CBD Oil & CBD Products

Why CBD businesses are considered High-Risk?

  • Legislation:

    While CBD products are considered legal nowadays in many markets, this industry is still considered taboo, especially by banks. The association with CBD and the cannabis plant confuses many people still, which means banks will not want to take on the risk.

    These misconceptions will limit businesses selling regulated CBD products, which means you’ll be penalized when it comes time to apply for a merchant account through your bank. 

  • Risk of Chargebacks: 

    Banks will make a decision based on risk. The unpredictable nature of CBD products means that banks will view your business as high-risk. This industry is highly regulated, with more websites being shut down every day for violating the changing guidelines set in place for businesses.

While you may not be in violation on purpose, your website and business can still be shut down, which means you are a huge risk to banks. 

Also, operating in the eCommerce space means that you run the risk of chargebacks

  • Reputational risk:

    CBD products often come with claims by companies. Many businesses in this space enter it to generate in a short period a lot of revenue, and acquiring banks know this. The sudden emergence of the market means that there are tons of people trying to take advantage of it.

    Unfortunately, these businesses have made it harder for legitimate CBD businesses to sell their products and get a CBD merchant account. Your CBD business will automatically be labeled as a high risk.

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What are mitigation measures for CBD Oil & CBD Products merchants to reduce risks when selling online​

CBD oil and CBD products have gained widespread popularity due to their various health benefits. As more people seek out these products, merchants selling them online must take steps to reduce risks and ensure their business is secure. To reduce risks and ensure security for merchants selling CBD oil and CBD products online, there are several essential mitigation measures to implement.

Secure Payment Processing

  • Use a secure payment gateway that is PCI compliant, supports 3D secure authentication, and has fraud detection tools built-in is crucial.
  • This helps ensure secure payment processing and reduces the risk of fraud.

Customer Verification

  • Merchants should verify customer information by requesting additional identification and comparing it to the billing and shipping address.
  • Using address verification services is also a useful tool to ensure the address provided by the customer is valid.

Clear Terms and Conditions

Merchants should clearly state their terms and conditions, outlining the refund and return policies, to prevent disputes and chargebacks.

 

Being a high-risk merchant vs. a regular merchant

  • Higher payment processing fees
  • Lengthier application process
  • Higher chargeback fees
  • Cash reserve requirments:
    • Capped reserve
    • Rolling reserve
    • Upfrom reserve
  • Volume caps
  • Additional technical requirements
  • Being on the TMF / MATCH list

 

Check out our knowledge hub to learn more about what processing fees, application process, chargebacks and cash reserve requirements or TMF / MATCH list mean. 

Other risk factors?

There may be other risk factors as to why you as a CBD merchant are classified as a high-risk merchant, such as:

  • Accepting subscription-style payments

  • Being on the Member Alert to Control High-Risk Merchants, or MATCH list — a list managed by Mastercard that monitors merchant behavior, like chargeback history

  • High average transaction sizes

  • High sales volumes

  • Highly regulated industries

  • International sales

  • Large number of card-not-present transactions

  • Little to no business experience

  • Long fulfillment time frames

  • New or poor credit scores

  • Past fraud or illegal activity

     

As CBD Oil and CBD Products merchant how to find a payment provider?

It takes effort for businesses to secure a payment processing partner when they are considered high-risk but it is definetly possible to find the right payment solution if you focus on:

  • Maintaining healthy cash levels. Most processors would like to see a healthy cash level in your business bank account. 
  • Try to reduce chargebacks. There could be a number of factors behind the soaring number of chargebacks in your business. Whatever the reasons may be, you can always analyze them and try to reduce your chargebacks.
  • Be transparent. Disclose all materials and relevant information during the application process. Payment processors may ask you for very detailed information about your business and finances. Be open, honest, and transparent.
  • Keep your documents ready. This could mean having six months of bank statements and a few years of tax returns. That said, each processor has its own set of requirements so make sure to check them.
  • Follow the guidelines of your payment processor. When you apply for a high-risk payment solution, besides your business needs, the risk the payment solutions provider takes also matters. So, be flexible and see if there are things you can do to reduce your risk by discussing with them and following their recommendations.

Our Platform will find the right payment solution for your business

Our biggest differentiator? 

We provide payment solutions for merchants with a 90% Succes Rate by Algoritmic matching and pre-KYC onboarding in each industry and region globally.

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