Many licensed firearms dealers have difficulty with their payment processing. We won’t get into the politics of it, but if you’re in the industry you know exactly what we’re talking about. A few years ago when regulations allowed for online sales, it added another layer of complexity and risk that caused many processors and acquiring banks to pull out of the industry altogether.
Now, before you freak out and think that buying a firearm online is like adding items to your Amazon cart and having a firearm show up at your door step, let us assure you that the process is nothing like that. The actual transaction (the sale) occurs online, but the firearm must be shipped to a dealer with a Federal Firearms License. The buyer then must go to said dealer and fill out the necessary paperwork for the transfer to be completed. These transfers are subject to federal and state regulations, so if a person is a felon or they’re otherwise not legally able to purchase or possess a firearm, the dealer will never complete the transfer and give possession to the buyer.
This scenario could cause chargeback issues for the merchant. Think about it. If the buyer made the purchase, but their background check is flagged and they can never receive the item, they’re going to want their money back and may go through the chargeback process to get it. It’s imperative for the merchant to have airtight disclosures and agreements to ensure that if this were to happen, the responsibility solely belongs to the buyer.
This is also where good customer service comes in. Many sellers of firearms understand that an ounce of prevention is worth a pound of cure. Since possession is 9/10 of the law, the FFL that received the firearm could keep it and resell it to someone else. Most of them, however, are honest and hard-working people that don’t look for ways to take advantage of other people. In these scenarios, the seller could work with the dealer that has possession of the firearm and offer to pay for the shipping cost for the dealer to send the item back to them. Once they receive the item, they’ll generally issue a refund to the buyer minus the shipping costs. These steps will [generally] prevent chargebacks from occurring. Regardless of your industry, if your chargeback ratio surpasses 1.5%, you’re at risk of having the merchant account terminated and being added to the MATCH (Merchant Alert to Control High-Risk Merchants) list. This is basically an industry wide blacklist that marks the business (legal name, dba, EIN) and the business owners (name, DOB, SSN) so that no one will extend them payment processing capabilities again while they remain on that list. It’s like ChexSystems for banks regarding people who have defrauded banks through bad checks.
For these reasons, it can be difficult for firearms businesses to get and maintain merchant accounts. And, when they do, they tend to pay an extreme, high-risk premium as far as pricing is concerned. We at Magothy Payments are very pro-2nd Amendment. In fact, our CEO is a firearms enthusiast with a conceal carry permit and a [pending] federal firearms license. Our acquiring bank US Bank (and its subsidiary Elavon) is the most pro-2nd amendment bank in the country with a federal banking charter. This means they will approve licensed firearms dealers when others won’t. They will even approve merchant accounts to sell firearms online directly to buyers in an e-commerce environment (with the aforementioned protocols in place) or through online marketplaces like GunBroker – which can integrate directly with our Magothy Payment Gateway. Also, we don’t charge additional premiums for firearms businesses. They’ll get the same interchange + 0.50% and 10 cents markup that we offer to all our clients (0.75% and 10 cents for American Express).
For omnichannel merchants that have both a retail store AND an e-commerce store, WooPOS would be an ideal solution. It can track and manage inventory in store and online when paired with the WooCommerce shopping cart.
Magothy Payments offers the best merchant accounts for firearms dealers, hands down – whether in-store, online, or both.