out more and get started today at our SecureGlobalPay electronic cigarette merchant account page and online application.
Complete the quick and easy application form to get started.
Alternatively, contact us today and speak with one of our experts who can answer any queries or concerns you may have.