The market for both online firearms and retail firearms in the United States is huge. According to a May 2017 report from the Statistic Brain Research Institute, 3.4 million handguns and rifles are produced each year in and 32% of US households own firearms. The guns and ammunition industry brings in annual revenues topping $11 billion and continues to grow yearly. Should you need assistance in establishing a firearms sales merchant account, SecureGlobalPay can help.
Online firearms sales represent a vast market. Yet a great many banks and traditional financial institutions will not work with firearms merchants. Owing to the high volume of credit card chargebacks common in the industry, these merchants are considered high risk.
Online firearms and gun sales merchants rely on their ability to accept and process credit card payments. But the ‘high risk’ designation can sometimes prevent this. The solution for online firearms merchants seeking to process credit cards online is to apply for an online firearm sales merchant account from an online payment processor like SecureGlobalPay.
Specializing in providing high risk merchant accounts for online firearm sales merchants, SecureGlobalPay offers customized payment processing solutions for new and established businesses of all sizes.
Once approved, SecureGlobalPay can set up chargeback management tools, a fraud filter, and a payment gateway. To begin the process, apply now and get approved for an online firearm sales merchant account in as little as 24 hours.
Applying for an online firearms sales merchant account
SecureGlobalPay’s quick and simple online application makes it easy to begin the process. Be prepared to provide the following items when applying.
NOTE: Your chargeback ratio must be under 2%.
SecureGlobalPay has expertise working with new and existing businesses. We also can work with merchants rejected or terminated by another credit processor, as well as those with bad credit or a history of excessive chargebacks.
Although your application does not guarantee approval, qualifying merchants can begin processing online credit card payments in as little as 24 hours.
Underwriters evaluate applicants to ensure they are running a legal business that abides by all relevant state and local laws as well as any applicable industry regulations. Underwriters are on the alert for any signs that merchants might represent unnecessary financial risk to credit card processors and financial institutions.
To prepare for the review, merchants should pay any and all outstanding debts and amass savings which can then be viewed via bank statement lines items and balances. Nominating the principal with the best credit history to apply for the account is also a good step.
Taking these measures likely will increase the likelihood of approval for an online firearms sales merchant account. Applications submitted with attention to detail are more likely to be approved without restrictions like processing volume caps or mandatory rolling reserves.
The basics on gun laws
The Second Amendment of the U.S. Constitution guarantees that the right to keep and bear arms shall not be infringed. However, state and local regulations can affect how firearms are sold and to whom. Further regulations may affect who can own or carry firearms within a specific jurisdiction.
Federally-licensed firearms dealers are required to conduct background checks on potential buyers but private, unlicensed sellers are not bound by this law. Individual states may prescribe additional laws. Some, such as Colorado and New York, require background checks through the National Instant Criminal Background Check System (NICS) for private sales. Some states like Montana, Louisiana, and Arkansas, have few to no regulations on private gun sales, including online purchases.
Any business that operates exclusively online is prone to a higher number of chargebacks. Fraud is always more common with transactions where merchants and customers don’t meet face to face. Credit card fraud is also more common.
Firearms law adds an additional wrinkle. Since federal laws restrict the sale to individuals, such as felons and those under protective abuse orders due to domestic violence, it is no surprise that these people and others may try to get around it by fraudulently buying firearms, ammunition, and accessories online.
There are a great many start-ups in the industry. New online firearm sales merchants are still learning how to run a business. Learning how to cope with fraud represents a steep learning curve. Following up purchases with detailed receipts via e-mail and providing tracking numbers to confirm orders are sensible safeguards against fraud.
This practice also helps avoid chargebacks. Without a receipt for proof of purchase, customers can get anxious and worry their orders won’t be fulfilled, dispute the transaction with their credit card companies. Products that don’t arrive when expected can also trigger transaction disputes.
Chargebacks can also be initiated due to customer dissatisfaction with a product. Firearms enthusiasts are notoriously particular about their purchases. Customers receiving weapons that do not meet expectations will often initiate a chargeback.
Guns also tend to be expensive retail products. Such high ticket items are (unfortunately) more prone to chargebacks. Customers will often dispute high-dollar items on their credit card statements because they suddenly decide they can’t afford them. ‘Friendly fraud’ occurs when customers dispute a transaction because they changed their minds about a purchase. This is separate and distinct from deliberate fraud or theft of a credit card.
