In business it takes a considerable amount of attention and planning to become successful. For some industries it can be a little harder to get off the ground especially for e-cigarette, vape and e-juice companies. This is the result of the difficulties involving running a successful business, also satisfying customers while still preserving full compliance of industry laws and regulations. Vape business often rely on the ability to take credit cards from customers as a form of payment. To insure growth for your business and deliver products client need without delay, vape merchants need a solution for online credit card processing on their websites. At Choice Funding we specialize in Vape accounts to make sure you are up and processing quickly.
E-Cigarette & Vape Merchant Accounts
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Concerned as a High Risk Processing Business?
With current and growing regulation looming in the vape industry it makes operating a business challenging for their owners. FDA regulations on products, age restrictions and also rules for merchant account providers can put more pressure on operating successfully. Because of these many challenges, finding a processor that will approve a merchant account to a vape company is extremely problematic. Banks often brand vapor and e-liquid companies as a high-risk industry for a range of reasons. Most merchant processors do not fully understand how the vape industry works. This results in many banks considering them high risk or not approving them at all. Choice Funding will have you approved quickly! If you’ve had trouble acquiring a credit card processing account online or at your business location Choice Funding can help. Let us tailor a solution to your business today!
Apply Today for Your E-Cigarette & Vape Merchant Account
Having a card processing solution that keeps your top interests in mind lets you get back to concentrating on what’s most important and that’s your business. Choice Funding makes it simple to set up a merchant account and our pricing plans are designed to insure you are paying the lowest possible rates with the top PCI security standards. Our USA based tech support department provides simple guided integrating into your pre-existing online system. We are compatible with nearly every website shopping cart so your customers can continue to conveniently place orders. All transactions are run safe and securely so you will have a lower risk of fraudulent occurrences that end up costing you more! Contact Choice Funding today and speak to a vape merchant account specialist for more information. Choice Funding makes choosing and merchant processing company more simplified!
eCig Industry Profile:
Electronic cigarettes are battery powered vaporizers which simulate the sensation of smoking, without the tobacco. Typically referred to as “vaping” the user inhales an aerosol (aka vapor) instead of cigarette smoke, which is generated via a heating element in the device which atomizes (gasifies) a liquid solution (commonly called e-liquid). The popularity of e-cigarettes has skyrocketed over the last 3 years, particularly among younger and female clientele.
- There are approximately 45,000,000 smokers in the US, but only 2,750,000 e-cigarette smokers.
- Only 6.7% of US adults have even tried an e-cigarette.
- Sales of e-cigarettes have grown 287% between 2013 and 2015.
- eCig brand marketshare is still largely fragmented, with the market leader Njoy commanding 32% of the market, followed by Krave at 16%, but thereafter the next three largest manufacturers command a combined 11%, meaning 41% of eCig sales are manufactured by companies which comprise less than 1% of total market share.
- Today there are more than 3,500 retail vaping shops and locations in every corder of the United States.
- e-Cig sales are projected to grow nearly 25% YoY through 2018, meanwhile traditional cigarette sales have fallen nearly 30% since 2004. Experts believe e-cig sales will exceed tobacco cigarette sales by 2026.
Everything an eCig Merchant Needs to Know About Chargebacks
All merchants have to be cognizant of their chargeback ratio, but that’s even more true for business’ in high risk industries such as electronic cigarettes, because their approval is already on a relatively short leash due simply to their industry type, and excessive chargebacks are the #1 way eCig businesses have their merchant accounts get shut down.
What is a chargeback, and why should I care?
A chargeback, simply defined, is when one of your customers, who has paid via their credit card, is dissatisfied. But instead of contacting you to deal with the issue, just calls their credit card issuer instead, and “dispute the charge”. They can “dispute a charge” for a variety of reasons, some legitimate, some illegitimate. But regardless of why they did it, once the customer has done it, the “chargeback process” has been initiated.
The reason you should care about chargebacks, is that if your chargeback threshold exceeds 2%, your business is in danger of having your eCig merchant account closed / terminated. That means, if more than 2 in every 100 of your customers contacts their issuing bank (again, regardless of whether their complaint is legit or not) then you can long-term plan on your account being closed. So, not only should you care because dealing with disgruntled customers is costly from both a time and money perspective, but also because it endangers your ability to accept payments via a credit card processor. And once you’ve been terminated, it’s incredibly difficult to get your merchant account opened with a new credit card processor. <
How do I calculate my chargeback ratio?
Your chargeback ratio is, again simplified a little here, the total number of chargebacks initiated during a period divided by the number of total transactions in the period. Typically calculated on a monthly basis, that means, in plain english, if you had 100 sales in April, and 2 of your former customers contacted their issuing bank to complain about a transaction in April, you had a 2% chargeback ratio in April. Again, that’s regardless of whether the customer’s reason for disputing the charge was legit, not legit, whether they won or lost the dispute. Note: Some high risk eCig credit card processors calculate your chargeback ratio based on the dollar amount of the chargeback, as opposed to transaction count. So, for instance, if you had 2 disputed transactions for $200 each (total $400), and you sold $10,000 worth of total goods over 100 transactions for the month, then you had a 4% by volume chargeback ratio, (whereas only a 2% by transaction count chargeback ratio). Therefore, it’s important to know which system your credit card processor is using to measure your account, when determining your acceptable chargeback ratio level.
