If you are at the point at which you are drawn in by the title “HELP! I Need a Payment Processor for my CBD Business!” it is likely that you already know either how difficult it is to open a merchant account at a traditional bank or how easy it is to get it shut down. Possibly both. In either case, unless you only accept cash payments (which is unlikely in 2022), you don’t have a way to receive payments from your customers. If you can’t receive payments, your business isn’t really, well, doing business, is it?

But, you already know that. In fact, you’re probably painfully aware of it. Thus, the cry for help.

So, let’s take a look at how you got into this situation and how you can get out of it.

It All Comes Down to the Risk

Most traditional banks and payment processors avoid providing merchant accounts to businesses that are particularly susceptible to risks that could cost them a lot of money. When they do provide services to such businesses, the approval process is longer and more rigorous than for other businesses.

In addition, the requirements for keeping the merchant account will be particularly strict. A chargeback rate that is perfectly normal—or even low—for your industry could get your account canceled suddenly and without warning.

For a variety of reasons, CBD-related businesses are considered to be “ high-risk businesses ,” which makes it difficult, and often impossible, to get a traditional bank to provide a merchant account. Some of the reasons are common to most high-risk businesses. The most prevalent of these is a high chargeback rate .

Problematic Legal Standing

One of the reasons that is unique to CBD businesses is the problematic and ever-changing legal standing of CBD . Laws and regulations related to CBD and other cannabis-related substances differ between countries and even between states and individual local municipalities. The significant confusion this causes increases the risk of inadvertently violating laws and regulations.

It is also important to keep in mind that the issue of CBD is a highly emotional issue for many people, which adds to the instability and unpredictability of developments. It’s not really surprising that banks would rather just stay out of it, since they typically don’t have the expertise and experience needed to deal with the unique needs of the industry.

Fraud

Another reason is the high occurrence of fraud. Despite significant decriminalization, there is still noticeable involvement of organized crime and gangs in the growing, processing, and distribution of cannabis in some regions. Naturally, this opens the way for various types of fraud.

As mentioned, a high chargeback rate is one of the most common reasons that businesses are viewed as high risk, and fraudulent chargebacks —or at least chargebacks of questionable legitimacy—are not rare. Even when they are legitimate and reasonable, chargebacks cost merchants and banks significant amounts of time and money. The potential losses are multiplied when actual fraud is involved.

How to Get a Merchant Account

The legal standing and public perception of CBD and related products are expected to change, but traditional banks and payment processors will probably continue to see the CBD industry as high risk for the foreseeable future. Having a knowledgeable and reliable high-risk payment processor can help your business run smoothly and in the midst of changing laws and regulations. Other benefits of using a high-risk payment processor include a lower risk of having your merchant account closed suddenly, access to a network of financial institutions that are willing and able to work with your business, multiple payment methods, and enhanced security.

Even before applying for a merchant account, you should make sure that everything has been arranged for your business to operate legally, such as obtained the required licenses (e.g., licenses to grow, process, or sell CBD products), certificates indicating that your growers/suppliers and other have the proper licenses, etc., and documentation of the results of testing by an accredited third-party laboratory (e.g., a COA ).

When you apply for a merchant account, you should have the following documents and information with you or readily available. The payment processor may ask for other documents as well, but these are a good start.

Be Honest and Frank

Hiding the nature of your business thinking that it will help you get your application approved will ultimately affect your business and the payment processor negatively. In short, it’s a very bad idea, from legal, practical, and ethical perspectives. If you lie about the type of business you operate and your lie is discovered, you will probably lose your account and have an even harder time finding a payment processor. Your personal reputation and the reputation of your business could be irreparably damaged.

In addition, there are enough high-risk payment processors that specialize in the CBD industry that there is no need to lie in the first place. It is also to your benefit to take maximum advantage of their unique knowledge and experience. That’s only possible if you provide them with the most accurate information possible about your actual circumstances and needs.

What You Need in a Payment Processor

Ideally, your payment processor should have experience with the CBD industry, but it should also be flexible enough to adapt to changes in laws and regulations regarding CBD, have clearly and thoroughly indicated pricing, provide multiple options for payment processing, and clearly indicate contract terms and conditions.

The payment processor’s system should integrate well with your business’ system. The payment processor must have the hardware and software needed to provide the services you need, but if their system and your system don’t “play” together well, you could be looking at delays in processing/payment, frustrated employees, and dissatisfied (former) customers.

Your payment processor should also provide good, reliable customer service that is available any time it is needed. Problems in the system delay or prevent reception of payments, which means that you are losing both time and money.

Clarify and Verify

A high-risk payment processor such as Zen Payments specializes in payment processing for high-risk industries and understands the payment processing needs and challenges of the CBD industry. We have the experience and expertise necessary not only to get you a merchant account, but also to make the payment process easier for your customers and for you.

Be sure to ask as many questions as necessary until you’re satisfied with the responses and clear on what you can expect and what will be expected of you. CBD-related business involves a lot of legal issues, so you should make sure that you have a clear understanding of the requirements and that those requirements are the ones that are currently in place. Our team at Zen Payments would be happy to speak with you and find ways to help your business prosper, so please don’t hesitate to contact us .