A payment expert on e-commerce payments for high-risk vertials

Nov 2

If you're a small e-commerce business, you know that smooth eCommerce payment processing is vital to converting your website visitors to sales. But for e-commerce vendors in a high-risk vertical like CBD, tobacco, supplements, or firearms, getting a reliable e-commerce payment processor to approve your sales is an uphill battle that you'll probably lose.

In this episode of The E-commerce Revolution, Ramin talks to Ryan Mirpanah, owner of Vector Payments, who has over 12 years of experience in the payment processing industry.

They discuss how online payment gateways can simplify card payments for small businesses and how Vector Payments offers straightforward payment processing for vendors in high-risk verticals.

What makes Vector different from other payment processors

Ramin: Taking a look at your site, I saw one of the selling propositions is simplifying the payment experience. Can you simplify the complex world of payment processing for us and explain how it all works?

Ryan: I think the industry and most people that are involved in payments, whether directly in my field or as a merchant, probably know of the main three to four groups:

Stripe for online
Square for in-person, and they are gradually going online as well
PayPal, obviously, for everybody

So those companies are called aggregates. And what that means is third-party processors.

And that's why every single time you buy from any of the merchants underneath their belt, you see SP Asterix for Stripe. You know, you see SQ Asterix for Square. You see PYA Asterix for PayPal.

And that's because their company was actually the company underwritten by the bank that they work with. Wells Fargo is the largest sponsor bank, which is what's required to sponsor sales in the country.

And the reason why there's a lot of frustration with those companies is that they approve everybody. You sign up, you get approved.

The issue is that once you run your first card, that's when they review what you're selling.

That's when they review more information about yourself, like running your social, doing different pieces.

And that's why a lot of the time, especially in high-risk verticals like CBD, they all get frozen, meaning funds are held.

You can't get ahold of anybody because it's kind of a new school, FinTech, where it's all online. Submit a ticket, and you know they'll get back to you maybe in a few days.

And you know, there are a lot of difficulties in this world. The last thing you want is to be kind of shackled to where you can't accept payment from customers.

Authorize.net as a near-impenetrable gateway

Ramin: Tell me about Authorize.net and how do they fit into the mix of the merchant processing side? Are they a company that you guys work with?

Ryan: Good question. So essentially Authorize is an online gateway, which is an online terminal.

Kind of like PayPal, where you can integrate it right to your site. But it's a separate company.

So really what we do is no matter the business type that's out there, once we submit your application and get you approved, we take the codes and then we program it into Authorize.net.

Authorize.net is one of the roughly five or six gateways that we integrate for our clients. Personally, I like Authorized on that. They're not probably the sleekest type of setup, you know, they haven't put tons into their dev work, but it doesn't matter what type of car you have, as long as it gets you from point A to point B.

But the bigger reason why I like them is because they're owned by Visa.

Typically, if you're taking a hundred cards, roughly about 60, 65% of them are going to be Visa cards, whether debit or credit. So, you know, having that security behind it has really made it one of the more impenetrable gateways in regards to all the hacking that's going on these days.

You know, nobody's out of the limelight of really getting hacked these days, but I've been working with Authorize on that since day one, you know, over 12 years ago now. And I couldn't tell you one thing that's ever occurred in regards to issues with that organization. So definitely they're a great gateway.

It’s simple, you can do invoicing, you can do a free app and key in transactions. If you're on the go like trade shows and whatnot, there's mobile readers available as well. But obviously the direct API integration, which you know about very well can be seamlessly attached to Shopify. You know, WordPress will commerce, big commerce and really majority of the platforms that are out there as a web set

How Vector solves problems for high-risk vendors

Ramin: You know that SKU Agency primarily does Shopify. Shopify has its payment processing system there, I believe powered by Stripe. How does Vector Payments fit into the mix?

Ryan: Going back to the beginning piece where I mentioned the aggregates and Wells Fargo: Stripe uses Wells Fargo as their main sponsor bank. And what I mean by "sponsor bank, "when it's all said and done, and a consumer puts their card online or inserts it in a terminal…

Within a couple of seconds it's approved, and that's it right on the backend. There's a sponsor bank integrated with any of the payment platforms out there.

All of those companies utilize the sponsor bank. They have essentially registered with the card brands to be able to sponsor each one of their cards as a transaction from the cardholders. So they are essentially saying, "We support X transaction with X business."

That's why not every bank supports every type of business vertical. For instance, as you mentioned, Wells Fargo and Stripe are not okay with the majority of the high-risk verticals out there. Like supplements and, as you know, a big one is CBD right now.

When it comes to Shopify payments directly, you're a hundred percent correct: they use Stripe. They're more kind of low-risk types of setups.

But Shopify doesn't work with any high-risk vertical. As kind of a newer vertical, a lot of people aren't familiar with CBD, but it's derived from hemp. You know, it's not cannabis or marijuana, but because it is such a very new vertical, the majority of the main sponsor banks do not support it.

