High-risk industries (e.g., CBD, firearms, casino, subscriptions, etc.) all have issues with payment processors because of things like regulations, compliance, high chargeback rates, fraud risk, restrictions, classifications, cross-border issues, reputation risk, etc., etc.
So, what can we do about it? If your business is in an industry that’s categorized as ‘high-risk’, then you want a solution.
In this article, we’ll use the cannabidiol (CBD) industry as an example.
The CBD industry experienced many changes over the past decade. And all that in a short time span at that. What was once considered a niche market has grown into a global commercial sector. A sector connected to many areas such as wellness, cosmetics, healthcare, and consumer lifestyle products. Its demand continues to rise day by day. And to fill that demand, new brands appear just as fast.
Yet despite all the progress that has been made, CBD businesses still face one glaring issue – the issue of payments.
Selling a product is only one part. Receiving payments reliably and securely is just as important. This is the main problem in the cannabidiol industry. Traditional financial systems were not made with industries like CBD in mind.
This resulted in barriers that prevent growth and create operational issues for those businesses.
The Complicated Issue of CBD Payments
CBD products are quite a unique case in the modern market.
In many areas, their products are legal, but depending on the country or state and even municipalities, the regulations that govern them are very different. They are a proverbial black sheep when it comes to the market. No one knows exactly where to place them, and when they are placed, their position quickly changes in a brief span of time.
Because of this, financial institutions face a problem when dealing with CBD merchants. Financial institutions often operate under strict rules and regulations. Adding a shifting and uncertain element clashes with their MO. It creates uncertainty that is difficult to monitor and is also expensive.
This issue labels CBD merchants as a high risk despite the companies operating fully within a legal framework.
The added obstacles obviously affect the growth and operation of those companies, all the way from minor inconveniences to more serious consequences, such as suddenly having their accounts or funds frozen.
Traditional Payment Providers and The Reason Behind Their Actions
Traditional payment providers focus on predictability.
They must comply with anti-money laundering regulations, prevention standards concerning fraud , and general global policies. When an industry presents additional requirements, many institutions choose to skip the problems altogether rather than to deal with them. And there are a lot of issues to face.
Issues like:
- Regulatory interpretation across jurisdictions
- Monitoring product compliance documentation
- Managing reputational risk
- Handling international transactions tied to cannabis legislation
When you deal with these kinds of issues it takes time. And it’s expensive. Very expensive.
Even slight errors can cause a lot of problems for the payment providers. And developing specialized systems to deal with these issues costs time and money. Because of this, the most logical choice is avoidance.
With that being said, it’s the avoidance and lack of interest in tackling the new market that has led to the development of specialized providers that solely focus on the cannabidiol industry.
It has created innovation.
Specialized Payment Platforms and The Reason Behind Their Rise
It is that step back from traditional payment providers that gave rise and paved the way to the emergence of specialized payment platforms.
These platforms have designed their infrastructure specifically to accommodate the CBD merchants and their business; they’ve done this by combining compliance monitoring with flexible payment acceptance. For these platforms, CBD merchants aren’t the exception; instead, they are the standard.
These platforms provide CBD payment solutions for online stores and merchants alike.
Here are the characteristics of modern CBD payment solutions:
Compliance
Verification processes are built directly into the system. Merchants submit: laboratory testing results, licensing documentation, product transparency information, and sourcing verification.
Payment Options
While this wasn’t the case 10 years ago, today’s CBD platforms fully support both credit and debit cards, as well as ACH transfers and digital wallets (with the rise in crypto popularity). It’s a much-needed flexibility that improves customer experience and enables high-risk industries to operate effectively on a global level.
Risk Management Tools
Tools that deal with higher risk by implementing stronger safeguards.
These safeguards protocols protect from real-time fraud, and they have automated chargeback monitoring. They also analyze transaction patterns and work to manage and assist with dispute issues.
These tools protect both merchants and the platforms.
Conclusion
The future of CBD commerce is intertwined with the future of payment technology.
The issue created innovation, and that same innovation has begun making strides in not only the cannabidiol industry, but in other industries as well; industries like the wellness markets, alternative health products, digital services, and more.
Like every technology and innovation, it is hard to predict where it will go and how much it will evolve. But one thing is sure, and that is that these specialized processes still have a long way to go, and that they are taking the cannabinoid industry with them. They are giving the CBD companies a boost and stability where it matters the most. Progress may be gradual, but it is still progress.
In short, CBD payment solutions are a foundation where the cannabidiol industry is being built.
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