What to Look for in a CBD Payment Processing Gateway

It’s an exciting time to be a CBD merchant, but the process of finding an effective payment processing solution as a “high-risk business” is proving to be a complicated process.

The domestic CBD industry has seen an explosion in sales in recent years. The health and wellness phenomenon has brick-and-mortar shops springing up all over the country, trying to keep pace with demand. The popularity of CBD shows no signs of slowing down, and the evidence is painted clearly in the number. In the U.S. alone, total expected revenue from CBD sales is projected to reach at least $16 billion by 2025. The pandemic did little to slow this bustling market, and projections remain bullish on its potential.

Moreover, the pandemic has given way to a CBD e-commerce market that is one of the fastest growing in the world. With consumer demand at an all-time high, it makes sense that online CBD merchants are scrambling to supply CBD products like supplements, oils, and skincare products to an ever-expanding flurry of curious customers. It’s an exciting time to be a CBD merchant, but the process of finding an effective payment processing solution as a “high-risk business” is proving to be a complicated process.

What is CBD and Why is it Challenging to Process?

Cannabinoid (or “CBD”) products are derived directly from hemp plants (it is important to make the clear distinction between hemp-derived product as opposed to a product derived from THC). Ultimately, this hemp-derived cannabinoid, or “CBD,” has been ruled to be legal to be sold within the United States after the 2018 Farm Bill was passed and removed hemp from the Controlled Substances Act. However, several logistical hurdles have placed a damper on the influx of interest and revenue that CBD has been generating over the past several years.

As it stands now, CBD products exist in the realm of a legal grey area. The Food and Drug Administration (FDA) has hesitated to back it with full approval due to its problematic association with illegal Cannabis plants. Confusing state laws, enhanced risk of fraudulent transactions, and overall regulatory uncertainty can make transactions incredibly complicated for merchants to manage in an area where legal and logistical uncertainty reigns supreme. The FDA still firmly regulates and monitors CBD merchants and CBD transactions, but it is going to take some time for the legal carousal to reach a resolution.

Unfortunately, this complicated legal and federal framework casts a bit of a shadow over CBD products that may make it tough for major banking companies and payment processors to ignore for the foreseeable future. Until FDA regulations are firmed up and health claims are properly substantiated, the CBD market will have to continue to categorically operate as a high-risk business.

However, recognizing what a high-risk industry entails allows you to search for a payment processor that is suited to assist you and ensure that as a merchant you’re placed in the best position to succeed within a competitive marketplace.

How Should CBD Merchants Operate as High-Risk Businesses?

Regulatory uncertainty presents complicated logistical problems to merchants who may not know how to deal with certain laws and stout regulations. It is important for CBD merchants to ensure that their payment transactions are completely secure. Indeed, businesses operating within the high-risk sector need to invest in a reputable high-risk processor that is equipped to deal with industries that inherently operate with elevated risk associated with them.

Extensive experience with successfully processing high-risk transactions is highly valuable to CBD merchants because the market, as new and as successful as it is, can be prone to fraudulent transaction risks and scams. Fraud protection and general assurance and faith in a payment processor pays dividends by letting merchants devote their focus entirely towards serving consumers. The CBD market is rapidly expanding and a highly competitive race — getting a leg up on competition by doubling down on your security puts you in the driver’s seat.

What Should Merchants Look for in a CBD Payment Processor?

Finding a reliable payment processor to handle transactions within a high-risk like the CBD industry can lead to what seems like a never-ending series of fits and starts. Many banks and processors will turn CBD merchants away completely, while others will attempt to exploit them with obscene fees and shady business practices.

Even so, CBD merchants do have options. Many secure and reliable payment processors are not only dedicated to resolving any issues that may arise with high-risk transactions but are also built to handle the scale that comes with the exploding popularity of industries like CBD.

Indeed, the federal and legal standstill that is impacting the CBD industry will not last forever. Just like with any other industry, CBD merchants need to be prepared for the sudden explosion of sales that many analysts are projecting. Loosening restrictions presents a great opportunity for CBD merchants to take advantage of the next potential “boom,” but only if they have a platform in place that is ready for it. Partnering with a payment processor that is built with infinite scalability and future growth in mind is the smartest practice for a market dominated by e-commerce and the appeal of convenience.

CBD merchants find themselves in a privileged position to especially reap the benefits of an exploding market, but that also means having to be especially ready to offer consumers a diverse set of incentives to shop with them. A wide range of assets that a good payment processor should provide includes:

  • Seamless Integration: Merchants need to be able to set themselves apart from the rest of their competition. Simple and fast integration into a feature-rich API library gives merchants plenty of options.
  • Reasonable Fees: Many payment processors will try to weaponize the high-risk nature of the CBD industry to trick merchants into paying hefty fees and confusing them with accounting issues. While high-risk business accounts generally have higher upfront pricing, make sure that your payment processing choice offers the affordability and convenience that matches your business needs.
  • Security and Customer Service: A great payment processing company needs to be built to handle major transaction issues, including those stemming from fraud and scams. These companies will work with merchants directly and be readily available to cater to their needs.

Finding the Right Payment Processor to Fit Your Needs

A proper payment processing partner that is well-suited to work with high-risk CBD merchants can scale business and set up long-term success — with profitability and longevity in mind. It is a business best practice and a necessity for CBD merchants to consider a partner that is built to protect them in today’s rapidly changing marketplace, not only within the CBD industry but in the payment processing industry at large.

Agile Financial Systems is ready to tackle the high-risk nature of CBD payment processing by offering innovative solutions that are reliable and built to ensure growth.

Are you an agent or merchant interested in partnering with AFS? CBD resellers can now take advantage of the AFS payment processing platform. Click here to learn more.

Are you an independent agent with CBD merchants? Sign up here to learn more about our CBD processing solutions.

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