CBD beauty products are legal and have continued to grow in popularity with customers of all ages throughout the United States.
Even so, it remains complicated for businesses in this industry to accept payments. Why is this the case, and how can you navigate these conditions successfully as a CBD entrepreneur?
Understand why your business is deemed to be high-risk
Like it or not, most traditional payment processors, including Stripe and PayPal, are reluctant to attach their name to anyone doing business in the CBD beauty arena.
Although hemp-derived CBD products with under 0.3% THC are legal throughout the country, gray areas about the marketing claims of supplements and beauty products still exist. Therefore, your best bet is to choose a processor that can give you a merchant account for CBD beauty brands.
Another reason for lenders’ reluctance is the higher risk of chargebacks that occurs in this industry. This is often the nature of the beast when it comes to health and wellness products, especially if they fall short of customers’ inflated expectations.
The result is a request for a refund from their bank or credit card company, which leads to added costs and higher risks for the processing company.
Finally, the CBD beauty sector is expected to comply with a host of federal and state regulations as well as the stipulations of the credit card networks. This added burden can increase the perceived risk that your company poses, resulting in a high-risk categorization.
Choosing the right payment processor
Partnering with the right high-risk provider can make all the difference. Take time to do careful research, focusing only on companies with demonstrated expertise in the CBD industry that are willing to provide you with a dedicated merchant account for processing card transactions.
They should also be able to seamlessly interface with a payment gateway that has historically demonstrated a willingness to process CBD payments.
Prepare for the application
Before you get your merchant account for CBD brands, you must go through the application and underwriting process. To that end, you will need to provide documents about your business, including your tax ID, bank account, and historical details, legal entity type, etc.
You will also need to show that your website is live and professional. Your policies, terms and conditions, and product documentation must be thorough and clear.
Additionally, you must produce certificates of analysis (COAs) for your products that verify ingredients, potency, and THC quantities according to a third-party lab.
Understand fees and requirements
As a high-risk business, you should expect to pay more. However, although some fees are non-negotiable, others are flexible. Therefore, ask about what you will be required to pay for things like processing rates, monthly minimums, setup, chargeback, and PCI compliance fees.
Also, find out if you will be mandated to open a rolling reserve that retains a portion of your sales to cover the cost of potential chargebacks or other incurred costs.
Make security a priority
Ensuring that customer payment details remain shielded from hackers protects your CBD business and helps to lower the number of chargebacks you experience.
To that end, you must comply with all of the requirements of the Payment Card Industry Data Security Standard (PCI DSS) to protect the cardholder data that you store, manage, or transmit.
In addition, you should work with a payment processor that provides you with fraud mitigation tools that analyze transactions in real-time to spot anomalies or suspicious patterns.
Combine these precautions with clear and transparent customer communication and impeccable transaction records that you can use as evidence should a chargeback dispute occur.
Success in the CBD beauty industry can be yours, but it does not come without added complexity and considerations. The good news is that you can prosper once you understand the special requirements of your industry.
Then choose a high-risk merchant services provider who can give you the expertise and focus on security that are vital to your success.
