Cannabidiol also is known as CBD has become popular over the last few years for its various benefits not only for human beings but also for pets as well. Due to CBD’s medicinal benefits, it has played a large part in the medical field for treatments of various diseases. Previously, CBD together with Marijuana was considered as a Schedule I drug by the United States Drug Enforcement Administration which is the most restrictive class of controlled substances and is considered highly addictive and has no medical value. Just last September, the classification of prescribed CBD has lowered to Schedule 5 drug with some guidelines that the THC or tetrahydrocannabinol content of the CBD must be below 0.1% and required to be FDA approved. Drugs classified as Schedule 5 are generally pain reliever and anti-diarrheal medications that have a low potential for abuse.
Even after the reclassification, CBD is still seen as high risk mainly because of its association with marijuana which is not yet legal worldwide. Although the demand and usage for CBD are on the rise, CBD merchants face difficulty in finding a reliable CBD merchant account provider. It is vital for CBD retailers to have a CBD Payment Gateway to be able to offer credit card processing for customers that aids in quick and easy checkout services for the clients. On top of this, merchant account for CBD provides other services such as assistance in e-commerce, online payments, ACH processing, and even chargeback management and fraud prevention thus, enabling the CBD business to grow further.
How to get a CBD merchant account?
There are factors that affect the approval of a merchant account for CBD and approvals are done on a case-by-case basis dependent on the submitted KYC documents and the financial history of the applying CBD business. A few things can be done by the merchants to increase the chances of opening a merchant account for CBD.
1. A good credit card history must be maintained both for business owners and for the company itself. There should be no overdraft fees or any history of low balances to have the best chance of getting a CBD merchant account.
2. The processing volumes must be stable and must have a large volume of transactions to show the merchant account providers that the business is worth the investment and makes them want to invest more. Providing a 3 to 6 months payment processing history can also be helpful and ensures faster approval.
3. The CBD business must comply with existing laws and regulations. Even before the start of the business, the permits must be checked for the legality of selling CBD or CBD related products.
The key to finding the right CBD merchant account provider to give the necessary merchant services is for merchants to ask for the right questions and to look for providers that specialize in the CBD industry.
The reclassification of CBD is a good sign that there has been a growing acceptance for cannabis business. On the other hand, there is also a steady increase in the demand for legal marijuana in the market and many entrepreneurs are attracted for the possibility of great profits. Although a lucrative business, there are numerous challenges that a merchant will face in operating a marijuana business.
- The classification of marijuana under federal law is Schedule I drug whereas restrictive policies and regulations are imposed making sellers vulnerable to potential federal investigations, probable prosecutions and also possible dispensary shutdown.
- Marijuana sellers pay higher sales taxes which add up to the financial burden of the company and also reduces profit margins for the business.
- Payment processing solutions (other than cash payments) remain to be elusive for the marijuana industry as a whole.
Many entrepreneurs are hopeful to be able to get medical marijuana merchant accounts for their businesses. In the United States where marijuana is considered illegal by the US Federal Government, there is no domestic solutions that can be provided for medical marijuana merchants as major credit card processors such as Visa, MasterCard, Discover, and American Express forbids marijuana payment processing on their network leaving merchants having no access to credit card processing even for medical marijuana. Credit card processing remains virtually non-existent and marijuana merchants are then forced to accept cash transactions limiting the payment options for customers. Cash transactions are risky for both the customer and the merchant as they may be targeted by thieves. Some customers do not carry a lot of money and prefer paying with the card.
However, there are some high risk merchant account providers that are able to find alternative ways for marijuana businesses to accept payments that is helpful to keep the business running smoothly and profitable.
- Pin debit transactions are also a great option which allows the customers to make purchases by using their debit card just like what they would at a grocery store through Pin debit processing services.
- Another alternative for receiving payments is through substitute checks which are basically an electronic copy of a paper check. But there are risks associated with this mode of accepting payments such as getting bad checks and high return ratio.
There are also other options but are seen to be riskier such as
1. One alternative payment solution to the marijuana merchants is for them to use an aggregate merchant account through offshore banking partners that have a shared billing descriptor to be able to process credit card payments. A generic billing description can add up to chargeback ratio as cardholders cannot easily identify their purchases.
3. Using cryptocurrencies is one popular way to accept payments for medical marijuana companies. But seen as prone to money laundering.
Even though the marijuana business remains to be a delicate thing for acquiring banks, providers are still hopeful for the possibility of offering domestic solutions in the very near future as there are growing lists of states that are joining the legalization of marijuana for both medical and recreational purposes together with the changes in regulations.
Applying For An iPayTotal CBD merchant account Is Easy
We wish to have a discussion with CBD merchants to begin. Along these lines, with a couple of inquiries concerning your business and no more than 10 minutes of your time, our account managers can get a feel for your business and know which of our CBD merchant account solutions is perfect for you.
iPayTotal merchant account solutions are customizable and ideal for any legal CBD business. For more information on how you can apply for an online CBD merchant account, call us directly at +44 800 776 5988 or get in touch with us through our website.