What you need to know about CBD payments.

 

 

Challenges faced by the CBD Industry

The CBD industry has gained popularity in recent years and has a heavy surge in demand. However, there are many hurdles and challenges faced by the industry.

Payment processing is one of the major issues that has hit the industry. Complicated regulations and various laws regarding CBD products make it a "high-risk business" to most acquiring banks. Most payment service providers like PayPal, Stripe, Square, etc., don’t approve merchant accounts for CBD businesses. Why is this? What can be done to ensure a merchant account? What are the options? In this blog, we try and help answer these questions.

Why do Payment Processors see a business as high-risk?

Most banks and payment getaways act on flags and deem certain businesses high risk. They do not approve accounts for such companies, and these companies are subject to strict rules, severe penalties, and high processing fees. These are some common reasons that make a business high risk.

• A new business with negligible transactions

• If a business has been dropped by a payment service provider before

• If a business experiences a high number of chargebacks

• A business with a poor credit score

• A business selling high-value services or products

For High-risk CBD business owners, the best thing is to partner with a reliable and secure payment company like Make the Impact for your merchant account, to ensure you will be able to overcome any of the above obstacles and be placed in a quality payment processing situation.

Why is the CBD Industry Considered High Risk?

Even though multiple CBD companies are starting up every day, the industry is considered high risk because of multiple reasons. Here are a few:

Complex Laws

Laws and regulations regarding CBD have become favorable recently, however, there is a lot of uncertainty. Most states have different rules, and people still associate CBD with marijuana and its intoxicant properties. There is no clear understanding of CBD production and use, so payment processors avoid these companies because they do not know what to expect. Even after legalization, there are a lot of challenges faced by this industry, as you will continue to read. This makes the CBD industry to be considered high-risk by financial institutions. This makes opening a merchant account a big issue for companies in this industry

Higher risk of chargebacks

The CBD industry is relatively new in comparison to most industries, and transactions can get a bit tricky at times. Research is still going on the benefits of CBD and its various products. Most of them are new and very unpredictable. Customers are not impressed in many cases and instantly file for chargebacks. Chargebacks are the number one reason for any merchant to be classified as higher risk or even be shut down.

Negative public perception

Many people confuse CBD with cannabis and the harmful effects of THC. They don’t have proper knowledge about CBD and its various health benefits, including relaxation properties. People mix up CBD, marijuana, THC, and hemp. They don’t know their properties or their differences. This causes CBD companies to be criticized and not approved for merchant accounts.

Slow and costly licensing

Even though CBD is legal now, most producers and distributors need to complete various legal processes and regulations. Obtaining a license for selling CBD products is a long process and involves application and other related costs. You need to wait many months to obtain a license, and getting a loan for this business is even more difficult.

Transaction processing and merchant account problems

Even after legalization, most payment processors considered CBD businesses high-risk, and there are many issues because of this CBD companies often have their merchant accounts frozen or funds held for a period of time, or worse unable to take payments anymore from their current provider.

We have seen a massive increase in the popularity of CBD products, and we expect that they will continue to grow rapidly. The positive and relaxing effects of CBD are well known now, and businesses are jumping at the opportunity to market CBD products. Therefore we strive to help these companies transform their business to qualify them for the best rates, and services in the industry.

For CBD business owners, it is recommended to partner with a trustworthy payment provider like Make the Impact for a merchant account and electronic transaction services, we will be able to walk you through the process of helping ensure that you are able to take payments for your company with the lowest risk.