How to Safeguard Against Payment Fraud in the Vape Industry

Payment fraud in the vape industry isn’t just a hassle; it can quickly eat into your profits, harm your reputation, and even put your merchant account at risk. With high-value products and strict regulations, vape merchants face unique challenges that require more than just basic payment checks. This is similar to the high-risk environments of off-shore merchant accounts and for businesses with significant recurring payments, like the telecom industry . The best way to protect your business is by combining strong payment verification tools, thorough age verification, and secure shipping practices. Getting these fundamentals right helps you stay one step ahead of fraudsters and keeps your operations running smoothly. According to industry research, merchants worldwide are projected to lose a cumulative $362 billion to online payment fraud between 2023 and 2028, which clearly shows why vape businesses can’t afford weak controls. This blog covers the main reasons vape merchants face higher fraud risks and shares practical ways to strengthen your payment systems and prevent costly disputes. Read on!

Why Vape Payments Are a Magnet for Fraud

Vape businesses face unique challenges that make payment fraud a constant threat. Understanding why fraud targets vape payments helps you build smarter defenses from the ground up.

Higher Transaction Values Attract More Fraud Attempts

Vape products tend to be pricier than typical retail items. Devices, mods, and premium e-liquids often push order values into higher tiers, which naturally attracts fraudsters looking for bigger payouts on stolen cards or fake orders. Unlike low-cost items, a single successful transaction here can deliver a substantial return, making vape orders a preferred target for organized fraud rings.

Repeat Customers Mean More Opportunities for Abuse

Many vape buyers are loyal and return frequently to restock or try new products. Fraudsters know this pattern and exploit it by “testing” stolen cards across multiple orders or by using friendly fraud, where legitimate customers dispute valid charges, to slowly but steadily drain merchant accounts. This repeat buying behavior makes it harder to spot fraud in real time without proper velocity checks and monitoring.

Strict Regulations Increase Scrutiny From Banks

Vape sales are heavily regulated, particularly regarding age verification and shipping restrictions. Payment processors and banks are on high alert for businesses that might slip on compliance, which raises the risk profile of vape merchants. Because of this, even minor spikes in dispute rates can trigger deeper investigations, account holds, or termination threats, adding pressure to maintain clean payment records. These compliance pressures intensified after U.S. federal changes, such as Tobacco 21 and stricter ID verification requirements at retail.

The Financial Consequences of Rising Disputes

When disputes or chargebacks exceed acceptable limits, costs multiply quickly. Beyond the direct loss from fraudulent transactions, vape merchants face penalties such as higher processing fees, reserve requirements, and potentially suspended or terminated payment accounts. These disruptions impact cash flow and damage reputation and customer trust, making proactive fraud management a must-have.

Why do vape merchants face a higher risk of payment fraud than other retailers?

Vape merchants handle high-value, heavily regulated products, which makes their payments attractive to fraudsters and closely monitored by banks. The nature of repeat customers and stringent compliance requirements leads to more frequent fraud attempts and disputes, requiring specialized tools and vigilance.

Understanding the Fraud and Dispute Landscape in Vape Today

Knowing the types of fraud common in the vape industry and how disputes arise is key to building defenses that actually work. This section breaks down the main fraud schemes and regulatory pressures vape sellers face every day.

Common Fraud Types in Vape Payments

Card testing remains a top tactic; fraudsters use small transactions to confirm stolen card details before making bigger purchases. Friendly fraud, in which customers claim unauthorized transactions even though they made the purchase, is also common. Other threats include order manipulation, where fraudsters exploit promotional codes or cancel parts of orders after receiving products, and account takeovers targeting merchant or customer accounts for fraudulent orders.

The Challenge of Age-Restricted Sales

Vape products require strict age verification not only to comply with laws but also to reduce fraud risk. Failure to properly verify age can result in disputed transactions and regulatory penalties. Both online and in-store sales must meet these standards, which complicates the payment process and increases the risk of errors or abuse.

