The 2008 market crash showed how risky any business model could be. You do not have to be a stock broker, a finance major, or a marketing genius to understand how to look and analyze the market you want to rule. In recent years the Cannabidiol industry saw a skyrocketing boom when a new extract of CBD came into the market. It did not take much time for people to realize that it’s the next big thing. Moreover, with the pandemic making everything online, it became clear that the future is online. So business and cannabis enthusiasts noticed this gap in the market and decided to do something about it. Little did they know about the grey area of the legality of a CBD product. It did not take much time for businesses to realize that they need the best CBD merchant account to handle and streamline their business for optimal functioning in the market.
What is a High-Risk CBD Merchant Account?
CBD companies or merchants are at high risk because it revolves around a high-risk industry. Despite the reluctant research and unbelievable efforts from cannabis enthusiasts, the true nature of the drug lies in the grey area, which in turn drags its legality into the same spectrum. Despite being used since ancient times, the plant is still struggling to find its place in the green section of the law book. The status differs based on the state and country of its maneuvering. Due to this unique case, the payment processor labels the business or industry as a high-risk industry as they tend to be at a higher risk for chargebacks, fraud, or a high volume of returns. Due to this, the merchants have to pay higher per transaction than merchants whose businesses do not lie in this high-risk section.
Why Best CBD Merchant Accounts Associate With High Risk?
If you are new to the whole CBD business, then you are probably scratching your head, wondering, “Why is it that if the sale of these products is legal, and how come merchants have to pay more than they are supposed to?” A very valid question. Therefore we have provided legal and logical reasons that will save you lots of time and help you understand how your fellow competitors navigate their business in this cut-throat market.
- Layered laws and stringent regulations – As mentioned, the laws related to the CBD industry have always been in the grey area. Depending on the country, state, or region, the regulations change. In most countries, they are illegal; in others, they work in a very discrete and low-key manner. In both these cases, people who want to associate with the product do not let themselves stop using these things. In the USA, after the introduction of the farm bill, more leniency came into the industry.
- Negative Social Impressions – Despite being one of the oldest herbs used for medicinal and recreational purposes, the CBD compound still finds it very hard to find a place in modern medicine. There has been some great news, thanks to long research studies that helped make a case for the compound, but it still is not enough for the drug to change sides in the legal area. After the partial legalization of the drug, people still associate it with something harmful and disruptive. These assumptions are not based on factual data but on belief systems that they have since their childhood. It harms the rapport of the industry and the businesses that associate with it.
- Higher Risk of Chargebacks – A chargeback is a charge returned to the payment card after the customer successfully disputes an item on their account statement or in their transactions report. How chargebacks fit themselves into the CBD industry is a bit of a tricky process. The CBD industry is new and is still growing. It makes the transactions a bit tricky at times. Research is still in the ideation phase, and the true impact of the compound is not well established. This uncertainty about the product leads to the customer getting cold feet and applying for a chargeback. Customers who find themselves not satisfied instantly file for a chargeback.
- Tiresome and long licensing process – It took many years for the law to make CBD legal. But if you want to get some revenue out of it, you will have to get a license. A license will help you with your legal matters and grant you the freedom to sell and purchase the apparatus you need to create your product. Thus, before you get to the good part, you will need to do some homework to get your license. Obtaining a License for CBD sale is a long process involving applications and other costs. The average waiting period is somewhere around 8-9 months. On the other hand, the entire process becomes even more difficult when you want to apply for a loan from a bank.
The cartwheel of the CBD industry is racing towards a fruitful destination. However, if you want to keep yourself safe from these scams, chargebacks, and other problems, you will need the help of a CDB merchant account. The business of CBD is a high-risk business; the sooner you accept the fact and roll with the punches, the better it will be for your business. In truth, a high-risk merchant account protects your business in numerous ways. So when you jump into the market to find your perfect payment processor, remember to gravitate toward a company that caters to a similar clientele. It will help you understand how your competitors tackle the problems in the market. How can you learn from their strategies? It is necessary to understand the market and various businesses associated with it. It will help you create an effective marketing strategy and help you understand the tactics needed to sustain in this ever-changing market.