CBD is an abbreviation for cannabidiol, which is a chemical compound found in cannabis plants. CBD does not contain tetrahydrocannabinol, also known as THC, which is the psychoactive ingredient in marijana that produces a high. CBD does not have an intoxicating effect on those who consume or inhale it, and it may have therapeutic effects.
In recent years, CBD has become a sought after product in the health and wellness industry, for both humans as well as pets. It is sold as a supplement in forms such as CBD oil or vape fluids, and is often infused in various products such as food-stuffs for humans and pets.
Society has a very complex relationship with cannabis plants, to say the least. There are several varieties of plants, such as hemp and marijuana. Some varieties produce intoxicating compounds, others not. Hemp is used in a multitude of products from textiles to car parts.
However, because of the intoxicating effects, the plants have long been lumped together, considered taboo and outlawed in most of the western world. There are a great many negative perceptions around cannabis in general.
Of course, times change. In some jurisdictions the use of CBD or marijuana for recreational or medical purposes has been decriminalized, with obviously some regulations, and stigma is easing. In February 2022, South African President Cyril Ramaposa announced plans to industrialize the hemp and cannabis sector in a bid to attract foreign investment and create as many as 130,000 jobs. With the medical cannabis market alone worth $7.8 billion in 2020 and expanding year on year there is definitely a growing demand, and emerging markets are looking to this novel industry to create economic growth.
A non-medical product like CBD is in an interesting position. It may or may not be considered a drug, depending on where you are. It is very difficult to run extended tests on a substance that is illegal, so there are not many studies relating to the use and effects of CBD. Therefore it is difficult to regulate something that can’t be tested. Legislation is complex and contradictory. It may be perfectly legal to sell CBD in one state, but not in the next. It may be legal to sell it, but it may not be legal for a bank to provide you with services for the proceeds from the sale of it. You may be able to buy CBD biscuits for your dog, but your veterinarian could lose their license if they even mention it to you. You may need a license to sell it in some areas, but not others. Complex indeed.
CBD merchants are considered high risk by banks and the payment industry, for several reasons, including:
- It is a relatively new industry
- The laws regarding it may be complex and changing
- The industry has a high chargeback rate
Of course, other factors such as financial history may also come into play in being classified as high risk.
Because of the complexities, many payment aggregators flat out refuse their services to CBD merchants. And it’s not just the aggregators, many payment processors also make their services unavailable to sellers of CBD products.
So – does this mean you have no hope in hell of selling your CBD infused peanut butter for dogs online? Luckily it does not! You do need to consider more than one aspect of your financial partners, though. You firstly need to ensure that your bank will permit you to bank the proceeds of CBD products, and secondly you need a payment processor or facilitator that will also allow transactions of this nature. It is all well and good to have a payment partner who will allow you to do the online transactions for these products, but if you can’t put the money somewhere you have a problem.
There are specialist providers who can assist you with merchant services for the selling of CBD products. Yes, high risk services cost more than lower risk industries, that goes without saying. But there is a lot more to choosing a provider than the cost alone. Choosing the cheapest price without looking at other aspects can cost you dearly in the long run.
When seeking a payment partner, don’t just rush to sign up with the first one you come across. Here are some things to consider when choosing a provider:
- Do they have the experience and expertise that you need?
- Do they have good reviews in the industry?
- Do they offer the payment flexibility that you need?
- Do they have excellent customer service?
- Do they offer transparent pricing structures with no surprise hidden fees?
- Do they lock you into a contract or do they offer flexible options such as month to month plans?
- Do they assist with chargebacks?
- Do they have clear and easy to read contracts and documents that explain what happens if your account is terminated or placed on hold?
CBD businesses do indeed face interesting challenges at this time. But with this new and evolving industry new opportunities are constantly arising. At Baer’s Crest we have a great deal of experience in high risk industries. Talk to us about payment solutions for your CBD products and let us guide you on your journey in this dynamic new industry.