Federal Rules Impacting Vape Transactions and Shipping

Several federal regulations shape how vape payments and deliveries are handled. Age verification at checkout is mandatory, often requiring third-party services with government-grade data. On delivery, adult signature requirements add another layer of protection. These rules also dictate the responsibilities of carriers and sellers, adding complexity but also opportunities to fight fraud effectively. This is particularly vital for tobacco retailers and the vape industry

How do age verification laws affect vape merchants’ payment processes?

Age verification laws require vape sellers to verify buyers’ legal age before completing a sale, often by integrating specialized third-party services into payment systems. This adds a critical compliance step and helps reduce fraud-related disputes by ensuring products don’t end up in the wrong hands.

Strengthening the Checkout to Stop Fraud Before It Starts

The checkout is your first and best chance to spot fraud and block it before it becomes a costly problem. Putting the right tools in place here reduces bad orders and dramatically reduces disputes.

Enable Address Verification and CVV Checks for Every Order

Ensuring the billing address matches the card on file via AVS and requiring the CVV code during checkout are basic yet robust defenses. For vape merchants, enforcing full matches on these checks for high-risk orders can catch many fraudulent attempts before they move forward.

Use 3D Secure 2 to Confirm Suspicious Payments

3D Secure 2 adds an extra authentication step that shifts liability away from the merchant if a transaction turns fraudulent. Applying it selectively to orders flagged as risky, such as high-value baskets or new customers, can significantly reduce chargebacks without adding friction for most buyers.

Apply Velocity Rules to Spot Unusual Patterns

Setting limits on how many orders can be placed per card, per device, or within a short time frame helps catch fraudsters trying to test multiple cards or place rapid-fire orders. These rules act as early warning signs and prevent suspicious activity from slipping through.

Maintain Blocklists and Allowlists to Control Access

Keeping a list of known fraudulent emails, IP addresses, or devices to block, alongside an allowlist of trusted customers, helps reduce repeat abuse. This targeted approach focuses your resources on real threats and smooths the path for legitimate buyers. Visa’s Acceptance Risk Standards recommend using a multi-tool approach, which includes AVS/CVV, Visa Secure, geolocation, velocity checks, and device intelligence.

Use Device and Browser Fingerprinting for Deeper Insights

Fingerprinting technology collects information about the buyer’s device and browser to detect patterns across multiple accounts or orders. It helps catch fraud that uses multiple identities, but the same hardware or network.

Keep Billing Descriptors Clear to Prevent Disputes

A billing descriptor that clearly shows your vape business name and contact information on the customer’s statement reduces confusion and “friendly fraud” disputes where buyers don’t recognize charges.

Can 3D Secure 2 increase cart abandonment during checkout?

While 3D Secure 2 adds an authentication step, when applied selectively to high-risk transactions, it minimizes friction for most buyers. This targeted use balances security with customer experience, keeping abandonment rates low while reducing fraud.

Making Age Verification Work for Your Vape Business

Age checks aren’t just a legal box to tick; they’re a critical line of defense against fraud and disputes. Age verification protects your business and builds trust with customers and payment partners when done right.

Use Trusted Third-Party Age Verification Services

Relying on specialized vendors that access government-grade data provides the most reliable confirmation of a buyer’s age. These services integrate seamlessly into online checkouts, blocking underage buyers before payment is processed and reducing chargeback risks associated with compliance failures.

Capture and Store Age Verification Proof

Keeping records of age checks, whether they’re digital confirmations or scanned IDs, strengthens your position in dispute cases. Proper documentation shows you’ve done your due diligence, helping to fight chargebacks arising from age-related compliance issues.

Train Staff on Recognizing Valid and Fake IDs

In-store staff must be prepared to spot fake or altered IDs and understand what forms of ID are acceptable. Regular training refreshers and clear internal policies reduce human error and protect your shop from selling to minors or invalid customers.

Set and Enforce a Clear Refusal Policy

Documenting and consistently enforcing a policy for refusing sales to underage or suspicious customers adds another layer of protection. Regular audits ensure compliance stays top of mind and catches any process gaps before they cause trouble.

What happens if a vape merchant fails to verify age properly?

Failing to verify age can result in regulatory fines, lost payment privileges, and a spike in chargebacks related to underage sales. It also damages your reputation with both customers and financial partners, underscoring the need for robust age verification processes.

