Kava Merchant Accounts: Merchant Processing for Kava Businesses
Businesses that sell kava face serious challenges when applying for merchant accounts. Securing a kava merchant account is not easy due to certain regulatory perceptions that make it difficult. Traditional low-risk sponsor banks typically prefer to avoid such industries and often refuse to evaluate the individual risk profiles of merchants.
Kava businesses are classified as high-risk and require specialized merchant accounts. At QuadraPay, we have extensive experience working with merchants in various high-risk industries, including kava, kratom, smoke shops, hookah, and bong businesses.
Our team has created this comprehensive guide to provide in-depth information about kava merchant accounts. It explores key challenges and solutions, includes an audio version of the post, and features informative infographics. After reading this guide, you’ll find it much easier to secure credit card processing for your kava business.
Understanding Kava and Its Market
Kava, scientifically known as Piper methysticum, is a plant native to the Pacific Islands. Traditionally, it has been consumed in that region as a beverage for centuries, made from its roots. Kava is widely believed to have relaxing and anxiety-reducing effects.
The kava industry is growing rapidly, and a well-known market research company SNS Insider projects that the global kava root extract market will reach a total value of approximately USD 4.68 billion by 2032. The industry is expected to achieve a CAGR of 15.9% from 2024 to 2032. A large majority of Kava users believe that it has a calming effect. However, these claims are not verified or approved by relevant authorities.
Today, kava is available in various forms, including root powder, whole roots, capsules, tinctures, softgels, ready-to-drink beverages, teas, chocolates, gummies, creams, balms, extracts, resin, powdered extracts, elixirs, and beverage packs.
These products are sold by various types of businesses, such as kava bars and cafés, health and wellness stores, online kava retailers, ethnic stores, smoke shops, natural food stores, fitness and wellness brands, pharmacies and supplement stores, independent distributors, and subscription box services. These businesses accept payments in various forms, including cash, cards, ACH transfers, and other methods.
What is a Kava Merchant Account?
A Kava Merchant Account is a specialized payment processing solution designed for businesses that sell kava products, such as kava bars, online stores, and health retailers. It enables businesses to accept credit and debit card payments and is offered by high-risk acquirers. Kava payment processing options include eCommerce solutions for online sales and retail card terminals for in-store transactions.
Key Challenges in Getting a Kava Merchant Account
Although kava is legal in most places, there are various challenges that kava merchants face when trying to obtain a credit card processing account. Let us review some of the main issues.
Regulatory scrutiny is a significant challenge for this industry. Kava products are subject to various complex regulations across different jurisdictions and states. Such complexity and risks often demotivate processors and underwriters. Even a minor underwriting mistake can cost the processor thousands of dollars, which is why they generally prefer to avoid this industry.
Banks and acquirers often maintain a list of industries they cannot support, and in many cases, kava is included on such lists. Classifying kava as a high-risk industry restricts the onboarding of merchants. Essentially, it’s a matter of preference: some banks simply choose not to venture into high-risk industries.
Chargeback risk is another factor to be aware of. Customers may dispute payments for various reasons, including dissatisfaction with the product’s effects, shipping delays, or product variations, among others. For merchants, it is crucial to set the right expectations when selling kava products.
Obtaining a merchant account is not enough for kava businesses; they also need a compatible kava payment gateway or terminal. Unfortunately, with only a few processors and payment gateways supporting kava, finding a working combination can be challenging. For example, a merchant may secure a merchant account and a payment gateway, but the gateway might lack integration with the merchant’s cart, complicating the process.
Due to the high-risk nature of the industry, these accounts are often expensive and may sometimes require setup charges, as well as higher-than-average merchant discount rates and fees. Some accounts may also be subject to a rolling reserve of 5% to 10%. It is important for merchants to be aware of and prepared for such rates. Declining an offer after approval due to high rates can negatively impact future applications. Since there are very few processors supporting this industry, your other applications may end up being sent to the same processor through another website you approach.
Merchants can overcome these challenges by working with processors that have experience and expertise in supporting kava businesses with credit card processing. These entities are referred to as high-risk credit card processors and typically do not openly advertise the industries they support online. This approach helps them avoid being overwhelmed by high-risk applications.
Strategies to Obtain a High-Risk Kava Merchant Account.
According to kava merchant accounts specialists at QuadraPay, the following steps can significantly improve your chances of securing approval for a kava business credit card processing account. These strategies are tailored for businesses associated with kava payment processing.
Partner with High-Risk Merchant Account Providers. Avoid applying to every payment processor you come across on the internet. Instead, focus on finding providers that specialize in high-risk industries and are equipped to manage the unique challenges of kava businesses. These processors thoroughly understand kava products and the associated regulatory landscape. Look for providers with a proven track record in the industry. Additionally, consult with peers in the kava business for recommendations on trusted payment processors.
Maintain Transparent Business Practices. Transparency is key to gaining trust and approval from payment processors. Ensure compliance with all relevant requirements, such as accurate product labeling, clear product disclosures, and robust payment security standards. Be proactive and maintain open communication with the onboarding team, providing accurate and detailed information about your business operations, product line, and marketing practices. Transparency builds credibility and improves your chances of approval.
