How To Choose The Right CBD Merchant Account Provider?

Major shift towards plastic money in recent years means businesses cannot afford to continue accepting payments in cash only. Variety should not just be limited to services and products offered by a business but also payment options.

In order to accept credit cards, you need a merchant account. Now obtaining a merchant account is fairly simple unless your business comes under the high risk category. And if you are a merchant selling CBD, you are almost guaranteed an outright refusal from a regular bank or processor even though you operate in a lucrative industry worth millions which is only expected grow further and predicted to reach 1,182.65 million by the end of 2024 at 31.26% CAGR.

Not all hope is lost because there are several reputed merchant account providers who are willing to take on your CBD business. But how do you choose the right one for you? Here are a few tips to follow while looking for a CBD Merchant Account:

Payment Options –

While credit card processing is an obvious choice, it is not the only choice of payment. There are several payment options that you can opt for when looking for a CBD Merchant account.

You also need to consider what suits your business the best. If you are a CBD store planning to expand into the e-commerce space in the future, you need to look for online payment processing solutions. So before settling on one, make sure they offer all the possible options you might need so you don’t have to waste time looking for another one in case your current provider isn’t enough.

But if you only need a POS Terminal to accept payments, you don’t want to end up paying for extra services you don’t even need.

Apply for a CBD Merchant Account

Additional features –

Chargeback protection tools, fraud prevention measures, PCI DSS compliance, 3D secure payment gateway, etc are some of the important features that a CBD merchant account provider should be able to provide. You will need a provider who will be willing to offer features that are customized to suit your business requirements.

Charges –

When you approach a processor for a CBD merchant account, they will shoo you away or charge unreasonable rates. Most merchants in a desperate attempt are then forced to pay higher processing fees.

Now bear in mind that you will be charged higher than other non-risky businesses. However, it also becomes important to negotiate in such cases. Different processors offer different pricing plans based on the kind of business you are and the type of payments you receive. Compare the prices of several other processors, understand the rate structure and only then settle for the one who offers the best services at a fair price.

Specialized Processor with stable bank partners –

Since CBD merchants deal with legal matters on the regular, a processor who is experienced and understands the industry will prove to be a helpful partner in the long run. They will also be lenient and are more prone to accepting your merchant account application.

Customer Support –

Effective and reliable customer support is important regardless of the type of business you operate. But it becomes all the more important in case of CBD business who deal in large processing volumes regularly. In case of any emergency, good customer support will provide solution on time.

Obtaining a CBD merchant account might be a task but keep in mind these tips and you might actually end up finding one that will only assist you in growing your business further.

CBD Merchant Account: Challenges faced by the CBD Oil Industry

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.

How to get CBD Merchant Account Solutions?

Products containing CBD used for medicinal propose were officially recognized as a ‘medicine’ by the Medicines and Healthcare products Regulatory Agency (MHRA) in 2016.

And as of last year the use of CBD oil has been made 100% legal in the UK for medicinal purpose only.

CBD stands for cannabidiol, one of many cannabinoids found in the cannabis plant. CBD tests have shown medicinal properties and health benefits like helping reduce seizures in cases of epilepsy, help with anxiety, treat chronic pain and act as an anti-inflammatory.

While some are still apprehensive about using it, CBD oil usage has seen an impressive increase since being legalized with more and more people being aware of the medicinal advantages it offers.

The effects of its slow yet steadily increasing popularity can be seen online with a large number of businesses selling CBD oil and related products. There are also a few key food health stores selling CBD oil products to customers.

Why the CBD Oil Industry is considered High-Risk?

The expression, Cash is king, rings the most true with Cannabis industry.

Despite the selling of CBD oil being made a completely legal business, the merchants are still forced to deal in cash due to the constant security threat and industry stigma. Banks and payment processors are highly wary of undertaking such businesses on board, understandably due to the huge risks involved.

CBD oil is extracted from cannabis and tied to marijuana which makes it a high risk industry. And similar to other high risk businesses, processors rarely accept applications of CBD merchants.
Many of these financial institutions have little idea how the industry functions because it’s relatively new.
In spite of the various proven health benefits broadcasted by CBD oil consumption, there are also side-effects to it. The controversial nature of selling CBD oil has led banks and processors to shy away from the industry.
Banks are afraid of reputation damage caused by taking on such businesses.
There are huge risks and too many legal hurdles to cross in terms of CBD businesses.

CBD oil Merchant Account Processing

With the many uncertainties and reservations surrounding the industry, CBD merchants can still find willing merchant account providers offering CBD industry-specific merchant account solutions.

Basic essentials required to open a CBD Merchant Account:

A legally compliant business
Positive & Long credit processing history
Healthy rolling reserves
High monthly volume
Low chargeback ratio

The key to finding the right merchant account provider is to find one who provides industry-specific merchant solutions. In the case of CBD merchants, a High Risk merchant account provider specializing in CBD merchant accounts would prove to be an apt fit.

A merchant account provider having significant experience in this industry will be aware of the workings and risks involved with the business offering services deemed fit for your business. Such processors will also help a merchant mitigate and lower risks by offering tools for the same.

A secure payment gateway is imperative with majority of CBD products sold online. Look for processors that integrate payment gateways with merchant accounts. There are plenty of reputable merchant account providers offering both, IBS being among one of the top-rated processors. Since CBD merchants deal with high risk products, a payment gateway that is PCI compliant is of paramount importance.

Securing a High Risk Merchant Account for CBD oil and related products is made easier with the right processors!