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Whether you’re already in the business of selling cannabidiol (CBD) -derived products, or merely considering this lucrative business model, determining the legal ramifications of both sale and payment processing is a good first step. Before we address the legal issues and the CBD requirements for high risk credit card processing, let’s define the product.
CBD is a compound derived from hemp and cannabis plants. While hemp and marijuana come from the same species of plant, cannabis, the variety is different.
Hemp contains no more than 0.3% tetrahydrocannabinol (THC), the psychoactive ingredient found in marijuana. Both hemp and marijuana have noted health benefits, and CBD is not different.
In fact, the growing list of therapeutic benefits has made it one of the fastest-growing industries. You’ll find CBD oil in everything from tinctures to topicals as well as in the food and drinks.
The market for CBD oil and its infused products is growing so fast that BDS Analytics predicts the U.S. CBD market will reach $20 billion in sales by 2024.
While once illegal, CBD is now allowed for purchase in almost every state.
Unfortunately, payment processing services have been slow to catch up and many are still leery of providing merchant accounts for CBD merchants. Fortunately, there are steps CBD businesses can take to obtain a payment gateway.
The Farm Bill, legalizing hemp-derived CBD, was passed just a few short years ago, on Dec. 20, 2018. Despite federal law, the legalization remains in the hands of the states.
While most states allow possession of CBD products, with some restrictions, the laws regarding the distribution of CBD products are not so clear.
In addition to legal issues, the growing number of health claims associated with CBD have not been substantiated by the Food & Drug Administration (FDA), leaving the regulatory body eager to investigate.
Nutraceuticals and nutritional supplements with reported health benefits have fallen into the high-risk businesses category for some time. Part of this is due to the unsubstantiated health claims that can lead to an increase in chargebacks brought on by consumers who feel they have been deceived.
After the passing of the Farm Bill, CBD merchants thought they were well on their way to a successful business model that included the ability to obtain bank accounts and work with a payment processor.
Some merchant account providers agreed and began providing payment solutions to help businesses increase CBD sales.
So, what happened? As sales ensued, problems arose, including CBD products that had more than the legal limit of 0.3% THC. Without regulations, it proved difficult to enforce either the amount of THC in a product or if the product even contained CBD and hemp.
The CBD industry found themselves back where they had started.
Fortunately for the industry selling CBD and hemp products, there are high risk merchant account providers willing to help support their business needs.
While a CBD business will probably be considered high risk until CBD products are approved by the FDA, obtaining a payment gateway, even if high risk, is crucial to a business’s success.
As with any business, some companies that provide CBD credit card processing are taking advantage of a bad situation. This results in additional restrictions, such as requiring high monthly processing volumes.
Here are a few key factors to look for in a CBD payment processor.
Ensure that your CBD payment processor has experience dealing with high-risk transactions. These companies have procedures in place that enable them to maintain your account when another credit card processor could choose to close the account or put it on hold.
Payment gateways need to work seamlessly with your online store, not the other way around. Don’t choose a processing solution that requires you to switch your eCommerce site to a new platform. These types of processing solutions can soon become major processing problems.
Choose high-risk merchant account services that allow you to use your existing platform and that have strong security features and fraud detection systems. As distribution across state lines in the United States can be a little risky, be sure your payment gateway filters out addresses in areas that do not allow direct shipment.
In a high risk business such as the CBD industry, you’ll need CBD merchant accounts that provide excellent customer service.
This requires credit card processors who are responsive and have procedures in place that mitigate problems arising from unhappy customers or technical difficulties. As with other high-risk merchants, good customer support can mean the difference between an increase in sales or an increase in chargebacks.
In addition to great customer support, eCommerce integration, and experience, look for a CBD high risk merchant account provider that does not charge unreasonable fees or place unnecessary restrictions on the account.
Be sure to ask potential high-risk payment processors if they charge any of the following fees: statement, compliance, non-compliance, terminal, setup, and termination.
In addition, look for service providers with systems in place that limits chargebacks. At your end, you’ll want to make sure that your refund policy is clearly stated on your website.
In order to establish a merchant account, you will need the following documents:
After collecting these documents, simply fill out a quick and easy online application and send it.
At High Risk Pay, we understand the high-risk industries that we have served for 23 years. In addition to some of the lowest fees for high-risk merchant accounts, we’ve developed a chargeback prevention program.
We’ve found that 86% of cardholders do not contact merchants before they file a dispute. This results in chargebacks that can close your merchant account.
High Risk Pay’s alert system helps you stay ahead of these dissatisfied customers, stop fraud, challenge chargebacks, and recover sales.
Our quick high risk merchant account instant approval system usually takes just 24-48 hours.
To find out if we are the CBD merchant services provider you’ve been looking for, contact us at High Risk Pay today!