The passage of the 2018 Farm Bill has proven to have a monumental impact on a variety of sectors of the American economy. One of the biggest impacts of the passage of that bill was the legalization of CBD. Since that time, the popularity of cannabidiol has exploded, with an estimated 1 in 3 Americans having tried the substance. This has led to an explosion of growth within various businesses related to CBD, including agriculture, farming, processing, and retail.
That growth has not come without some serious financial challenges. Despite its status as a legal supplement that can be purchased and sold anywhere in the United States – and despite ongoing efforts by the FDA to ensure the product’s safety – many credit card processors are reluctant to engage with CBD vendors. This has resulted in CBD earning a high-risk business classification. This has created real challenges for the CBD industry, as it has made it harder for them to access the basic tools of business that they need to survive and thrive. Accepting credit cards isn’t optional for any business these days, and you will have to do whatever it takes to gain access to these popular forms of payment.
This doesn’t mean a CBD vendor can’t start a CBD merchant account, but it makes it harder. As a result, many merchants are now looking for an alternative to merchant accounts for CBD. This means you will have to find a merchant account processor with specific experience in high-risk areas. Bankcard is among the best of these companies and has worked specifically with CBD vendors to start the merchant accounts they need. With years of experience working with various high-risk industries, Bankcard can help your business open the merchant account you deserve.
What Does a High-Risk Classification Mean for a CBD Merchant Account?
A high-risk classification comes with a series of challenges, and the fact that CBD merchant needs a high-risk merchant account helps explain why many CBD merchants are wondering where they can get a CBD merchant account.
These challenges can be difficult to overcome, as they may force your CBD business to spend more time applying for a merchant account, filling out online applications, and providing additional records. You will likely also be expected to provide additional information about your previous credit card processing history, bank statements, and credit history. Most importantly: You will lose money on every credit card transaction, particularly when compared to a low-risk business. Account approval is still possible, but business owners should expect to spend extra time trying to earn it.
The biggest challenge with a high-risk classification is the added fees. Normal credit card fees for credit card processing range from 1.15-3%. High-risk fees will be higher. This hurts your bottom line. Depending on the credit card and processor you use, you may also face an issue with high flat fees on each transaction you make.
These fees are not limited to credit card transactions. You will also have to pay higher fees when there is a chargeback. Chargebacks are refunds that a customer requests. Chargebacks can occur for many reasons, but customer dissatisfaction, confusion, or fraud are among the top reasons. If you operate in an industry where any of these incidents have a higher likelihood than normal, you are more likely to be classified as high-risk.
There are also higher cash reserve requirements. Every merchant account will keep some sort of cash reserve. This is meant to ensure that they will have adequate cash to process refunds. If you are a high-risk vendor, you’ll have to maintain higher cash reserves with your vendor. This means you will get less money from every transaction you complete.
What Might CBD Businesses Be Affected?
You may need a CBD merchant account if you sell CBD or CBD products. You may also face a high-risk classification even if you do more than just sell CBD. Businesses that could be impacted include:
- Convenience stores that sell CBD products
- Smoke shops
- Nutritional stores that sell CBD goods
- Websites that sell CBD or any CBD product
As you can see, being a high-risk merchant doesn’t mean that your business exclusively sells CBD. It may mean that you deal with a slew of other products.
If you are in these businesses, the odds are good that you will have a high-risk classification. This will have a variety of impacts on your business and line of work. Credit card processors like Bankcard can help you deal with these issues and ensure that you can still process credit card transactions at affordable prices.
Where are CBD Merchants Getting Their Merchant Accounts?
To find an alternative to merchant accounts for CBD, many CBD vendors are turning to high-risk vendors.
A high-risk vendor is necessary as a result of regulations and reputational challenges. As a newer industry, CBD is largely misunderstood. Many banks and financial institutions confuse it with THC, cannabis, or marijuana, even though legally sold CBD oil contains trace amounts of THC (at the most). It isn’t related to marijuana. This increases the need for you to find a credit card processor who understands what your industry involves and what it doesn’t. Unfortunately, as many CBD vendors know, this can make it extremely difficult to find a merchant account processor who can do business with them.
These challenges for CBD shops are real. Many vendors automatically assume that it’s an illegal substance and place stricter regulations on it – if they do business with it. As such, you need an alternative to merchant accounts for CBD.