So, where I come in is I would get the website approved on Authorize.net as one of the gateways that do integrate seamlessly to the Shopify checkout page. People don't realize that a lot of gateways have been kind of crossed off by Shopify since they brought their own payments platform.

We come in; we get the integration directly. So it's more or less the same type of setup as if you were to go directly with Shopify payments, and there's no difference to what any of the consumers that are transacting on your site would see. It's just not Shopify payments. It's Vector payments through Authorize.net.

Working with Vector

Ramin: Okay. And if I'm a CBD merchant, and I come to you. Before you even go anywhere else, before you do anything else, you need to qualify. You need to make sure that this is going to work.

Ryan: Correct. So we'll qualify people. The typical pricing is right under 4%, but there are no setup fees, no reserve, and no contract, which is how it should be. We make sure that we put our money where our mouth is with what we tell every one of our clients.

And each one of the clients has access to my cell phone. It's my personal cell phone because, you know, business doesn't stop Monday through Friday at 5:00.

But, you know, the bottom line is the lowest overall costs, supporting people. It's a very simple formula to keep them happy and, you know, we handle everything else from there.

Ramin: That's great. And, you know, just let's take that 4% number. It's an interesting point because some merchants jump into e-commerce, and they don't know the details of what they're being charged on the payment processing side.

So if you're low risk and are going through Shopify payments, you're probably paying somewhere in the neighborhood of 2.9% plus 30 cents a transaction. But if you're on the high-risk side, you're looking at more like 4%.

And your choices are unfortunately limited. So that's where a company like yours comes in. You can help facilitate this whole thing and make the process easier on board. But you're paying a higher percentage rate, and that's just the way it is because it's a high-risk industry. So there's no way around that.

Ryan: That is correct. However, there are also higher margins in those verticals for, say, the CBD merchants. So, you know, they kind of take the good with the bad that's out there. Yes, it is a little bit more expensive, but I think most people that especially have been in the CBD space for more than a couple of years went through the gauntlet of, you know, 4 or 5, 6, 7 years ago, where, you know, you would get terminated constantly, and funds would be held.

Funds are held because, typically, the sponsor bank doesn't know what you're actually selling. Even if your sales agents told them. That's why a lot of people don't like payment companies - because they bait and switch.

Tips for avoiding payment fraud

Ramin: Fraud is a big topic. And probably one that we could spend an entire podcast talking about, but maybe there are one or two tips that you can provide a merchant to protect themselves?

Ryan: Yeah, well, number one, the biggest thing is, and this is more on the merchant card process or your work with, but the DBA, the "Doing Business As" name should always match up with the name that the customers are going to recognize. If you put your LLC name like Ryan, LLC, but your Doing Business As the name is Vector Payments, they're not going to know who the heck Ryan LLC is.

So, that could open up what we call a friendly fraud which means they dispute a transaction. They would have been aware of you if you had the correct DBA as the credit card descriptor. So it should say Vector Payments, not Ryan, LLC.

But the bigger thing is to identify any type of fraudulent transaction. If you see a lot of similar types of purchases that come through, especially if it's periodically - back to back to back to back. And typically, it's really early in the morning because a lot of it happens in Europe and other international countries.

Actually, just yesterday, I talked with a client of mine. They had somebody that wanted to buy $12,000 worth of product. And it was an international customer, and they were excited because they're a smaller business. But I'm really glad they reached out to me because I don't know if they were a legitimate customer.

They wanted them to pay $6,000 to go through a third-party shipping company of their choice and ship it to another address that's separate from the billing address. I said, no, you want to be very careful with that. And as exciting as seeing a $12,000 sale, it's that much worse when you ship $12,000 worth of products and then get a dispute, which means you're out double, probably at least 20 grand.

You're never going to get that back. So, you know, just being aware of abnormal types of transactions out there, and I'm not saying ignore large sales. But I would trust domestic sales, US-based or North America-based sales, a lot more than anything internationally unless you know the person.

But those are some of the biggest pieces to look out for are abnormal sales. You know, a lot of similar-sized transactions that come out of nowhere, late night or early morning: monitor them, especially if you have a billing address and a different shipping address.

And you know, we have security settings that we implement on all of our gateways for our clients. We can do it to where it's flagged for review, which means we can either deny it instantly because it's going to be fraud or flag it for review, which means you have to go in and review it physically. If you feel comfortable, you can hit submit, and it's all processed.

Talk to Vector Payments

To learn more about Vector Payments, visit their website at VectorPayments.com or email Ryan directly at ryan@vectorpayments.com.

If you enjoyed this chat between Ryan and Ramin, watch interviews with more e-commerce entrepreneurs on our YouTube channel. You can also listen in on Apple Podcasts, Spotify, Audible, Amazon Music, iHeartRadio (or wherever else you listen to your favorite podcasts).

Need help setting up your payment processors? Talk to Ramin or another team member here at SKU Agency. We're happy to introduce you to Ryan to talk about how to build your e-commerce brand and facilitate payments for your high-risk products.

As Ryan says in the podcast, "I am an open book and, you know, I'm always happy to help people."

Ramin Ramhormozi