Merchants in the electronic cigarette and vaporizer industries have felt the effects of regulatory changes and tightening underwriting guidelines. It is not uncommon for an electronic cigarette payment processor to require the same documentation of tobacco businesses today. Working with an experienced vape shop merchant account provider can help ensure businesses have reliable and affordable payment processing.
What is an eCigarette Merchant Account?
Once a merchant has obtained merchant services, the payment processor or merchant services company will provide a credit card terminal; either a physical POS system/credit card machine or an online application such as a payment gateway or virtual terminal. Customers making purchases can either swipe or dip their cards upon checkout at a retail storefront. Online sales customers can enter their card information through a secure payment gateway on their own computer or mobile phone. We integrate with; WooCommerce, Shopify, BigCommerce, Ecwid, LimeLight, Magento, Opencart and Prestashop to name a few.
When the card account information is captured by either a terminal or gateway, the transaction information is encrypted in the payment terminal and sent as a file through the acquiring bank to the payment card network, a secure banking system owned and managed by the companies of Visa, MasterCard, Discover, and American Express.
Once the card account information has been received at the payment card network, the file is decrypted. This information is used to determine the card-issuing bank of the customer and start the verification process. The customer bank performs a fraud check and confirms the available credit once the request is received. After verification, a response to the authorization request is determined and sent back to the merchant location.
The authorization request takes only a matter of seconds before informing both the customer and the merchant to the result. Either a transaction receipt is printed in the merchant storefront’s credit card machine or displayed on a secure checkout page. Each authorization will have a transaction ID or a code for denied transactions showing the reason for the decline.
Types of e-Cig Merchant Accounts
Merchants selling e Cigs or e Juices are the types of businesses that can benefit the most from using a vaporizer merchant account designed for their business. Vape merchant accounts selling online or through a storefront will be set up properly with the banks. The financial industry has a reputation of changing their minds on certain types of merchants if industries are too risky. These decisions are usually based on changes in the legal or regulatory environment surrounding the industry.
As of 2016, the FDA regulates all types of tobacco, including electronic cigarettes and e juices sold in the United States. At this time the regulation for e cigs is still rather sparse, but this can change rather quickly depending on the ambitions of the FDA or any other government official. Since their introduction to the markets in 2004, Federal requirements of merchants selling e cigs and e juices keep changing. Ultimately resulting in many financial institutions changing their opinions and avoiding card not present transactions.
Partnering with an e-cig merchant services company that specializes in tobacco and electronic cigarettes can help ensure that any sudden changes in federal or other regulatory areas that will affect the industry can be handled in a manner that does not disrupt business. This means that a specialized e cig merchant account processor will have a number of different solutions available to quickly and seamlessly adjust their e-cig merchant accounts to prevent any loss of credit card processing services.
Why are E Cigarettes High Risk?
Since their inception and release into the US markets, the e cig industry has remained relatively unaffected by significant legislation to regulate and control the industry. Even though there are few requirements by the card payment networks for compliance, some processors are becoming strict. A few payment processors have begun requiring CNP vaporizer merchants to seek legal reviews. In the form of a letter, these reviews state the merchant’s full compliance with federal and local tobacco laws.
While the legal waters surrounding electronic cigarettes are becoming difficult for navigation, preparing for change is essential. The anticipation of additional requirements by payment processors or card networks is possible to continue online or retail sales. While this is not the case currently for all payment processors, some have started asking for legal reviews.
Advantages of Electronic Cigarette Credit Card Processing
Merchants in the e Cig industry have certain needs and requirements of their payment processors to ensure the functionality and longevity of their ecigarette merchant account services. Since e Cigarettes and vaporizers fall into a grey area for many payment processors it’s important for merchants to ensure that their chosen service provider can handle any potential changes to the legal or payment networks and their ability to accept e cig transactions.
Merchants that decide to use an electronic cigarette merchant account, instead of a sponsored payment account, will have the option for direct integration into the acquiring bank, an important function for businesses because it can allow for better approval rates, faster authorizations, higher monthly volume caps and fewer restrictions than most merchant accounts placed through an eWallet or similar type payment account system.