Expand Payment Options. Diversify the payment options you offer to your customers. In some cases, payment processors may require existing processing statements as part of the approval process. If credit card processing statements are unavailable, alternative records, such as ACH or eCheck statements, can serve as substitutes. Beyond securing approval, offering multiple payment methods improves conversion rates and provides greater stability for your business.
Optimize Your Online Presence. Payment processors will evaluate your website and consider various factors. It is crucial for your website to appear professional and credible. Clearly display your refund policies, product descriptions, and customer service details. Doing so not only instills confidence in payment processors when assessing your application but also reduces the likelihood of chargebacks and returns by setting clear expectations for your customers regarding your products.
Build a Strong Credit and Financial Profile. The approval process for a merchant account involves a credit risk evaluation, where the payment processor assesses your financial standing and credit rating. To improve your chances of approval, ensure you showcase a robust financial profile. Provide detailed bank statements for both your business and personal accounts. Additionally, submitting previous credit card processing statements can significantly boost your approval chances by demonstrating your financial stability.
As experienced merchant account consultants, we’ve observed many instances where business owners create new business accounts during the application process. While they may have their reasons, this practice often works against them. Processors may perceive the company as financially unstable or suspect the business is hiding past transactions—both of which can harm your application.
Educate Yourself on Compliance. Industries such as kratom, kava, cannabis, CBD, and others are heavily regulated and dependent on compliance. As a business owner, it is essential to stay informed about the latest compliance and regulatory requirements in the jurisdictions where you operate or plan to sell. By understanding and adhering to these regulations, you position your business as responsible and compliant, making it more appealing to payment processors.
Types of Kava Payment Processing: Online and Retail
When it comes to digital payments for a Kava business, there are two main ways of accepting payments. The first, which is quite common these days, is online Kava payment processing. This is designed for businesses that sell Kava over the internet via a website or mobile application. This is referred to as e-commerce payment processing for Kava.
Another popular type of payment processing solution is for businesses that operate at retail stores. These businesses have physical locations where customers purchase Kava products and make payments using credit or debit cards. For such businesses, we offer retail credit card terminals. Let’s explore both in detail.
Online Kava Payment Processing
With online payment processing, Kava businesses can accept credit cards, debit cards, ACH transfers, and other digital payment methods on their websites as well as through platforms like social media and mobile applications.
This type of payment solution includes a payment gateway, which acts as a communication channel between the merchant acquirer and the merchant. The payment gateway also ensures that transactions are secure and that customers’ card and personal details are handled properly.
Merchant accounts for Kava businesses generally fall into the category of nutraceuticals or herbal supplements. These accounts are provided by acquiring banks or payment service providers. Businesses often require recurring payment solutions for subscription models, which are commonly used by Kava clubs. Since all transactions on websites are “card-not-present,” the risk of fraud is higher. To mitigate this, payment solution providers implement various tools to reduce instances of fraud.
Retail Kava Payment Processing
For businesses that sell Kava at physical stores, we offer retail credit card processing solutions. These terminals support credit card payments via tapping or swiping. Additionally, they support other payment methods, such as Apple Pay and Google Pay. Our terminals can be easily integrated with popular Kava store point-of-sale (POS) systems or dedicated Kava POS setups. Retail terminals are a great asset for Kava bars and can significantly enhance the customer experience.
KYC Requirements for Kava Merchant Accounts
To gain approval for a merchant account, every Kava business is required to provide a set of business and personal documents to the payment processor for review. This process is known as KYC (Know Your Customer) evaluation, underwriting, or sometimes vetting. During this step, the payment processor reviews and verifies the documents provided by the merchant. This serves as an essential safeguard to reduce the risks of fraud, money laundering, and regulatory violations. Below are some key documents typically required when applying for such a solution.
Business Registration Documents. To sell Kava and accept card payments, it is mandatory to have proper business registration documents. These can include a public limited company, private limited company, LLC, Inc., or even a DBA.
A Certificate of Incorporation or its equivalent is required for business registration. In the United States, merchants must also provide an EIN (Employer Identification Number). Similarly, businesses in the UK are required to submit a VAT certificate. Comparable requirements exist for businesses registered in the European Union and Canada.
Banking and Financial Records. These include recent bank statements. It is recommended to provide at least 3 to 6 months of business bank statements as well as personal bank statements. If your business is already accepting card payments or other types of digital payments, you should also include statements reflecting these transactions, such as ACH or eCheck statements.
Personal Identification. Government-issued photo IDs for the individuals behind the business are required. This is typically a driver’s license or passport. For US-based merchants, a Social Security Number (SSN) must also be submitted. Equivalent identification requirements apply to businesses in other regions.
Accurate Product Claims. Avoid making false claims about the effects of Kava products. It is equally important to provide clear disclaimers about potential health risks and proper usage. For any edible product, include a detailed product description. Some payment processors may also require a Certificate of Analysis (COA), which should document tests for heavy metals, contaminants, and alkaloid content.
