According to a Pew Research Center survey conducted in June 2021, 30% of all adults in the United States own at least one firearm, and over 40% live in a household where guns are owned. Although the actual number is unknown, it is estimated that there are almost 400 million firearms owned by private citizens. Gun and ammunition sales in the U.S. is a $12 billion market, and it has grown significantly over the past year. Here is how this affects payment processing for firearms businesses:
Despite the size of the market and the profitability of firearms businesses, firearms dealers have been marginalized in a variety of ways in certain areas of society. It can be hard to find payment processing for firearms businesses! One of these is the financial industry.
As with any business, the ability to process payments made by credit card is essentially a prerequisite for firearms businesses. In general, customers prefer paying by credit card due to its convenience and other factors. This can be a problem for firearms businesses. Banks and other financial institutions that usually process such payments typically view firearms dealers as “high-risk” businesses, and in many cases will not approve applications for merchant accounts, payment processing, or other services.
In the context of payment processing, “high risk” can indicate a number of things. In general, financial institutions consider a business to be high risk if the business is part of an industry with a high rate of chargebacks, a high rate of fraud, and a high rate of sales of goods and services that are age-restricted or otherwise legally controlled. All three of these apply to firearms dealers. In addition, gun shops, etc., have a more complex sales process.
Although the right of the general public to own firearms and other weapons has been codified at the national level in the Constitution, there are differences—sometimes significant differences—between states in gun-related laws and regulations. That means that sales of firearms across state lines may be even more complex. It also increases the risk of unintentional violation of the laws and regulations of a specific state.
The rise of the Internet over the past few decades has been a great boom to businesses around the world, providing a way to do more business, over a wider area, with higher efficiency and lower costs. It continues to provide people with new opportunities. On the other hand, many of those new opportunities bring with them new challenges to overcome.
Firearms dealers already operate under a fairly heavy burden of legal requirements, including background checks, age restrictions, and training requirements. The ability to sell firearms via the Internet dramatically expands the potential customer base, but it also adds steps to the transaction. Ordinarily, when you order something online, it is shipped directly to you. In the case of firearms, however, customers can buy guns legally online, but the guns cannot be shipped directly to the buyer. Instead, it must be shipped to a dealer that has a Federal Firearms License. Extra steps in a process are extra opportunities for problems to occur, and so the already elevated risk of fraud, etc., is increased further.
Of course, it should be kept in mind that being considered a “high-risk business” does not mean that there is anything dishonest or sketchy about the company. Many businesses are considered to be high risk despite having a long track record of generally trouble-free and fully legitimate operation. They are “high-risk” businesses simply because the industry they are in is considered to be a “high-risk” industry.
So, whether your firearms business really does present a higher degree of risk or not, the fact is that financial institutions are likely to consider it to be a high-risk business for the reasons we have mentioned. Traditional banks and payment processors will be reluctant to provide you with an account, and the approval process itself will be longer, more stringent, and less likely of success. What does that mean for you? It means that you will have to find a payment processor that is willing to take on high-risk businesses as clients.
In the case of credit card payments, payment processing companies serve as intermediaries between the customer’s bank and the merchant’s bank. They facilitate the movement of payments between the customer’s account and the merchant’s account. In some cases, they can handle other methods of payment as well, such as check, mobile wallet, voice, text, and ACH payments, in addition to the more common credit card and debit card transactions.
Some payment processors, such as PayPal, Stripe, and Square, avoid high-risk businesses, and some refuse to deal with firearms sales altogether. Fortunately, there are payment processors that are willing to take on high-risk businesses as clients. Some even specialize in high-risk industries. In addition to finding a payment processor with the right experience, expertise, resources, and tools, be sure to confirm that it allows firearms sales. If it does not, it is much safer to find out now rather than waking up one day to find that your account has suddenly been closed.
If you have questions, ask them. As much as having a clear and accurate understanding of what services will be provided, how much it will cost, and what is expected of you makes life easier for you, it makes doing business and providing services to you much smoother and effective for the payment processor as well. With the added complexities of firearms sales, it’s doubly important to have a solid understanding of what it involved. A good payment processor will be able to provide you with that knowledge.