Nowadays, the cannabis industry is one of the most lucrative for any entrepreneur. It is estimated it will be worth $47.22 billion by 2028.
Despite its exponential growth, CBD businesses still face many challenges in the market, as they are considered high-risk businesses. Because of the legalities and risks associated with the CBD industry, not many banks or financial providers are willing to work with businesses in the CBD market.
This is why CBD businesses need a payment processor who is well-versed in the world of cannabis to help them run their business and provide payment options to their customers.
This blog post will explain in detail how to find a payment processor that is a good fit for a CBD business, so you can be fully prepared to make the right choice.
Is CBD Legal?
The CBD industry is becoming one of the fastest-growing industries in America. This is because of the new regulations brought by the 2018 Farm Bill. This bill legalized all hemp-derived CBD products at the federal level, as long as they contain less than 0.3% THC.
However, this doesn’t mean that the legality of CBD products stays consistent across the entire U.S.
All states have restrictions on the use and sale of CBD products. For example, some states allow only hemp-derived CBD products, some allow higher THC levels than others, and some prohibit adding CBD to beverages and food.
Any CBD business owner needs to know the laws and nuances of the state they plan to operate in to avoid legal trouble.
You can find out more about the legal status of cannabis in each state in this article.
Why Are CBD Businesses Considered High-Risk?
CBD businesses are considered to fall under the category of highly regulated industries. This is because highly regulated companies have the following features:
They are subject to strict rules and regulations.
The government highly regulates them.
They provide highly regulated products.
The business could be subject to severe penalties.
They are a new business or belong to a niche industry.
Any CBD-related business is considered high risk because of the grey legal status of cannabis in the U.S.
While the 2018 Farm Bill loosened some of the regulations on CBD, the legality surrounding the use and sale of CBD products is still complex. For example, it is legal to sell CBD for medical purposes only in some states, while in others, it’s legal to sell CBD products for both medical and recreational purposes.
This is why it’s challenging for CBD businesses to find a bank or payment processor willing to work with them.
Why Should You Use a Payment Processor for Your CBD Business?
A payment processor is a third party involved in your business’ transaction process. They help you manage your customers’ payments by connecting a customer’s bank and the merchant’s account.
CBD businesses are part of the high-risk industry. This is why they need a payment processor like Merrco that understands high-risk businesses to help them with payment methods, facilitate transactions and support their ecommerce business. CBD businesses need a high-risk payment processor to provide:
1. Several Payment Options
CBD payment processors offer payment methods like credit or debit cards, mobile payments, BNPL and many more to make shopping convenient for your customers.
The more payment method options your customers have to choose from, the more likely they will keep returning to your store.
2. Better Customer Support
Payment processors like Merrco provide excellent customer care services like troubleshooting, fraud protection and data security to help your CBD business run smoothly.
In addition, since they are experts in the cannabis industry, the specialists at Merrco will provide you with the support you need to thrive in the CBD space.
3. Simple Payment Integration
New payment methods will have to be integrated into your CBD store, and payment processors can make that integration easy. This will allow for a seamless connection with other payment sectors, such as billing and accounting.
What to Look for in a CBD Payment Processor
As a CBD business owner, you need a payment processor you can trust. Here is a list of features to look for when choosing a payment processor for your CBD business.
CBD businesses are part of a high-risk industry, so your payment processor should be equipped to deal with high-risk transactions. But unfortunately, it is also a relatively new industry, making it prone to fraudulent activities.
When deciding on which payment processor to use, choose one that can offer security and privacy. Additionally, select one willing to take on all the risks associated with a CBD business and has a solid partnership with a reputable bank willing to open high-risk merchant accounts.
CBD businesses may have to pay higher payment processing fees than low-risk businesses. Your chargeback fees could be higher (due to high chargeback risk), but you may also have to consider other costs like statement fees, compliance fees, non-compliance fees, terminal fees and monthly or annual fees.
There are many payment processing companies out there. Conduct your research, book some consultations and compare different payment processing fees to see which one won’t cut into your profit margins.
Running a CBD business is already a time-consuming and challenging task. Therefore, it is vital to find a payment processor that makes payment integration straightforward.
Not all CBD payment processors provide access through an API integration for payment processing, which is beneficial for your CBD business because it is easy to monitor and gives you insights into your sales and how your ecommerce experience is viewed by your customers.
Point-of-Sale (POS) terminals are available to customers who wish to make in-store payments. Choose a payment processor that offers in-store POS solutions to complement online payments.
This helps you increase the number of customers that can buy your products and fosters customer loyalty. In addition, payment processors that offer POS services provide you with another added convenience as you can do it all in one location.
Accepts a Range of Major Credit Card Brands
The use of cash in the world today is slowly declining. According to Travis Credit Union, over 55% of Americans used credit cards for their last purchase.
This decline in the use of cash and increase in credit or debit card payments is the biggest reason you should choose a payment processor that accepts a wide range of credit card brands. This provides your customers with a safer and more convenient cash alternative.
Good Customer Support
Any business can run into problems with payment methods. You need to know how your payment processor will handle these problems if they occur.
Before choosing a payment processor, find out how they operate and solve any problems you might have, as well as how much experience they have in the CBD industry. Keep in mind their customer support is a reflection of your business as well.
Of course, personalized customer service would be the most convenient option, but it does tend to be more expensive. Make sure to choose a payment processor service that fits within your budget.
Every CBD business has to make tough decisions when choosing a suitable payment processor. All payment processors are different and come with their pros and cons.
So, before you select a payment processor for your CBD business, take the time to do your research and ensure the one you choose helps you navigate this high-risk industry and meets your business goals.
How Can Merrco Help?
Merrco is an experienced payment processor that offers cutting-edge, secure payment solutions to cannabis and CBD businesses. Our expertise in the cannabis industry allows us to provide intelligent solutions and high-quality customer service to meet the needs of CBD business owners in both Canada and the U.S.
If you have any questions on how we can best help your business, please email us at firstname.lastname@example.org or call us on our toll-free line at 1-800-957-0534.