Excessive chargebacks can impede a merchant’s ability to remain in business. Each chargeback increases the ratio of overall chargebacks and affects a merchant’s relationship with a processor. High chargeback ratios can lead processors to terminate their online firearm sales merchant accounts, making it impossible to process credit card payments.
Having a chargeback ratio of over 2% can lead to termination of a merchant account. Once an account is shut down, it is much more difficult to get approved for another.
Merchants can take positive steps to manage their chargeback ratios.
Keeping details of every transaction is a good start. Specific information regarding date and time of the transaction, as well as the IP address of the computer from which the purchase was made should be noted in case the transaction is disputed.
Managing unhappy customers is a crucial step in managing chargebacks. Providing friendly and effective customer service helps cut down on chargeback ratios. Customer service representatives should be available to offer full refunds immediately to any unhappy customers. Although refunds cut into profit margins, they are ultimately less costly to a business than chargebacks.
Merchants can avoid chargebacks due to sticker shock by making sure customers know how the purchases will look on their bills. Clearly displaying the business names and contact information on all emails, websites, promotional material and receipts are great examples of positive client communication. This helps prepare clients for how purchases will appear on their credit card statements. Email receipts to confirm a transaction are another savvy way to avoid chargebacks.
Chargebacks can be planned for and managed with some effort and initiative. Providing good customer service, practicing clear communication, listing explicit terms and conditions and refund policies on paperwork, as well as operating in accordance with a sound business model can also lead to lower chargeback ratios. Offering full refunds, communicating with patrons, and having skilled customer service teams available 24 hours per day are great ways to keep chargeback ratios below 2% and your merchant accounts open.
Using a mitigation program
Mitigation programs, like the one offered by SecureGlobalPay, can cut chargeback ratios by as much as 25%.
SecureGlobalPay’s elite alert and prevention system was created specifically for high-risk merchants, such as online firearm sales businesses. By partnering with Verifi and its new Cardholder Dispute Resolution Network (CDRN) and Ethoca’s alert system, SecureGlobalPay provides merchants with Chargeback Protection that allows businesses to resolve credit card transaction disputes directly.
The high price processors pay for excessive chargebacks
Excessive chargeback ratios are a risk that is passed along to the credit card payment service provider. Whenever a business exceeds a 2% chargeback ratio, credit card brands, such as MasterCard and Visa, can also fine the specific processor that handles the merchants’ credit card payments. Excessive chargeback ratios can lead to fines of thousands of dollars for each account.
When fines cut into processors’ profits, they react. Traditional banks and financial institutions will shut down online firearm sales merchant accounts with chargeback ratios of greater than 3%.
Higher processing volumes
High Risk businesses are usually approved for merchant accounts with some restrictions, such as a monthly credit card processing volume cap and or rolling reserves. This limits the number of credit card transactions per month a merchant is permitted to handle. Once that cap amount is reached, the merchant cannot process any more credit card purchases, effectively shutting down business until the next calendar month.
Merchants that effectively manage risk and keep chargeback ratios low can request new caps in as little as three months.
Online firearm sales merchant categories
The United States and other countries like the UK assign numerical codes, known as Standard Industrial Classification (SIC) codes, to business establishments in order to identify the primary purposes of these businesses.
In general, online firearm sales merchants fall under one of these codes:
- 3484: Small Arms (Typically, the code used for companies that manufacture small arms and accessories that have a bore smaller than 30 mm)
- 3489: Ordnance and Accessories, Not Elsewhere Classified (Typically, the code used for companies that manufacture firearms and accessories with a bore bigger than 30 mm)
- 5091: Sporting and Recreational Goods and Supplies
Northern American Classification System (NAICS) are categories of six-digit codes used by federal statistical agencies to classify establishments. The information is used to collect, analyze, and publish statistical information about similar types of businesses and the way they impact the economy in the U.S.
The following NAICS codes often are used for firearms businesses:
- 332994: Small Arms, Ordnance, and Ordnance Accessories Manufacturing
- 348401: Firearm Accessories-Manufacturers
- 348402: Firearms-Manufacturers
- 348403: Small Arms-Manufacturers
- 348404: Ammunition Reloading Equipment and Supplies-Manufacturers
- 348405: Guns-Manufacturers
- 348406: Guns Accessories-Manufacturers
- 423910: Sporting and Recreational Goods Stores
- 451110: Sporting Goods Stores
- 594102: Hunting Equipment
Visit the United States Census Bureau to view the complete NAICS code list.