Credit card processing for e-cigarette shops can be a challenge for small business owners. The proliferation of cashless transactions makes this a challenge as well. According to Gallup poll findings published in August of this year, 13% of those surveyed said they make all or most of their purchases with cash. Five years ago, that figure was 28%. If you’re running a business, it is likely imperative that you accept card payments.

High-risk payment processing.

The middleman in the sales transaction is the merchant card processing company. This company manages the transactions and ensures that the merchant gets paid. It approves the transaction at the point of sale. It also manages the transaction between the bank that issues the card to the user and the bank the merchant uses for funds from sales. Merchant card processing companies classify businesses by the amount of risk they perceive. Here are some of the factors that these companies use to determine the risk level of a business.

• High rate of chargebacks. If a business category historically experiences a high rate of card transaction chargebacks, then the industry is considered high risk.
• Instability. Some industries are considered unstable. Vape shops and e-cigarette stores have a reputation for going out of business. This is not a proven fact but financial institutions have marked the industry as unstable.
• Time in business. If you have a new business and do not have a proven record of success, then the banks will consider you a high risk.

Vape merchant accounts and e-cigarette merchant accounts are considered high risk. Therefore, it is harder for these businesses to find a merchant card processing company that will collaborate with them.

Vape and e-cigarette shops are growing.

Considering that the vape and e-cigarette industry is relatively new, its growth rate is astounding. Currently around a $22 billion industry, most estimates put the vape and e-cigarette industry at more than $100 billion by 2030. This is one of the reasons that merchant card processing companies consider these businesses high risk. Banks and financial institutions need to qualify the fact that they clear card transactions. It is hard for them to do this for a new, but fast-growing industry that produces such a significant number of daily transactions. 

Association with illegal products.

Even with the exponential growth rate of this industry, there are other reasons that banks and financial institutions are reluctant to offer merchant card processing to e-cigarette and vape shops.

• Age restrictions on sales. Since many of these products contain nicotine, there is the possibility that underage sales may occur. However, most financial institutions do not want to risk their reputations for a possible violation of these restrictions.
• A connotation of illegal products. Vapes and e-cigarettes have been associated with marijuana and other illegal smoking substances. Whether or not this is true, some banks shy away from associating with these businesses for that reason.

Card processing solutions.

Even with the challenges these businesses face, there are specialty payment technology companies that can help a vape or e-cigarette shop process card transactions.

Humboldt Merchant Services has been helping businesses process card transactions since 1992. We know that every business is different. That is why we create customized solutions for each client. We use in-house underwriting and risk management for fast approvals and work with all major credit card companies.

If you’re ready for a partner that is committed to helping high-risk businesses, call 877.387.5642 or visit us online.