E-Cigarette Merchants (And Payments) Under Attack | DirectPayNet
Where can e-cigarette merchants find a merchant account

E-Cigarette Merchants are Under Attack! What it Means for Payment Processing.

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Type the keyword e-cigarette into Google News, and you will find controversial headlines about this branch of the tobacco industry. Most noteworthy is published content related to the impact of e-cigarettes on the youth. Also worth reading is friction between sellers and regulatory government agencies. There are also articles on the United States’ recent consideration to prohibit online sales all together.

There is a reason e-cigarettes are a global hot topic: global smokers use them to vape and wean themselves off of traditional tobacco cigarettes. They also use them for sheer pleasure. Tobacco has been popular since the dawn of time and it has always been considered a high-risk industry.

Are you genuinely worried about the foreseeable future of your online e-cigarette store? Allow us to help. It is a convenient time to carefully examine the distinct possibility that your payment processing could be negatively affected. Keep reading carefully to understand why you should stay informed about e-cigarette industry news. Follow advice on how to navigate banking compliance and protect your merchant and bank accounts from unexpected termination.

 

E-Cigarettes are controversial

E-Cigarettes are controversial all over the world. Controversy combined with government efforts to regulate e-cigarette businesses is what makes merchants in this industry high risk. While the products are legal, e-cigarettes could soon see a negative reaction from credit card processing service providers if they haven’t already. This is incredibly challenging for vendors, but it’s not a lost cause.

The legitimate concern of global governments is the physical health effects on users. Also of concern, maybe even more so, is the product’s popularity among teens. Research studies show adolescents represent a considerable number of vaping consumers. Some governments are considering this a youth epidemic and require e-cigarette sellers to address the teen vaping phenomenon.

 

Reputation shapes policy

The reaction of most European countries and US banks toward e-cigarette merchants is similar to their treatment of other high-risk industries. For example, conservative attitudes shape policies of online gambling, adult entertainment, firearms and cannabis. Banks label this reputational risk. They are simply reacting to government regulations, as they want to minimize their own penalties and fines.

Acquiring banks react whenever government does not look favourably on an industry. This affects payment processing in both card present and card-not-present environments. Additionally, it has an impact on business bank and merchant accounts, and other compliance-related issues.

Every seller is assigned a merchant category code (MCC) number based on an industry group list defined by Visa and other credit card networks. E-Cigarette businesses are labeled with a unique high risk MCC number. As a result, vendors should be vigilant in every jurisdiction they operate. Pay attention to industry policies, banking and compliance as they can differ in every country. It is also wise to seek legal counsel to help adapt to industry changes.

 

Vaping around the world

In a recent news story, the corporation Phillip Morris launched a lawsuit against the city of Seoul. The South Korean regulators released a study on the harmful effects of e-cigarettes even alluding to the discovering of cancer-causing ingredients. In South Korea e-cigarettes are legal, but those which are nicotine-filled get classified as tobacco. Therefore, it cannot be sold to minors.

Since 2015, many countries around the world have carefully regulated e-cigarette products due to health concerns and its explosive popularity among teens. Singapore, Thailand and Brazil strictly prohibit e-cigarettes. However, countries such as Canada permit vaping products and maintain strict regulations for the industry. Some global regulations are still in progress. For example, e-cigarettes are legal in Australia and the US, while regulatory efforts continue.

In Europe e-cigarettes are allowed, as are nicotine-free cartridges, sometimes to those below 20 years of age. However, nicotine cartridges are not standard everywhere and only permitted in certain regions or for people above a precise age.

Be vigilant when selling vape pens, mods, accessories and other products regardless of your headquarters. Be strategic about where you get processing services to avoid future challenges. Alternative payment solutions like PayPal and Stripe prohibit e-cigarette business from using their service to process orders. Merchants are suspended and funds are frozen when terms and conditions are knowingly violated. A merchant account tailored specifically for high-risk merchants will reduce chances of interrupted processing.