Proof of Inventory. Many websites claiming to sell Kava are actually dropshipping businesses. Although dropshipping merchant accounts for Kava are available, obtaining them is often challenging. If your business holds inventory, it is significantly easier to gain approval. To differentiate yourself from dropshipping businesses, we recommend providing proof of inventory, such as purchasing invoices, images of your inventory, or warehouse receipts.
Website Compliance for Kava Business
A Kava business website must ensure compliance with legal requirements to operate responsibly and avoid regulatory issues. Below are key points to consider for maintaining compliance:
Age Restriction. The website must restrict users below the legal age for purchasing Kava products. The legal age may vary depending on the merchant’s location and the region where the product is being purchased. Regulations surrounding Kava sales differ across countries, and in some cases, they are ambiguous. It is advisable to communicate clearly with the underwriter regarding age verification requirements. To meet these requirements, your website should have age verification software in place, which can be adjusted according to underwriter requests.
Your website’s content should avoid unsupported health claims, which can lead to chargebacks and disputes. Additionally, your content must adhere to local and international advertising standards to avoid legal and financial risks.
Application Process for Kava Payment Processing
The application process for a Kava merchant account begins with selecting a payment processor that is willing to support merchants in this industry. Once the merchant identifies a suitable processor, they submit the required KYC documents. Along with these documents, the merchant must complete a detailed merchant account application form, which includes information about the business model, product descriptions, and operational history.
The payment processor’s underwriting team will review the application and KYC documents. Additionally, the payment processor may conduct a site inspection of the merchant’s business. After performing these checks, the processor will assess the risks involved in onboarding the merchant.
If everything is in order, the merchant will receive an account offer along with a contract. This contract must be signed by both parties. Once the contract is signed, the merchant will receive login credentials for the payment gateway and integration details.
After integration, the merchant should perform test transactions. Once successfully verified, the merchant can start accepting live transactions on their Kava website.
FAQs for Kava Merchant Accounts
Can I sell kava internationally with a high-risk merchant account?
Yes, you can certainly do so, as many high-risk merchant account providers support international credit card transactions. However, it is crucial to check whether the payment processor supports the specific country from where your customer is making the purchase. Additionally, you must ensure that local regulations in the customer’s country allow them to purchase kava. Confirm whether you are permitted to ship the product from your country to the customer’s country. Essentially, the main challenge lies in regulatory compliance, and payment processors may impose certain restrictions based on these regulations.
Are there any restrictions on the type of kava products I can sell with a merchant account?
When you submit an application, the payment processor will thoroughly review your website, including all the products listed on your shopping cart. They will also verify health claims and check for non-compliant labeling. Based on this information, they will determine whether they can support all your products or exclude certain items. If a payment processor is selective about the types of products it supports, there are likely valid reasons behind this decision, and merchants should be prepared to accept such restrictions.
How can I reduce chargeback risks for my kava business?
Kava businesses may face higher chargebacks, but there are several effective ways to reduce them. One of the best approaches is to set clear expectations for customers. Avoid making false claims about your products and ensure that orders are shipped on time and in the right condition. Additionally, subscribing to chargeback alert systems can provide early warnings and mitigate disputes. Implementing tools like Address Verification System (AVS) and 3D Secure can further reduce chargeback risks by enhancing transaction security.
What are rolling reserves, and how do they impact my cash flow?
In most cases, payment processors may not require a rolling reserve. However, if they cannot justify waiving it, they may ask the merchant to agree to a 5% to 10% rolling reserve, typically held for 3 to 6 months. Rolling reserves are released periodically, often after 90 days. While this can strain cash flow, the reserve serves as a safeguard for the processor to cover chargebacks, refunds, and disputes. Payment processors may use the reserve amount to initiate refunds immediately if needed.
Can I integrate my kava merchant account with multiple eCommerce platforms?
Integration is generally not an issue with our payment processing partners. They support a wide range of eCommerce platforms, including Shopify, Magento, WooCommerce, Joomla, Zen Cart, OpenCart, and even Wix. For advanced integration, API documentation is also available, allowing merchants to utilize the full functionality of the payment solution.
What happens if my application for a kava merchant account is declined?
If your merchant account application is declined, we will work with you to identify the reasons for the denial. Once the issues are resolved—whether on your website or at the organizational level—we can reapply to the same processor. Additionally, we may approach other processors to increase your chances of approval.
How long does it typically take to get a kava merchant account approved?
The approval timeline for an eCommerce merchant account for a kava business is typically 5 to 10 business days. However, in some cases, approvals may happen even sooner. The timeline depends on factors such as the availability of required documents, modifications to the website, and compliance requirements. Our team will work closely with you to expedite the process and secure approval as quickly as possible.
Can I switch to a different payment processor after setting up my kava merchant account?
Yes, you can switch to a different payment processor if you are dissatisfied with the current service or receive a better offer. However, keep in mind that some processors may charge an early termination fee, which could apply if you end the agreement prematurely. In certain cases, the new processor may offer to cover these fees if you switch your account to them. If you’re considering switching and need assistance, feel free to reach out to us without hesitation.