Why do eCig businesses get lots of chargebacks?
Some businesses, and this is true of eCig merchant accounts, are particularly prone to high chargebacks, (and thus categorized as high risk credit card processing) for a few reasons. These include:
- Many eCig businesses are small businesses, without particularly strong name recognition, thus there are a disproportionately large number of customers who report that they do not recall making a purchase, when reviewing their credit card statement.
- Customers of eCommerce eCig businesses and glass paraphernalia or smoking accessory sales , are often using drop shippers or third-party fulfillment centers to fulfill and ship orders. If there are any delays in the delivery of goods, such as backorders or delivery issues, this can result in a cascade of chargebacks for the eCig business.
- Businesses that sell physical goods, particularly those for whom young men are a sizable demographic, often face higher incidence of stolen credit cards being processed as part of a scam. As this is a large demographic, particularly for eCommerce glass and paraphernalia businesses, higher chargebacks can be expected.
- Many startup and eCig business owners do not understand the need, or understand proper deployment methods of the chargeback avoidance, fraud filtering, or chargeback mitigation tools available. As a result, they fail to use the same tools that larger or more well-established businesses use. Combine that with the fact that fraudsters know this, and are actively targeting small businesses and startups, and thus the higher expected chargeback ratio.
- Many small big businesses do not fully appreciate how important maintaining a low chargeback ratio is to keeping their account (nor how hard it will be to obtain a second MID after the first is closed) and as a result, will not quickly issue refunds where there is any question as to whether the customer deserves the refund, but instead willingly allow the transaction to go to chargeback where they attempt to fight the chargeback.
Why did my merchant account get held / frozen / dropped / terminated due to chargebacks?
If you were recently terminated (aka “account held”, frozen, or dropped) from your credit card processor due to chargebacks, then you likely exceeded the threshold allowable for that credit card processor. If you had a low risk or mid risk merchant account, then your account may have even been shut down with below a 2-3% chargeback ratio. If you had a high risk merchant account, you likely had over a 3% chargeback ratio when your account was shut down. In any case, the reason you were shut down is because credit card processors are extremely sensitive to high levels of chargebacks. They are, for two reasons:
The first reason is that high chargebacks are an early sign that there are serious customer service problems in your business (or business model) and the credit card processor may face future problems. The reason that is of particular concern to the merchant service provider, is that if you are not able to pay for all of the future refunds or chargebacks that they anticipate as coming, the credit card processor may become liable for these.
The second reason is that the credit card processor must maintain a strong relationship with their sponsor bank, and Visa MasterCard AmEx. By continuing to process transactions for businesses that are not able to maintain a low chargeback level, they run the risk of endangering their bank sponsor relationship, or facing fines from the card brands. Typically, the downside risk of either of these events happening, are significantly costlier than any profits your business might be bringing to the credit card processor.
How do I keep my chargeback ratio below 2%
Firstly, it’s important to recognize that the most common reasons for a chargeback are either customer fraud (meaning the customer is using stolen credit cards) or that the customer experience does not match their expectations. So, when trying to keep your chargeback ratio below 2%, the key is to make sure that you’re using sufficient fraud protections (both for e-commerce and retail) and that the customer experience matches their expectations (that is, the customer is informed about the cost of the product, delivery time, scope of services, etc.). Here’s a few ideas that eCig merchants can use…
- Inform and Disclose: If you purchased something on BestBuy.com and didn’t receive a detailed receipt listing the item purchased, the amount, the vendor, who to contact with issues, and delivery time, you’d likely be very concerned that something was wrong with your order. Despite that, when it comes to setting up their own sales processes, many vaping, glass, and eCig merchants don’t ensure that the same steps are occurring in their sales funnel. So, each step of the way, make sure that the customer is fully informed and that information is adequately disclosed. This may take the form of a detailed payment receipt, shipping tracking ID, a live customer service rep (if you don’t have one, your high risk merchant account provider might offer such a service), and be as transparent as your business model permits.
- Stay in front of the customer: Most customers initiate a chargeback within 4 days of the original transaction. So, if you want to minimize transactions, following up with the customer 30 days out, does nothing. You need to make sure that you’re following up aggressively to ensure the customer is happy in the week or so following the purchase. That means send a detailed receipt after the transaction, perhaps follow up with a customer satisfaction survey 2-3 days after the transaction and make sure your contact info is in the survey, (you can usually get this service via your high risk credit card processor, from us it costs $9 per month). And just generally get in front of the customer and be very accessible particularly for the first week after a sale.
- Receive Chargeback Alerts: Chargeback alerts, (aka customer dispute alerts) are literally the easiest thing you can do as an eCig business owner to shave 25% off of your chargeback ratio (it won’t shave 40% no matter what the salesperson tells you). Chargeback alerts, is simply a service that you can sign up for (again, we offer it to our merchants, it costs $9 per month). These alerts tell you that a customer has initiated a chargeback, and provide you with a 3 day window to issue a full refund to the customer. If you do so, there is no chargeback. Obviously, you’re out the money of the purchase, but for businesses trying to control chargeback ratios in order to maintain their account (this is particularly true of eCommerce eCig merchant accounts) then this is an acceptable cost of doing business. Again, these alerts will only catch 1 in 4 chargebacks, so don’t expect this to solve your chargeback problems, but it will help.