 

Survival of your e-cigarette store depends on your banking relationship

It is imperative to keep your existing e-cigarette merchant account in good shape. How do you do that exactly? Ensure refund and fraud rates are under control. Healthy chargeback ratios will range from 0-1%. Beyond that acquiring banks will look unfavourably at the numbers. If your rates are excessively high for over 90 days, your account could face closure.

On another note, some European vape retailers might encounter questions from their bank about products that may contain tetrahydrocannabinol or THC. Be aware that this could be a reason for merchant account suspension or termination. Marijuana consumption is not yet legal in all European countries. However, selling THC-type products may get a pass if the ingredient does not exceed maximum thresholds as regulated by certain countries.

Regardless of where your business is located, always make key decisions with your payment processing in mind. Do not sell THC-related products if it’s prohibited by your payment provider.

DirectPayNet has a wealth of experience working with merchants that acquiring banks consider high risk. Therefore, we know the importance of keeping your payment processing active to keep accepting online orders.

 

Stay aware of industry news

It has been reported that the Food and Drug Administration (FDA) in the US is considering a ban of all online sales of e-cigarettes. If your bank decides to shut down services to you in the future, this could be a reason why.

Whether you like it or not, the e-cigarette business is high risk. Sellers must be proactive if they want to keep their payment processing active.

Vaping is legal in two-thirds of countries globally. If it were illegal, banks would not board businesses in this industry and credit card companies would be prohibiting sales. With this in mind, the e-cigarette merchants must do everything possible to be compliant. They must also be transparent about how they market to consumers.

DirectPayNet makes it a point to be aware of industry news and trends to protect our clients. You should practice the same protocol, especially for an e-cigarette business.

 

More than just processing

Getting a merchant account approved doesn’t merely happen because of a few months of good processing statements. In reality, three to six months of bank statements may be requested to assess activity and account balances. If your business becomes defunct, the banks want reassurance there will be little liability. Financial statements are just one aspect of approval to accept credit cards online. Merchants often overlook the state of their website.

 

Compliance is key to keep e-cigarette payment processing safe

Regardless of which country your business is registered in, verify your online e-cigarette store is compliant. All websites are carefully reviewed by the underwriting departments of acquiring banks whether you are applying for a merchant account or have existing payment processing. In fact, the following compliance measures can be implemented to ease the auditing and approval phases of your bank application.

Age Verification

Use age verification pop-ups to verify your online visitors are of legal age to consume your products. This measure is common across online adult entertainment and retail, and marijuana-related businesses (MRBs).

 

Warning Labels

Add warning labels to products. Not all countries require this, but doing so will demonstrate your willingness to be compliant with the law.

 

Mature Marketing

It goes without saying that e-cigarette merchants should never market to teens. An acquiring bank will fiercely reject a new merchant account application or an existing MID if a seller‘s marketing is aimed at teens. Only market products to potential consumers of legal age limit in your geographical region. This equally applies to countries where cross-border payments are accepted.

 

False Claims

Remove all unsubstantiated claims of health benefits from your website. You could risk losing your merchant account due to false declarations or guarantees.

The above are compliance measures that can be considered when applying for credit card processing. But what about after a transaction has been generated? Are customer signatures typically required upon delivery? Are receipt of time and date-stamped invoices assured? Is your site secure and do you protect customer IDs and credit card information?

 

Payment solutions are still available for e-cigarette merchants

Call outside help for your payment solutions needs. Outsource to DirectPayNet if you are confused about industry compliance and potential payment processing issues. Focus on selling vape pens, cartridges, accessories and other products. In the meantime let DirectPayNet assist you with your next merchant account. Email us today to help your e-cigarette store.

About the author

Maranda is the portfolio manager and operations assistant at DirectPayNet. She began her career as a published writer before moving on to the world of digital marketing where she learned about online advertising and e-commerce fraud. Prior to lending a helping hand to high-risk merchants at DirectPayNet, Maranda gained extensive experience in affiliate management for several online verticals including education, health, sports, entertainment, fashion and gaming. In 2016, she leveraged her online experience and became a certified fraud examiner (CFE). You can email Maranda with any questions about merchant accounts.