Cannabidiol acts as a natural remedy for many common ailments. Popularly known as CBD, it is one of the many cannabinoids found in the Cannabis sativa plant.
The rising CBD industry is predicted to rake in at least $3 billion annually. The global CBD Oil market is expected to grow at a CAGR of 31.08% during the period 2018-2022.
This is good news for businesses and vendors of this natural plant. Running an online CBD business is a great idea, but it’s not exactly a walk in the park. Even though, CBD has been gaining significant support and is been legalized in several states, it is yet to be seen as mainstream.
On April 30th, 2018, CBD was classified as a Schedule I Drug after the 9th US Circuit Court rejected a petition from the Hemp Industries Association. This ruling could lead to problems for CBD merchants, who are essentially marketing, according to the federal government, a substance on the same level of illegality as cocaine and heroin.
Credit Card Processing Challenges for CBD Merchants
“It’s hemp..not drugs,” says the CBD shop owner when they received a letter from the bank stating that the bank is closing their CBD store’s accounts due to their business nature. The letter also states that “it is in the best interest” of the bank to close their accounts because of the “elevated risk” associated with a “marijuana related business.”
This is not the only instance. There have been several cases wherein online as well as brick-and-mortar stores selling CBD oil have had bank accounts suddenly shut on similar grounds.
Credit card processors like PayPal and Stripe refuse to process customer transactions of CBD merchants forcing them to go out of business. Account shutdowns are frequent enough and often done without any prior notice.
CBD being closely related to marijuana, which is considered an illegal substance, has become the biggest challenge in finding a way to accept payments for merchants.
CBD products that make ‘unsubstantiated’ health claims also find it difficult to find a credit card processor. Unsubstantiated health claims are those that have not been evaluated by the FDA.
Because of such reasons majority of the CBD industry has to work with cash leading to businesses being vulnerable to constant security threats like theft and break-ins.
Fact: CBD Merchants cannot obtain regular merchant account solutions.
Legal uncertainties as well as constant change in regulations have made financial institutions extremely leery of accepting CBD merchants, tagging them as high risks. Processors and acquiring banks are unwilling to spend extra resources that are required to ensure legal compliance of business that want to open a CBD merchant account.
Finding the right Merchant Account Provider
CBD online and retail stores have the same rights to credit card processing as any other regular legal business.
Banks and financial institutions are finding a way to help CBD businesses, although a slow transition but a welcome move nonetheless.
Meanwhile, High Risk Merchant Account Solutions are the best bet for merchants selling CBD or related products. Yes, it may be a difficult process to obtain a CBD merchant account but with the right credit card processor it is very much possible.
