Grand View Research reported that the size of the e-cigarette and vape market size was valued at as much as $6.09 billion back in 2020. But it is also set to expand at a compound annual growth rate of 27.3% from the years 2021 to 2028. Worldwide vaping sales alone are expected to hit $40 billion by the year 2023.
This growth can be attributed to the fact that there are more “safer tobacco alternatives” that are being created to combat tobacco addiction.
The selling point to vaping is that they still deliver the “addictive nicotine”, but sans the harmful results from tobacco smoke. A general increase in concern over tobacco smoking has further propelled the popularity of vaping and e-cigarettes.
What Is A Vape And e-Cigarette Merchant Account?
If you are looking into opening your own vape and e-cigarette business, there is no doubt that this industry is highly lucrative.
With a vape and e-cigarette merchant account, you have the choice of accepting credit card payments for brick and mortar stores using a point-of-sale system. You can also make mobile payments through an attachment that easily plugs into your iPad or mobile phone. There is also the choice to take virtual payments where you can accept payments over the phone, through mail order, or typed via a website on your computer.
Then there is a merchant account that can serve an e-commerce store where you can take payments online via a payment gateway integrated into your business website.
The downside is that you will not have an easy time securing a merchant account to process credit and debit card payments if it is through a traditional bank or provider.
Why? Both vaping and e-cigarettes are considered high-risk businesses.
Why Is The Vape And e-Cigarette Industry High-Risk?
The vape and e-cigarette industry is considered high-risk. The Family Smoking Prevention and Tobacco Control Act of 2009, gave the FDA full authority to oversee the manufacture, marketing, and distribution of tobacco products, all to protect the public’s health.
This law has made traditional processors extremely wary of taking on these merchants for fear of potential legal risks. But there are more reasons that the vaping and e-cigarette industry falls under the high-risk category.
One of the many reasons for this high-risk status is the considerably high chargeback rates. And this can be attributed to different reasons. Due to the newness of these types of businesses and the general lack of “name recognition”, many customers file chargebacks when they fail to recognize the name of the vaping store on their bank statements.
There have also been reports of delays in delivery. Most vape shops rely heavily on third-party suppliers to ship their products to customers. Sometimes backorders and shipping delays can cause issues, prompting unhappy customers to file for chargebacks.
Finally, these types of businesses are highly targeted for fraud as they are new to the business and have not implemented any robust security or anti-fraud tools to protect their stores and their customers. As they are not as established and lack the resources, they may not know how to prevent or mitigate chargebacks.
What do You Need To Open A Vape and e-Cigarette Merchant Account?
Depending on the individual processor, there will be a need for certain information and documentation to be submitted with the application. The more complete your information, the faster you can get your merchant account activated.
Here are just a few items you may need to submit to your processor:
- Voided check from your bank
- Proof of an SSL certificate
- Social Security Number
- Valid government I.D.
- Six months of card processing statements (To demonstrate chargeback ratios)
How To Apply For A Vape And e-Cigarette Merchant Account
Applying for a vape and e-cigarette merchant account is an easy and streamlined process. Once you have submitted all of the aforementioned information and documentation, along with your completed online application, the underwriters will carefully review your application.
No processor wants to support any illegal or fraudulent business and therefore, underwriters will take care to thoroughly assess your business to ensure the legitimacy of your business.
They will also look thoroughly into your finances. Issues such as unpaid bills, late payments, any negative bank account balances, and history of chargebacks will be examined.
During this time, you will need to make certain that your website is fully SSL secure and PCI compliant. In a high-risk industry, this is an absolute must to protect your business and your customers’ sensitive card information.
Processing time and approval for the application can take as little as 48 hours, again, depending on the processor. Once approved, you will be assigned a representative to set up your merchant account and a payment gateway, if applicable. After all the setup is complete, you can begin taking credit and debit card payments.
Open Your Vape And e-Cigarette Merchant Account Today
The vape and e-cigarette industry is still in its infancy but is quickly gaining popularity worldwide as more smokers want to transition out of smoking tobacco cigarettes for health reasons.
As more vape and e-cigarette businesses begin cropping up, it’s important to ensure that the merchant account provider you choose will be one that is well-versed and up-to-date with all the federal regulations regarding this high-risk industry.
Also, knowing that this is a high-risk industry, make certain that the provider you choose offers both anti-fraud and charge mitigation tools to combat the higher incidences of chargeback and fraud.
With so many “so-called” vape and e-cigarette merchant account providers, research to determine whether or not they offer fair rates and fees. Contract terms should not be abusive. When in doubt, seek the advice of a lawyer to verify that the terms on your contract contain clauses that are favorable to both parties. Taking these vital steps will help you open a vape and e-cigarette merchant account with confidence.