Benefits of Using High-Risk Merchant Services for your CBD Company
Cannabidiol (CBD) is a compound derived from Cannabis sativa plants like marijuana and hemp. It is now known for its calming, pain-relieving, antioxidant, and anti-inflammatory benefits.
In the market, we can see so much variety in CBD for sale—from oils, tinctures, lotions, balms, and gummies to vapes, concentrates, and so many more. As the industry grows, more and more people are seeing the potential of CBD.
CBD Regulations By The Food And Drug Administration
The legalization of CBD is because of the 2018 Farm Bill, signed into law by Donald Trump. This law differentiated hemp and all its derivatives from other cannabis plants and removed it from the definition of marijuana in the Controlled Substances Act (CSA).
The 2018 Farm Bill also preserved The Food and Drug Administration’s (FDA) authority over CBD or hemp products. This means that every CBD product must adhere to FDA’s standards and regulations in place.
To properly regulate CBD products in the market, the FDA requires that all products must only contain up to 0.3% THC (tetrahydrocannabinol – the main psychoactive ingredient in cannabis plants). Manufacturers must also be keen on labeling and advertising CBD products so that all claims will be truthful and transparent to the users.
CBD as a High-Risk Industry
Since the legalization of the CBD industry has only been recent, the lines around it are still blurry. The regulations are still vague and are still changing as authorities learn more about them.
For example, marijuana is still illegal, but the only difference with hemp is that it contains more THC compounds, but they look, smell, and feel almost the same. Aside from this, there are still so many misconceptions and confusion between the two among CBD consumers; that’s why CBD products are prone to more disputes and legal concerns.
The government and financial institutions labeled the CBD industry as high-risk because of this. High-risk industries tend to attract a large number of commercial disputes and legal restrictions, and they involve a massive risk for all three parties which are the buyer, seller, and the financial institution.
High-Risk Merchant Accounts
All payment processing institutions assume the risk for every transaction. If there are any chargebacks, disputes, or fraudulent charges and the company does not have enough funds to cover them, the payment merchant account is responsible for reimbursing the cardholder.
Payment institutions would like to minimize these instances so most traditional merchants would put transaction limits in place or deny service to high-risk industries completely. These companies should opt for high-risk merchant accounts.
High-risk merchant accounts are payment processors that have a set strategy to deal with these risks and make sure that companies don’t face the possibility of account termination because of it.
Benefits Of Using A High-Risk Merchant Account
High-risk merchant accounts are specifically made for high-risk industries. Here are some ways high-risk companies can benefit from high-risk merchant accounts:
Global Expansion Opportunities
High-risk merchant accounts are open to transactions outside the country that the company originated from. This opens up opportunities to expand the business market to a lot more people.
Taking the business online is also possible as transacting in multiple currencies is allowed by high-risk merchant accounts. Business owners can take advantage of this to reach more customers and gain more profit through the internet.
Tight Security Strategies
These payment processors have a set strategy to detect fraudulent transactions or accounts. Preventive measures are important for both the company and the financial institution. When you apply these measures, you can reduce risks. Additionally, it helps minimize disputes on the business, the payment merchant account, and the card’s original owner.
Flexible Payment Options
Most high-risk merchant accounts are open to flexible and customizable payment options that will suit the needs of the business and customers. They allow companies to accept different types of payments from their clients. Aside from this, high-risk merchant accounts do not limit transactions per month, so companies have the liberty of selling as many products as the business needs.
Chargebacks are one of the most common problems high-risk industries face. This is also the main reason why high-risk merchant accounts are the best option for the CBD industry.
An excessive amount of chargebacks may lead to account termination for traditional payment processors. However, high-risk merchant accounts ask for a reserve fund that would be the safety net for all cases of chargebacks and disputes. The reserve fund may entail an additional cost, but it is necessary for sustaining the business and keeping it afloat.
Any business venture entails a risk of disputes and fraud. With the CBD industry being labeled as high-risk and with all the changes it still undergoes, it is best to partner with CBD high-risk merchant accounts that can deal with these charges effectively and offer options that will benefit the business in the long run.