Just like hemp and cannabis merchants, CBD merchants are having a tough time finding banking and merchant services available to them. But that doesn’t mean banks aren’t interested.
A recent article in Digital Transactions said that many banks and merchant services providers are scrambling to sign up CBD merchants, as they see the potential for high profits from these high-risk merchants.
While CBD has been deemed to be legal to sell and consumer (assuming it has below-legal levels of 0.3% THC, and is derived from hemp and not marijuana), it’s still painted with the same cannabis brush by many banks and financial institutions. As a result, CBD is still a bit of a sticky wicket for some banks, which is why its merchants stay on the high-risk list.
However, says Digital Transactions, “CBD’s popularity as a treatment for everything from pain to anxiety has exploded in the past year,” which is why so many acquirers are pursuing CBD merchant accounts.
But not all banks are so eager to work with CBD merchants, who also have to comply with different governmental regulations. There are still so many regulations that banks have to follow when working with CBD merchants that it scares many of them off.
The reason is because the banks have to comply with their own regulators, such as the Office of the Comptroller of the Currency, Jason Putnam, senior VP and director of merchant services at The Independent Bankers Bank told Digital Transactions.
“We have to be on par with the regulators and we have to make sure they understand what’s going on,” Putnam said. “The biggest thing is making sure the regulators are OK with how we handle this.”
There are other legal considerations that banks are wary of, as the legality of CBD is still a bit complicated. For example, the 2018 Farm Bill may have exempted CBD from federal definitions of a controlled substance, there are still several states where CBD is not legal, which means no interstate selling from a legal state to a non-legal state (such as Idaho, Nebraska, or South Dakota).
And there are other governmental regulations to comply with, such as the Food and Drug Administration (FDA). According to the FDA, products that add CBD to food or label it as a dietary supplement are not legal for interstate sales, until the FDA has tested CBD’s safety.
Finally, the merchant services providers have to monitor the merchants to make sure they’re in compliance with their agreements and policies. This is also an issue if a non-CBD merchant decides they want to start selling CBD products. An otherwise non-high risk merchant may have to deal with new regulations or even risk being dropped by their merchant services provider just by adding the new product to their inventory.
If nothing else, this is a good reminder for why CBD merchants are better off working with a merchant services company that specializes in high-risk accounts. They have the contacts and industry knowledge to find banks and processors who are willing to work with CBD merchants. So rather than the merchant spending a large part of their week trying to find new banks every time their old bank gets a little squeamish, they can leave it up to the experts.
To learn more about getting merchant services for your own hemp or CBD business, please visit the Corepay website or call us at (800) 408-0095.
Photo credit: PXFuel.com (Creative Commons 0)