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High-Risk Merchant Services & How They Can Help Your CBD Business

May 18, 2021

High-Risk Merchant Services & How They
Can Help Your CBD Business

The CBD market has been gaining more and more
attention in recent years because of the
public’s interest in its potential health
benefits. CBD, also referred to as cannabidiol,
is known to be beneficial in reducing
inflammation and stiffness and alleviating pain.
Additionally, it’s also said to help with
anxiety and insomnia.

CBD companies offer many kinds of CBD
for sale
, from CBD isolate
and broad-spectrum CBD to full-spectrum CBD.
These products include oils and tinctures,
tablets and soft gels, powders, topicals such as
creams and salves, and edibles such as gummies
and other confectioneries.

No wonder CBD businesses have been thriving in
the past few years! The global cannabis market
is estimated to be valued at $20.5 billion in
2020 alone and is projected to reach over $90
billion in 2026.

The growth of the global CBD market is driven by
several factors. These would include its medical
application, being able to help with several
health conditions, the increase in social
acceptance, and the legalization of cannabis
globally.

Cannabis is considered legal for medical use in
over 40 countries, including Australia and New
Zealand. On the other hand, cannabis is
considered legal for recreational use in five
countries, including Canada, South Africa, and
15 states in the US, including Alaska and
California.

Challenges For
CBD Businesses

Although CBD has been gaining attention for its
potential health benefits, and the CBD market
has been growing, CBD businesses continue to
face several challenges, as most businesses
do.

One of the challenges they face is the negative
perception of the public. Although there is a
rise in social acceptance of cannabis and its
potential health benefits, there is still a lack
of understanding about how CBD and marijuana
differ.

Next, licensing is often expensive but slow.
There are numerous licenses CBD businesses must
obtain, which means paying for application fees,
license-acquisition costs, and other costs,
including maintenance.

Finally, transaction issues, which are considered
to be one of the biggest challenges CBD
businesses face. Most credit card vendors and
online payment processing services are often
hesitant or do not allow CBD companies to
transact through their platform because of the
risk it poses.

Reading on, you will learn more about why CBD
businesses are considered high-risk merchants,
the qualities of high-risk businesses, what
high-risk merchant services are and why they are
considered a solution for CBD companies, and the
things to consider when choosing high-risk
merchant services.

Why CBD
Companies Are Considered High-Risk
Merchants

There are two conditions for a business to be
considered high-risk. The first condition is
that it operates within a high-risk industry,
which addresses safety and health
concerns.

The second condition is the risk of financial
failure, which addresses the viability of a
company. CBD businesses are considered to be
high-risk merchants mainly because of the legal
status of CBD. Cannabidiol can be derived from
either the hemp plant or the cannabis plant.
However, the 2018 US Farm Bill only legalized
hemp-derived CBD products on a federal level,
given that they contain less than 0.3% of
THC.

Another reason why CBD businesses are considered
high-risk merchants would be the complex
regulations and laws surrounding CBD products,
which include regulations from the FDA.

Qualities
of High-Risk Businesses

Several factors come into play when considering
whether or not a business falls under the
high-risk category. These are what banks and
payment processors consider when determining
risks. Here are several qualities of businesses
that usually get labeled as high-risk:

  • High Chargeback
    Rates
    – Chargebacks are when
    customers request for their transaction to
    be reversed. The payment processors or banks
    will be the ones to process this request,
    therefore requiring more work on their end.
    Industries that usually have high chargeback
    rates aside from CBD businesses include
    electronics, gaming, and health &
    wellness.
  • Poor Credit
    History
    – This is when a
    business fails to pay its bills on time.
    This often goes beyond the business’
    financial situation and can even assess the
    business owner’s credit score.

  • Highly Regulated
    Businesses
    – These are
    businesses governed by numerous laws and
    regulations from various government
    agencies.

What Are
High-Risk Merchant Services And Why Are
They Considered A Solution For CBD
Companies?

High-risk
merchant services
are
considered to be a solution to the challenges of
CBD companies when it comes to payment
processing. It allows high-risk businesses to
accept credit card payments. High-risk merchant
accounts come with higher fees as compared to
those in low-risk businesses. These fees account
for the high potential chargebacks.

There are many benefits to having a high-risk
merchant account. The first is that it offers
different kinds of payments, which allows your
business to offer a variety of payment schemes
while considering the preferences and
convenience of your customers.

Next is that you can transact globally and grow
your business since multiple currencies are
accepted, therefore giving your business access
to a larger market. Another benefit would be
chargeback protection services which protect
them from possible frauds. The fees and reserves
account for the high potential chargebacks.

Things to
Consider When Choosing High-Risk
Merchant Services

Looking for the right partner that offers
high-risk merchant services need not be taxing,
as long as you know what you are looking for.
There are many high-risk merchant services out
there that offer different kinds of services,
which is why you need to find the right one that
can address your needs and preferences. Here are
some things to consider when choosing high-risk
merchant services:

  • Experience &
    expertise 
    – It is
    important to research and find out how long
    the payment gateway has been operating, as
    well as the background information of those
    who lead the company to make sure that they
    are reliable and legitimate. Make sure to
    consider if they have experience with
    merchants in the same industry.
  • Reviews
    Research and read through the reviews of
    their customers regarding their services and
    customer support. These reviews will help
    you decide whether or not you will partner
    with them.
  • Services Offered
    – This includes being open to the
    flexibility and customization of various
    payment schemes you would like to implement
    that matches the needs of your business.
  • Customer Service
    – Customer support agents who are
    responsive and ready to assist you and help
    you address the concerns you may have is
    another important factor to consider.
  • Contract – A
    reasonable and detailed contract that
    explains the terms and conditions, as well
    as the services you will be availing of and
    how long the contract lasts.
  • Pricing
    Transparency
    –  The
    breakdown of fees should be accessible and
    can be easily found on their website. This
    includes all the details and potential costs
    that may be added.

Although CBD businesses face several challenges,
there are also numerous opportunities to look
forward to. Since there are many laws,
regulations, and requirements surrounding CBD
products, starting a CBD business may require
much effort.

When it comes to manufacturing, marketing, and
advertising CBD products, it is essential to
research and learn about these regulations. It
is also important to work with partners who can
help you provide better services to
customers.

High-risk merchant services serve as a great
solution to helping you provide convenient and
hassle-free payment processes to your customers.
Take all these into account, and you’re on your
way to building a successful CBD business!