The gradual shift towards e-cigarettes and vape in recent times has not affected the tobacco and cigars industry. Despite the health risks involved and smoking being a taboo among some social circles, the percentage of smokers has not seen a major decline.
With the rising tobacco consumption in certain emerging markets, the global tobacco industry is showcasing an increase in revenues and profits. According to reports, the industry generated worldwide revenue of US$11.9 billion in 2017 and is expected to increase to US$13.4 billion by 2021.
Over the last decade or so, health professionals and the government have implemented measures and spread awareness to prevent smoking, yet the industry is going strong as ever. It is safe to say that tobacco & cigar products still have a huge demand and face no threat of going out of business anytime soon.
Although there are restrictions in place to curb the use of tobacco, there is not a single law prohibiting the sale of cigarettes, cigars or tobacco. Yet, the uncertain laws governing tobacco businesses make banks wary of dealing with them & placing them in the high-risk category.
Why is Tobacco considered a High-Risk Industry?
Health Concerns: It is no secret that tobacco used in cigars and cigarettes results in health risks. Lung diseases that include emphysema and chronic bronchitis, Lung Cancer, Heart complications are caused by smoking.
Unpredictable Industry laws: The government continues to introduce tough laws in order to stub out the tobacco industry. The sudden change in rules and regulations does not help merchants either. The murky laws placed on businesses who sell it and the taboo surrounding those who use it raises red flags in the eyes of the merchant account provider and sponsor banks.
High Chargebacks: One of the major reasons tobacco merchants are considered high risk is due to the high amount of chargebacks that occur. Online retailers are more vulnerable to chargebacks than a brick-and-mortar store. Card-not-present transactions, delay in delivery and fraudulent activities causes a surge in chargebacks.
Use High-Risk Merchant Account Solutions for your Cigars & Tobacco Business
Yes, you may face many challenges trying to obtain credit card processing solutions but in order to elevate and expand your business, it is of extreme importance.
Because of stringent industry laws, underwriters will need to examine and ensure that your business is in compliance with the rules and regulations.
Tobacco-related businesses are also known to sell marijuana-related products. In this case, make sure the products are not sold as marijuana paraphernalia while also being transparent about your business nature and the products you sell.
High-Risk Merchant Account Providers that specialize in tobacco industry are more likely to understand your business and provide high-risk tobacco merchant account solutions that suit your requirements. This also ensures smooth and fast underwriting process.
Beware of credit card processors offering easy merchant account services. These providers take advantage by charging hidden fees or high processing rates.
Choose the right high-risk merchant account provider and start processing today!