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

High-Risk Merchants
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!