The actions of some CBD vendors haven’t helped the situation, as the CBD industry is replete with individuals who defraud consumers. Stronger governmental regulations may help alleviate these problems, but until then, many merchant account vendors will struggle to manage CBD-related concerns.
What Services Does a CBD Merchant Account Need?
Part of the reason that finding a CBD merchant account is so difficult is all the services you will still need.
The most obvious of these is payment processing. Having a high-risk payment gateway means being able to charge a Mastercard, Visa, or debit card. When you use a payment processing service, you’ll want to find out what cards they take, what fees there are, and how quickly you will get the money charged to the customer’s card.
This may be the most basic service your CBD merchant account will need, but it barely scratches the surface of your credit card needs. This is particularly the case for the CBD business, which may have a more diverse and eclectic customers than many other businesses. Many CBD functions are Internet-based, and you may sell an extensive amount of products through your website. This means you will need to have online payment options that can provide you with eCommerce tools. You will need an online payment processor that allows you to make orders and ship those orders. This eCommerce function should also work with various online merchants, including PayPal, Stripe, Shopify, and more.
Another component of online payments that must be considered is ACH payments. ACH payments involve moving money directly from one bank to another. Depending on your business model or how much CBD you sell, you may find that using ACH to accept payment is a worthwhile investment of your time and money. As such, it’s worth checking whether or not your merchant account providers offer this tool and what the fees for its use may be.
You may also find that your need for robust processing solutions extends to various other areas. For example, cryptocurrency is becoming a much more popular way of processing payments and ensuring people can buy certain products. Many other CBD vendors are now taking cryptocurrency, and to keep up with your competition, you may find the need to do the same. As such, it’s unquestionably worth investigating whether or not your CBD merchant processing vendor will take cryptocurrency. If they do, you’ll have to determine the fees. You will also need to ensure that they take a diverse array of crypto, not just Bitcoin, which is currently the most popular form.
If you have a traditional brick-and-mortar store, you will need to ensure that you have payment processing solutions that can also handle in-person transactions. This means having a point of sale (POS) machine. These POS systems must integrate with your inventory and other accounting software. Furthermore, you’ll have to ensure that you have access to the customer service support you may need in this business. If a machine breaks, how quickly can it be repaired? How much will repairs cost your business?
Despite their shrinking popularity, many individuals still use checks or eChecks for payment. Your business must have a system in place that allows for these financial methods to be processed. This is particularly the case if you have a website or a store that appeals to CBD’s growing older demographic.
What Does My CBD Merchant Account Need?
The list above delineates some of the basic services you would expect from any CBD payment processor. However, you need more if you are looking for an alternative to merchant accounts for CBD. You will also need a vendor with the right attitude – someone who can provide you with all of the desired services but is also constantly keeping an eye out for better ways to serve you that extend well beyond traditional customer service. Again, this can be a challenge, but it is not insurmountable.
You need an alternative vendor who can go above and beyond your basic needs. Customer support is critical for any merchant account processor. You will have to ensure that your merchant account processor is completely dedicated to fulfilling your needs and addressing any challenges you may have in your business. They should have 24/7 support and quick response. After all, if you have a problem processing a credit card, your business may be unable to earn money until these issues are resolved.
You also need to ensure that you have a merchant account processor that can integrate with various other services. Remember, the meaning of integration is a broad one. On the one hand, there are basic concerns: Your merchant account vendor must be able to integrate with your already existing processing software. If you have accounts with other vendors, they need to be able to easily log in to those accounts, access your data, and make the appropriate changes to allow for your secure payments to continue to process.
This isn’t enough, and if you want a good merchant account processor, they need to provide you with more.
Integration must also exist with your existing accounting and marketing software. You should be able to easily access any payment records and make sure that you can export the necessary data. This ensures that you will still have secure access to your financial records. Furthermore, you’ll need to ensure you can access customer contact data. This includes a customer’s name, address, phone, email, and more. When used properly, merchant accounting software can integrate with your marketing efforts. This can give you a huge boost that can better enable you to connect with your customers, providing them information about goods, services, and future offerings.
Bankcard Can Provide You With the Merchant Account Services You Need
If you need merchant account services, then you need the best. You need a business with years of experience in this area, first-rate customer service, and the ability to meet your growing needs. That’s Bankcard. Bankcard is proud to serve as your strategic partner in business and will work with you to ensure that your various financial needs are met. Have a question? Want to know more? Contact us today.