High-Risk Merchant Accounts for CBD Businesses: A Complete Guide

The global cannabidiol (CBD) industry is expanding at an accelerated rate and is projected to reach $22 billion by 2030. Despite its phenomenal growth and demand, CBD businesses face a growing concern in terms of processing payments. One of the main reasons for this challenge is that financial institutions classify CBD businesses as a high-risk sector, which makes opening merchant accounts – a vital factor for long-term success – more complex than usual.

In this post, we break down the specifics of opening high-risk merchant accounts for CBD businesses. We’ll cover everything from the benefits of having a high-risk merchant account, how to apply for one, and the best practices for maintaining one.

But first, let’s understand why banks and card networks consider CBD businesses high-risk.

Why CBD Businesses are Considered High-Risk

Despite CBD products being legal in many parts of the world, they face a high-risk classification for the following reasons:

• The laws governing CBD products and businesses are complex, with regulations varying within states and regions that make banks and financial institutions hesitant to support them.
• CBD products undergo extra scrutiny from regulatory agencies such as the Food and Drug Administration (FDA), which means flouting any rules can expose payment providers to risk and liabilities.
• CBD businesses often experience higher customer disputes, which can invite higher chargeback rates from banks and card processors.
• CBD’s association with cannabis, despite being considered a non-psychoactive compound, invites heavy regulatory and financial scrutiny – thus flagging it as high-risk.

What is a High-Risk Merchant Account and What are its Benefits?

A high-risk merchant account is a special type of account that allows CBD businesses to process payments seamlessly despite their risk profiles. It may come with higher fees and stricter terms than standard accounts, but it also includes advanced fraud detection features and tools to monitor chargeback disputes. 

Overall, a high-risk merchant account can provide much-needed stability for your CBD business, as it is designed to expect – and handle – regulatory issues.

Here are the advantages of a CBD high-risk merchant account:

Multi-Payment Method Flexibility

Being labeled as a high-risk business should not prevent you from expanding your customer base and sales, especially due to limited payment options. A high-risk merchant account allows your customers to pay using a wide range of payment methods, such as cards, digital wallets,  mobile payments, and cryptocurrencies.

Lower Risk of Account Termination

If you’re a high-risk merchant operating a standard account, it may get shut down if your payment provider flags several CBD-related transactions. Since this specialized account is designed expressly for your risk profile, it lowers the risk of such terminations – providing merchants with operational stability.

Protection Against Chargebacks

Chargeback rates are a higher-than-usual occurrence for CBD businesses due to regulatory scrutiny and customer disputes. A high-risk merchant account helps keep your chargeback rates in check and within critical thresholds by employing fraud detection tools and monitoring systems. By keeping chargeback incidents to a minimum, you invite lower scrutiny from payment processors while also maintaining a steady cash flow.

Worldwide Multi-Currency Support

Customers of CBD businesses are spread worldwide, which means your account should be equipped to handle hundreds of global transactions each month. With high-risk accounts offering multi-currency features, processing international payments becomes easier, helping you adhere to both compliance measures and generate steady sales.

For example, a Canada-based CBD merchant can easily sell products to clients based in Asia or Europe through a high-risk merchant account, without raising flags about cross-border payments or currency conversion issues.

Better Scalability

As your CBD business expands, so does the scrutiny from payment processors – potentially leading to account freezing risks and transaction limits. However, having a high-risk account counters these hurdles, allowing you to scale without inviting additional scrutiny.

Common Challenges of a High-Risk Merchant Account

There are several advantages to having a high-risk account, but CBD merchants may still encounter hurdles both during and after account approval, including:

• Higher processing fees per transaction compared to low-risk industries
• Prolonged application reviews that scrutinize your product range and business model
• Periodical scrutiny to ensure ongoing compliance and lawful operations
• Limited payment partners who support CBD merchants consistently

In light of the above issues, it’s critical to choose a partner who understands the industry and offers specialized solutions to these challenges.

What You Need to Apply for a High-Risk Merchant Account

Choose a reliable payment processing partner with proven experience in handling high-risk industries. This will give you better access to specialized high-risk tools and features such as fraud protection, chargeback monitoring, and high transaction approvals. When you’re ready to apply for a high-risk merchant account, ensure you have the following ready for review:

• A business license or valid proof of legal registration in your jurisdiction
• Compliance documents, such as Certificates of Analysis (COAs), which validate the transparency of ingredients, product compliance, and THC and CBD levels.
• Professional and compliant e-commerce website that verifies age, outlines clear refund/exchange policies, and features accurate product descriptions
• Financial records and bank statements demonstrating a history of stable transactions
• Clear documentation or SOPs on how your business handles customer disputes or returns.

Team Up With an Expert High-Risk Payment Gateway Partner

To succeed in the booming CBD industry and overcome its unique hurdles, you need a high-risk merchant account that can help you boost your revenue and scale with confidence.

While traditional providers have been hesitant to support CBD merchants due to their high-risk profile, specialized partners like Centrobill have both the expertise and tools to help you navigate these challenges efficiently. Secure your CBD high-risk merchant account today. Talk to the experts at Centrobill today and take your CBD business to new heights.

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