CBD Payment Processor HighRiskPay.com Explained
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Summary:
Although CBD was completely legalized in 2018 with the U.S. Farm Bill, its association with the cannabis industry at large causes it to be seen as high risk in the eyes of conventional payment processors. Due to the higher-risk categorization, the CBD industry often uses alternative payment processors such as HighRiskPay.com. Although they have higher fees and some additional requirements for merchants, processors like High Risk Pay are as easy to use as any of the traditional payment processors.
The successful legalization of cannabis in several states and all of Canada has led to a flood of cannabis and hemp-related products. If you’ve walked through a grocery store or health supplement store lately, chances are you’ve seen advertisements for “CBD” products. CBD, or cannabidiol, is an element of the cannabis plant that does not get you high like THC. But proponents claim it can have significant health benefits. Due to its relation to the entire cannabis industry, however, CBD is often seen as high risk by traditional payment processors and banks. Therefore, alternative high-risk merchant account processors, such as HighRiskPay.com are often used for CBD payment processing.
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Legal marijuana and CBD
In 2012, Oregon and Colorado pioneered the legal marijuana and cannabis movement by legalizing marijuana consumption for recreational use. Although medical marijuana had been around for ages, those states were the first to legalize and regulate recreational marijuana use. This effectively opened the floodgates of the cannabis industry, and many people began to rush for a piece of “green gold.”
However, as marijuana is still illegal on a federal level and banks and traditional payment processors see the industry as high risk, the industry has been forced to deal in cash or use alternative payment processors like HighRiskPay.com.
What exactly is CBD?
CBD is derived from the hemp plant and not the marijuana plant. The main genetic difference between hemp and marijuana is gender; hemp is the male plant, and marijuana is the female plant. Hemp has almost no TCH in it, so products derived from the hemp plant, such as CBD, only have 0.3% THC content. Due to the low THC content and the supposed health benefits, the federal government legalized CBD on a national level with the Farm Bill of 2018. It is often used in oils, capsules, supplements, and topical solutions.
Although it’s now legal, CBD’s association with the overall cannabis industry has put limits on how easy it is bought and sold. Thus, one of the issues CBD businesses and their vendors, merchants, and distributors have to deal with is payment processing.
HighRiskPay.com
There are several alternative payment processors used by industries that are considered high risk. HighRiskPay.com, however, has set up a specific CBD merchant account for the CBD industry. They connect CBD merchants with their CBD merchant processing platform. HighRiskPay.com provides the following benefits for establishing a CBD merchant account.
Transparency
HighRiskPay.com is upfront regarding all the fees that the client is charged for payment processing. This is important for budgeting and planning cash flow.
Simplicity
After the transaction has been approved, HighRiskPay.com will not ask for any other supporting documents or information.
Accepts all cards
HighRiskPay.com accepts all major credit card companies in the U.S., including Visa, Mastercard, and American Express. However, you might want to double-check if you are using a non-U.S. credit card network, such as UnionPay.
Low fees
HighRiskPay.com has lower fees than the rest of the alternative payment process, or so they claim. As alternative payment processing is more expensive than the traditional payment processing route, this can be a nice benefit.
Multiple payment methods
HighRiskPay.com will accept payment methods outside the scope of traditional credit cards and debit cards, such as bitcoin.
Fraud protection
HighRiskPay.com has a number of fraud prevention mechanisms to make them more fraud-proof than your average alternative payment processor.
Chargeback prevention
Chargebacks happen when a card issuer demands compensation for a disputed or fraudulent transaction. HighRiskPay.com has special methods in place to eliminate these.
Recurring billing
As mentioned above, many alternative payment processors have monthly or annual fees attached to them. HighRiskPay.com provides automatic recurring monthly or annual billing like you would receive with any SaaS service you might subscribe to.
Payment analytics
HighRiskPay.com provides a variety of analytical data that is relevant to your payments and transactions.
How do traditional payment processors work?
When you go into a store and swipe your debit or credit card, your payment must be processed. This also happens with online transactions using a debit card, credit card, or service like PayPal. Here is how the traditional payment process works.