Shipping Smart: How to Reduce Disputes and Fraud on Delivery

Shipping vape products comes with its own set of challenges. The proper shipping policies and practices help protect your business from lost packages, fraudulent claims, and regulatory issues.

Ship to Verified Addresses or Require Signatures

Matching shipments to the card’s billing address adds a strong layer of fraud protection. When orders look suspicious or are high-value, requiring an adult signature at delivery ensures the product reaches an authorized recipient. This extra step reduces the risk of chargebacks from stolen cards or package theft. UPS explicitly offers Adult Signature Required services that merchants can leverage to support compliance and defend against chargebacks.

Use Adult Signature Confirmation Always

Adult signature confirmation isn’t just a recommendation; it’s often a legal necessity for vape products. It provides proof that the item was handed over to someone of legal age, which is crucial if a customer later disputes the delivery or claims they never received the package. Keeping delivery receipts with signatures helps you fight these disputes effectively. This compliance requirement is a major operational challenge for fulfillment and logistics services and is critical for high-risk retail sectors like cannabis .

Avoid High-Risk Locations and Carriers

Certain shipping zones and freight forwarders have earned reputations for higher fraud or lost packages. Using rule-based holds or blocks for these areas reduces your exposure. It’s essential to regularly review your shipping partners and monitor industry updates on risky locations to avoid surprises.

Comply with State Labeling and Tax Rules

Each state has its own regulations regarding vape product labeling, taxes, and fees. Noncompliance can lead to returns, regulatory fines, or chargebacks when customers dispute unexpected charges. Staying current with these laws helps you avoid these pitfalls and maintain smooth order fulfillment.

How can adult signature requirements lower chargebacks for vape merchants?

Requiring an adult signature ensures the product is delivered directly to a verified adult, reducing the risk of delivery disputes and fraudulent chargebacks due to claims of non-delivery or underage receipt.

Point of Sale Safeguards to Protect Your Vape Shop

Your physical store checkout needs strong controls to catch fraud early and reduce costly disputes. Simple but effective POS safeguards keep your team and your bottom line protected.

• Enforce ID Scans for Restricted Products: Require staff to scan IDs for age verification when selling vape devices or e-liquids. Automated prompts or alerts at the POS remind employees to check every time, reducing accidental underage sales and helping comply with regulations.
• Use Manager Approvals for Sensitive Actions: Set up user permissions so voids, returns, and manual card entries require manager approval. This reduces the risk of refund fraud or theft from inside the store and keeps transaction records clean.
• Provide Clear, Digital Receipts: Send digital receipts that include detailed item descriptions to customers. Clear receipts help avoid confusion about purchases, reducing the risk of friendly fraud or chargebacks due to misunderstandings.
• Conduct Regular Inventory Audits: Frequent inventory checks catch early signs of skimming or refund fraud. Tracking stock alongside sales data helps identify discrepancies that might otherwise go unnoticed, protecting your margins.

Chargeback Prevention Strategies That Work

Chargebacks can hit vape merchants hard, but many disputes can be prevented with clear communication and proactive steps. Here’s how to keep chargebacks in check and protect your business.

Publish Transparent Terms and Policies

Clearly outline your refund, return, and shipping policies in plain language. Display these policies prominently on your website and include them in order confirmation emails. Transparency helps set customer expectations and reduces confusion that often leads to disputes.

Send Delivery Confirmations and Follow-Ups

Providing customers with delivery tracking updates and friendly follow-up messages encourages them to reach out with concerns before filing a dispute. Prompt communication can resolve issues early and prevent unnecessary chargebacks.

Use Alert and Dispute Deflection Programs

Many payment processors offer alert systems that notify you when a chargeback is likely or when a customer initiates a dispute. These tools allow you to address the issue quickly or contact the customer directly to avoid escalation.

Build Strong Representation Cases

If a chargeback does occur, having solid evidence can help you win the dispute. Keep thorough records, including proof of age verification, delivery confirmation with an adult signature, and any use of fraud-prevention tools like 3D Secure.