Another important facet to keep in mind when researching electronic cigarette payment processing companies is the functionality of the business’ billing model since most electronic cigarette companies generally offer 2 types. Working with a bank that can accept both 1-time sales or a subscription re-billing program that customers opt into joining can give merchants the flexibility to offer different products and services without creating problems at the payment processor.
Internet-based merchants will also need to consider the payment gateway that they decide to partner with when it comes time to integrate, with many choices available to merchants and payment processors, finding a reliable service is essential. Working with a PCI Compliant tobacco payment gateway will ensure that all online processing of transactions is secure. Fast authorizations and extensive reporting, along with robust transaction management features separates the quality of gateway services.
Pricing for E-Cig Merchant Accounts
Most e-cigarette merchant accounts are using one of 2 pricing models; tiered pricing or cost-plus pricing, also known as interchange-plus pricing. Both provide businesses complete ecig merchant account services with various fees charged for account services, network services, and other transactions. Other merchant services providers offer gimmicks of flat monthly fee or flat transaction fee pricing. These models almost always end up costing merchants significantly more than a tiered or cost-plus pricing system.
The tiered pricing method charges merchants on either a 3 up to 6 tier scale that varies depending on the customer’s card, acceptance method among other factors. Most introductory fees were right around 1%, appearing to be very low to merchants that signed on to these programs. As merchants learned, few cards qualified for these low tiers and even though debit cards qualified, their costs were significantly lower in a cost-plus environment. The tiered method was a very common system from the early days of payment processing but has been losing traction in the industry. The lower overall costs of interchange plus pricing is now the leading pricing model.
A cost-plus pricing model discounts every transaction the same amount regardless of the type of card or acceptance method. Merchants opting for this pricing system almost always save significant amounts on their payment processing costs. The savings on qualified or mid-qualified card transactions are usually minimal for merchants. The largest savings come from debit cards and non-qualified transactions, making this the preferred pricing method.
Another trend that has caught on in the United States has been the use of flat fee payment processing services. Offering either flat fee is per transaction or per month, this sales gimmick has caught on with some e-cigarette merchant account providers. Designed for startups, these merchant service programs are very costly for smaller to larger merchants that rely on merchant services. Their high discount and overage fees make these merchant solutions a costly choice for most businesses.
Required Documents for Vape Merchant Account Services
When merchants are looking for an electronic cigarette or vaporizer merchant account, the underwriters will generally have a list of required documents. Providing these documents from the start will help merchants have their vape or smoke shop approved for merchant services faster. Some of the most commonly requested documents include
- Completed Application
- Copy of Government ID
- Proof of Business
- Copy of Recent Bank Statements
- Copy of Recent Merchant Account Statements
Providing a complete application and color copy of an ID from the start will help the underwriters begin many of the background and other checks required for merchant services. Missing important information will delay the process and force merchants to have to wait longer to accept credit cards.
Prior financials is also a very important part of the underwriting process for acquiring banks. Understanding how the business operates and is managed plays a big part in the decision making of ecigarette merchant account applications. It’s not only important to supply the last 3-6 months worth of statements, but it is also very important to maintain a solid financial record incase a business wants to apply for a new account in the future.
Due to many of the increasing government regulations, underwriters might begin to request additional documentation when reviewing an electronic cigarette merchant account application. Many times the ecig banking teams will want proof of the business using either pictures of the store, receipts of inventory, or copies of licenses. This helps paint the picture that merchants are legitimate and following the local and federal guidelines for ejuice and ecig sales.
Allied Payments will always help merchants understand what documents need to be submitted with every application. This helps businesses receive their approvals in a timely fashion without much hassle by the acquiring bank’s underwriting team.
ECigarette Merchant Services from Allied Payments
Providing the best e-cigarette merchant accounts in the industry with our retail and online electronic cigarette credit card processing services. Our solid payment processing relationships ensure that electronic cigarette companies can continue growing their businesses without interruption of services.
Our fast application process allows merchants the ability to quickly set up and begin processing transactions almost immediately. Working with Allied Payments will ensure that merchants have a safe and secure payment processing service. Regardless if merchants are selling e cigs online or through a retail storefront, Allied Payments can do it.
Merchants with questions or in need of more information about e-cig credit card processing or online e-cig merchant account services are welcome to contact us. Our helpful representatives will be happy to assist merchants with all of their needs.