Debit card and credit card payments
1. The customer pays with the card; the payment processor takes the card’s input information and relays it to the credit card company or credit card network.
2. With a credit card, the information is then relayed to the credit card issuer to instantly check if there is sufficient credit available. With a debit card, the information is relayed to the issuing bank to make sure the acquiring bank funds are available.
3. If adequate credit and funds are confirmed, then the network approves the charge, and the transaction goes through.
4. After the transaction, the payment processing company still has to transfer the funds from the purchaser’s bank account if the transaction was made with a debit card.
Pro Tip
PayPal works a bit differently in that it acts as a payment gateway geared towards eCommerce businesses. As most people will use a credit or debit card with PayPal, PayPal will follow the steps listed above to confirm the existence of funds or credit before approving the money to be sent. PayPal, however, allows you to wire money or even write checks to fill up the account. In this case, paying from your PayPal account is much simpler since your account already has money in it.
Alternative payment processing
There are some cases when merchants cannot use the payment processing systems that a traditional merchant account provider would use because they are considered high risk. Some of the reasons for the high-risk label are as follows:
High transaction volume
If a vendor processes more than $20,000 per month or regularly has items that sell for $500, they can be considered high risk.
International payments
A merchant doing many international transactions can be at a higher risk of fraud.
Low credit score
A merchant with a low credit score will almost always be considered a higher risk and thus be limited to alternative payment processing.
New merchant
If the merchant has never processed payments before or has a minimal track record, they will be considered high risk.
High-risk industry
Industries can be considered high risk, whether their product exists in a gray area like marijuana or if the industry is associated with above-normal fraud cases.
CBD vs. THC
Hemp and marijuana consist of many elements, but two of the most important are CBD and THC. THC is the molecule found in marijuana that produces effects that are colloquially known as “getting high.” CBD, however, does not get you high but can produce various health benefits. Some participants in the CBD business claim that it can:
- Offset anxiety and depression
- Treat select epilepsy syndromes
- Reduce PTSD symptoms
- Treat opioid addiction
- Alleviate ALS symptoms
- Relieve unmanageable pain
- Ease diabetic complications
- Protect against neurological disease
What it means to be a high-risk CBD merchant
Unfortunately, due to the high-risk association of the cannabis industry, traditional payment processors will often not be available to CBD merchants. They will have to use alternative payment processors instead. There are several CBD merchant account providers, including HighRiskPay.com. These work similarly to traditional payment processors, but the vendor or merchant may have to meet additional requirements, such as:
- They must pay higher fees due to the higher risk.
- A high-risk merchant might need to lock into longer contract terms.
- They might also need to pay an early termination fee in addition to a monthly or annual fee.
- High-risk merchant accounts also may need a rolling reserve, where the payment processor holds back a certain percent of your income. They do this until they can further verify your transactions were not fraudulent or at risk of chargeback.
While you can use HighRiskPay.com when you buy or sell CBD products, you may want to use another money transfer service for lower-risk transactions. Use our comparison tool to find the most convenient option
FAQ
Does PayPal accept CBD transactions?
No, PayPal does not accept CBD transactions and is not an approved CBD merchant processor. Stripe does not either. If you want to use Square to sell CBD products, you can apply for their CBD program.
Can banks work with CBD companies?
Some will, but they are few and far between and have more complex limits and regulations. North Bay Credit Union is an example of a financial institution, such as a bank or credit union, that can work with the CBD industry.
What does CBD mean on a bank statement?
CBD on a bank statement stands for “consolidated banking data.” This terminology has been discontinued at most banks, though. If the “CBD” is in reference to a hemp-based product, then it stands for cannabidiol.
Key takeaways
- Although CBD was completely legalized in 2018 with the U.S. Farm Bill, its association with the cannabis industry at large causes it to be seen as high risk in the eyes of conventional payment processors.
- As the CBD industry is considered high risk, CBD merchants must use alternative payment processors or specific CBD merchant services such as HighRiskPay.com.
- Alternative payment processors may charge higher fees or require longer contract terms, additional fees, or a rolling reserve.
- HighRiskPay.com accepts all major credit cards and claims to have lower fees than other alternative payment processors.
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