What’s the best way to handle a chargeback once it’s filed?

Respond quickly with clear, organized evidence supporting your case. Documentation such as proof of delivery, age verification, and customer communication is key to winning representation.

Monitoring Dispute Ratios to Stay Ahead of Trouble

Keeping a close watch on your dispute ratios is crucial to catch problems early, before they lead to account holds, higher fees, or fines. Here’s how vape merchants can stay on top of this critical metric:

• Track Disputes by Brand and Reason Code: Break down your chargebacks and disputes by product brand and specific reason codes. This helps you identify patterns or recurring issues so you can focus your fraud controls where they matter most.
• Understand Visa’s New Acquirer Monitoring Program (VAMP): VAMP combines fraud reports and dispute data into a single monitoring ratio that assesses both card-not-present fraud and transaction disputes. While it applies broadly, thresholds and enforcement vary by region and merchant size. Knowing how this program works helps you prepare and reduce risk.
• Set Internal Warning Levels Below Network Thresholds: It’s smart to establish your own guardrails well below official dispute limits. This gives you an early warning system so you can act quickly, helping avoid fees, holds, or even account termination.
• Escalate Issues Quickly When You Spot Trends: If you notice dispute ratios climbing, contact your payment processor and fraud team immediately. Prompt adjustments, rule tuning, or additional controls can prevent problems from growing.

Building a Layered Defense Plan Against Payment Fraud

A strong fraud defense isn’t about a single solution; it’s about combining multiple tools and policies that work together to protect your vape business at every stage.

Week One: Set Up Basic Protections

• Turn on Address Verification Service (AVS) and CVV checks to verify cardholder details.
• Enable device fingerprinting and velocity rules to spot suspicious order patterns.
• Activate 3D Secure 2 for high-risk profiles or big orders to add an extra verification step.
• Require an adult signature on all vape product shipments.
• Update your billing descriptor with clear business info and support contacts to reduce confusion on statements.

Week Two: Strengthen Compliance and Communication

• Implement a third-party age verification vendor for online checkout and tighten POS age checks.
• Publish clear refund, return, and shipping policies; include them in order confirmation emails.
• Enroll in chargeback alert and dispute deflection programs through your payment processor.

Ongoing Maintenance: Monitor and Train

• Review dispute dashboards weekly and adjust fraud rules monthly based on trends.
• Refresh staff training quarterly to keep everyone sharp on compliance and fraud spotting.

How quickly can vape merchants expect to see results from a layered fraud defense?

While some improvements, like fewer fraudulent orders, can show within days, ongoing tuning and staff training over weeks and months are needed to build a consistently strong defense.

Protect Your Vape Business with 2Accept

At 2Accept, we know the vape industry comes with unique payment hurdles and fraud risks. That’s why our solutions are built specifically for vape merchants like you, with flexible payment options, advanced fraud controls, and dedicated support ready when you need it most. Don’t leave your business vulnerable to fraud or payment disruptions. Take control now with 2Accept and experience a payment partner that truly understands your needs. Visit 2Accept today to secure your transactions, minimize chargebacks, and keep your vape business thriving without worry.

Frequently Asked Questions

How does payment fraud affect vape product pricing?

Payment fraud increases costs for vape merchants through chargeback fees and higher processing rates. These added expenses are often passed on to customers, leading to higher prices across the board.

What role does customer education play in preventing vape payment fraud?

Educating customers about secure payment methods, recognizing phishing attempts, and verifying purchase details can reduce friendly fraud and unauthorized chargebacks.

Can vape merchants accept cryptocurrency to reduce payment fraud?

Some vape merchants explore cryptocurrency as an alternative payment method to avoid chargebacks, but it comes with volatility and regulatory challenges that need careful consideration.

How do vaping regulations impact online payment processing?

Changes to vaping laws can affect which products are allowed for sale, how payments are processed, and which payment providers vape merchants can work with, making compliance monitoring critical.

What are the best practices for handling vape subscriptions to avoid fraud?

For subscription-based vape services, using recurring billing with strong customer authentication and regular account reviews helps minimize fraud risks and reduce payment declines.