The COVID-19 pandemic has created a world that is anything but normal. But as business must go on, companies are finding innovative ways to stay clean, safe and solvent, offering peace of mind to customers and becoming more profitable. In particular, they’re moving to contactless payments.
For most organizations, processing touch-free payments may be as simple as investing in a contactless POS system. However, things aren’t that easy for high-risk businesses, such as hemp-derived CBD shops.
Despite being legal in much of the United States, the CBD industry is still considered high-risk, so many banks and traditional financial institutions avoid working with them. As a result, many CBD businesses struggle to secure merchant accounts that would enable them to process credit and debit card transactions, and thus cannot accept a common, convenient form of customer payment.
Benefits of contactless payments
Before the coronavirus began sweeping across the globe, consumers were starting to become fond of contactless payments. Today, it is critically important to both customers and businesses everywhere. There are many benefits to contactless payments, including:
The main reason people prefer contactless payments is to prevent catching or spreading disease, which is more top-of-mind than ever. As many are still afraid even to go into the supermarket, physically handing a stranger cash or your credit card can be even scarier. Shoppers want to limit touch points wherever possible and contactless payments, such as mobile wallets or tap-and-go using a mobile card reader, help them do that.
Speed and convenience
Contactless payments happen at lightning speed. There’s no typing in a PIN (Personal Identification Number) or signing on the dotted line. More and more customers prefer to pay with a credit card or their mobile phone, and they are increasingly choosing businesses with payment methods that deliver the speed, safety and convenience they want. As contactless options are still rare for CBD merchants, adding them can put a store ahead of its competition.
Unfortunately, high-risk merchants are more prone to payment fraud, and illegal activities can lead to major complications, fines and financial losses. Upgrading to contactless payments provides an extra level of security for businesses because these methods are just as safe as EMV chip and PIN transactions. If a data breach does happen, contactless payment methods don’t allow credit card numbers to be used fraudulently.
Challenges faced by CBD businesses
The CBD therapeutics segment is estimated to reach $9.3 billion by 2026, so clearly there is an enormous amount of potential in this industry. However, for these high-risk merchants, there are many payment processing challenges, including specific laws and regulations to follow and other complexities related to compliance.
Unfortunately, there is a lot of gray area surrounding payment processing for CBD. Legality has changed a great deal and still varies at federal, state and local levels. It confusingly depends on a number of different factors, including individual state laws, how states interpret federal law, the amount of THC in a product, passage of specific legislation, what type of product CBD has been added to, etc. Some businesses may have to obtain certain licenses or have their products professionally tested in a lab.
Another reason for payment processing problems is the prevalence of fraud in the CBD industry. Credit card fraud and customer chargebacks happen more often than in other sectors, thus the high-risk label applied to CBD businesses. Because of this, most large credit card companies, like Visa and MasterCard, simply aren’t willing to process cannabis products, including CBD. That can also extend to e-commerce transactions that go through PayPal, Shopify or other platforms.
So, why are these major companies reluctant to accept CBD payments? Mostly, it comes down to a complicated set of laws and guidelines involving one word: hemp.
CBD product inconsistencies
Hemp is derived from marijuana plants that contain less than 0.3% tetrahydrocannabinol (THC), which is the substance that produces psychoactive effects. Hemp is now legal to sell in the U.S., but regulators still don’t have clarity on what to do about CBD. That’s because there are a lot of inconsistencies with the term “CBD products.”
These can either be completely hemp-based or blended with THC. In some cases, the THC level in CBD products can exceed the federal legal limit of 0.3%. This creates confusion, including potential liability issues for payment processors and banks that can’t clearly determine the risks involved.
Huge growth opportunity
If hemp-derived CBD businesses were able to find a suitable payment processing company to accept contactless payments, there is massive potential for growth. Since these payments aren’t accepted by many CBD establishments today, having the ability to take contactless payments can give a business the upper hand over its competition.
Payment processing options
In recent years, a few payment processing companies have emerged to work with CBD businesses. Popular companies include Square and Payline Data, which can work for some businesses but don’t make sense for everyone, as they sometimes freeze merchant accounts or drop a client if it processes above a certain transaction volume – or for no apparent reason. Other services exploit the limited choices for high-risk merchants by charging high or hidden processing fees.
Due to the added risks and complications for CBD businesses, it’s extremely important for merchants to partner with a trusted payment solutions provider.
A contactless payments partner for CBD stores
Here at FLEX Payment Solutions, we understand the difficulties that come along with running a hemp-derived CBD shop. Given our significant experience and knowledge as high-risk industry experts, we’re here to help your business thrive. We can provide you with the fast, easy, reliable and convenient contactless payment solutions that customers want and you must have, including advanced touch-free technologies like IVR and Text 2 Pay.
FLEX offers debit and credit card processing services for online and retail businesses, including high-risk partners like CBD stores, Native American merchants, collection agencies and more. We have a unique compliance background and offer exceptional customer service. No matter the size or type of business, we provide flexible, customized payment options that serve your needs, save money and help you grow.