The CBD industry continues to grow in leaps and bounds. With more countries passing laws legalizing the use of marijuana and other CBD products for medical and wellness reasons. The opportunities seem endless and having the proper cannabis payment processing solution is crucial for success. Dispensary credit card processing solutions and cashless ATM payments by SecureGlobalPay.
According to a report, 36 states and the District of Columbia have endorsed medical marijuana. While the remaining 14 states have passed laws permitting the use of cannabidiol in oil form for the treatment of epilepsy.
The popularity of CBD products has also been embraced by over 47 countries around the world including: Canada, Mexico, Japan, Russia, South Africa, Costa Rica and India.
There is an ever increasing demand for CBD products. And this can be confirmed with a simple Google search.
A search for “CBD products for sale online” turns up tons of results ranging from skincare to pain relief items.
Statistics estimate projected sales in the cannabis industry to hit $90.4 billion by the year 2026. This is due to an expectant growth rate of 28% annually.
The industry definitely holds a promising future for people looking to operate and profit from CBD businesses. In the long term, having the proper marijuana merchant account is equally important as having the proper bank account.
But like with every other venture, there are challenges that need to be addressed for business owners to succeed.
Challenges the CBD Industry is Facing
In today’s business world, customers appreciate speed and convenience when shopping for products and services.
People do not carry cash around anymore, instead, they prefer using cashless ATM or contactless payment options. This is the reason why every business needs to open a merchant account and accept credit and debit cards.
While for some businesses, opening a merchant account is a straightforward process, it is not as easy for anyone doing business in the CBD industry that wishes to have a solid cannabis merchant account and processing relationships established.
People looking to operate a marijuana or cannabis related business, simply cannot enter into a bank and open a merchant account.
Due to this setback, only dispensary credit card processing companies are in a position to help CBD businesses accept payments with cashless ATM’s.
But why are banking institutions turning down the opportunity to provide cannabis payment processing solutions and work with businesses in the CBD industry?
The reason is because they are considered high risk.
A business is considered high risk due to a huge percentage rate of chargebacks, unstable legal regulations and a massive amount of fraud cases.
CBD related businesses are not the only businesses in this category. Other businesses considered high risk include: real estate, tobacco, dating, antiques, travel, gambling, gun sales and adult entertainment.
Federal Laws & Financial Institutions
Many state laws allow the use, sale and possession of cannabis, but it is illegal under federal law.
Banks are regulated by federal law and have to abide by the Controlled Substances Act—a U.S. drug policy that does not recognize the lawful use and possession of certain narcotics and stimulants like cannabis. This is another reason why banking institutions choose to stay away from the CBD industry.
On the other hand, credit card companies are not regulated by federal banking laws, however their policies which border on transactional issues and public perception, stops them from having any dealings with CBD products.
Card processing companies desperate for business can often try to cut corners by diverting payments to accept credit cards offshore, but this can be expensive. Occasionally, they will try and board these merchants in a different business classification just to get them approved. This never ends well.
Too many reversed payments and disputes come along with offshore transactions. Instead of a business making profit, it is recording losses with a considerable chunk taken out of revenue to refund customers back.
Other payment processing companies use misleading tactics by claiming CBD businesses are low risk businesses. This hardly works and it is only a matter of time before such shady schemes are discovered.
Businesses that resort to this illegal practice only end up losing their licenses and getting blacklisted. It becomes an almost impossible task to get another business approved.
The U.S. Government and Charlotte Figi
The legalization of cannabis for medicinal purposes started in the late 90’s with Washington, Hawaii, Alaska, Maine, Colorado, Oregon and Nevada being the first states to take a tolerant stand.
This medical awareness exploded in 2004, when Charlotte Figi, a young girl with Dravet syndrome became almost seizure-free after using Cannabidiol oil. Before using CBD oil as treatment, Figi used to have as many as 300 seizures in a week.
In 2018, the Farm Bill was passed which legalized hemp at the federal level, putting it alongside other agricultural crops like corn and soyabeans.
This change allowed researchers to study certain derivatives of the cannabis plant and see if they could be used in the development of new drugs.
In light of this, the U.S Departments of Treasury and Justice went ahead to instruct credit unions and banks to provide services to the CBD industry.
Additional federal support for the industry in the shape of the Secure and Fair Enforcement (SAFE) Banking Act was passed in the house.
But financial institutions have held their ground and choose to still stay away from the high risk cannabis industry.
The popularity of CBD products may be growing. But the controversies, legal differences across federal and state lines as well as the fear that these products can be easily abused remain.
Dispensary Credit Card Processing Solution
Despite all these setbacks, billions of dollars are still being generated from the industry.
And now with states like Washington and Colorado allowing laws for marijuana to be smoked even for leisure purposes, the demand for CBD products will only continue to rise and rise.
It is not surprising that payment processing companies focusing on high risk industries have emerged in the absence of other institutions afraid of the risks involved.
These CBD merchant account companies know the terrain. They have developed their operations around federal and state laws. These unique cannabis payment processing providers know all the card network regulations related to processing high risk transactions.
Dispensary card processing companies provide safe gateways for cannabis businesses to accept cashless payment from customers.
This good development allows business owners to take their ventures online and boost revenue by selling products or services locally and internationally.
Dispensary credit card payment processing companies are aware of the high risks in the cannabis industry. That is why they have preventive tools in place to reduce transaction disputes and protect customers from fraudulent activities.
While banks and other financial institutions have turned down the opportunity to offer their services to the lucrative CBD industry, dispensary credit card processing companies have shown a willingness to run with the risk.
Choosing a Dispensary Credit Card Processor
Always do your research before taking a final decision on a dispensary credit card processing service.
Here are a few things to consider before choosing a high risk merchant service that is best suited for your CBD business
- Experience and Reputation: One important thing to consider when choosing a dispensary credit card processor is knowledge and expertise. This is the right way to determine if a high risk merchant service actually knows exactly what they are doing.
- Customer support and service: Always consider a cannabis credit card processing company that is available 24/7 to assist you. CBD businesses require close supervision because of the confusing regulations involved. The right provider should always be on hand to help with inquiries.
- Payment options: Credit cards, debit cards, echecks, gift cards and even pay later facilities are all payment alternatives associated with a high risk merchant account. The right payment provider should be able to provide multiple payment options for your CBD business including cashless ATM machines.
A Harris Poll, carried out among 2000 people showed that 44% of the respondents preferred making payments with debit cards. This is clearly against the popular opinion that 99% of Americans make payments with their credit cards.
- Fee transparency: High risk services cost more than the average payment processor. This does not mean that additional fees should be included without your knowledge. A full disclosure and breakdown of fees should always be brought to your attention. It should be in line with the terms and agreement of the services being provided.
Setting up a CBD merchant account is a compulsory requirement for anyone looking to flourish in this market space. With all the options for credit card processing solutions available, make sure to do your due diligence and choose wisely.
Without the services of a dispensary credit card processing company, business owners will struggle to stay afloat as well as lose customers to their competition.
Applying for a cashless ATM merchant account from a high risk merchant account provider is a straightforward process. Applications can be made online and processed within 24 hours. A cannabis related merchant account will take a bit longer.
Accept credit cards, debit cards and cashless ATM payments for all your cannabis related products and services. Credit card processing solutions that make sense – SecureGlobalPay!