Merchants in the electronic cigarette and vape 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 Electronic Cigarette Merchant Account?

ecigarette merchant accountOnce 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 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 determines the customer’s card-issuing bank and starts 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 returned to the merchant location.

The authorization request takes only seconds before informing the customer and the merchant of the result. 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.

Vape and e-Cig Merchant Accounts

Merchants selling e Cigs or e Juices are the types of businesses that can benefit the most from using a vape 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 for changing their minds about 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.

ecig payment processingAs of 2016, the FDA regulates all types of tobacco, including e-cigarettes and e juices sold in the United States. Currently, 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 for merchants selling e cigs and e-juices keep changing. Ultimately resulting in many financial institutions changing their opinions and avoiding card-not-present transactions for vape merchants selling online.

Partnering with an e-cig merchant services company specializing 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 several different options to quickly and seamlessly adjust their e-cig merchant accounts to prevent any loss of credit card processing services.

Why is a Vape Merchant 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 vape shops 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 e-cigs are becoming difficult for navigation, preparing for change is essential. The anticipation of additional requirements by card processors or card networks is possible to continue online or retail sales.  While this is not true for all payment processors, some have asked for legal reviews by outside lawyers for vape businesses.

Advantages of Online Vape 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 vapes fall into a grey area for many card processors, merchants must 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.

electronic cigarette payment processingOnline merchants that decide to use an e-cig 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 remember when researching online card processors s is the functionality of the business’ billing model since most e-cig companies generally offer 2 types. Working with a bank that can provide merchant accounts for 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 they decide to partner with when it comes time to integrate, with many choices available to merchants and card 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, extensive reporting, and robust transaction management features separate the quality of gateway services.

Pricing for Vape Merchant Accounts

Most e-cigarette merchant accounts use one of 2 pricing models; tiered pricing or cost-plus pricing, also known as interchange-plus pricing.  Both provide businesses with complete ecig merchant account services with various fees 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 cost 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, and 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 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 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 a flat fee per transaction or per month, this sales gimmick has caught on with some vape payment providers. Designed for startups, these merchant service programs are costly for smaller to larger merchants relying on merchant services.  Their high discount and overage fees make these merchant solutions costly for most businesses.

Required Documents for Vape Merchant Account Services

When merchants seek an e-cig or vape merchant account, the underwriters 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 wait longer to accept credit cards.

cbd vape merchant accountPrior 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 vape merchant account applications. It’s not only important to supply the last 3-6 months’ worth of statements but also to maintain a solid financial record in case a business wants to apply for a new account.

Due to increasing government regulations, underwriters might request additional documentation when reviewing an online e-cig merchant account application. The ecig banking teams often want proof of the business using either picture of the store, receipts of inventory, or copies of licenses. This helps show that merchants are legitimate and follow local and federal ejuice and e-cig business sales guidelines.

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.

Apply for Vape Merchant Services from Allied Payments

Providing the best vape payment accounts in the industry with our retail and online electronic cigarette credit card processing services.  Our solid ecommerce payment relationships ensure that e-cig companies can continue growing their businesses without interruption of services.

Our fast application process allows vape merchants to set up and process transactions almost immediately.  Working with Allied Payments will ensure merchants have a secure ecommerce processing service.  Whether merchants sell e-cigarettes online or through a retail storefront, Allied Payments can do it.

Merchants with questions or need more information about e-cig credit card processing or online e-cig merchant account services are welcome to contact us. Our helpful representatives will happily assist merchants in the vape industry with their needs.