The cannabidiol (CBD) market is projected to grow by 700 percent by 2020, and a report by market intelligence firm, Hemp Business Journal, anticipates the market will rise to $2.1 billion by 2020. Studies show that CBD oil has many therapeutic benefits, including antioxidant and neuroprotective properties. CBD contains no tetrahydrocannabinol (THC), so it doesn’t have the same psychoactive effects as marijuana.
Growth in hemp-based products is only a piece of the cannabis industry puzzle. The entire legal cannabis industry is expected to hit $57 billion by 2027, according to Arcview Market Research.
Selling in the CBD Oil Market
Though CBD oil are widely available for sale and there is an obvious market for these products, a legal murkiness surrounding these items makes it difficult for merchants to operate a business in the sector.
Currently, 31 states and the District of Columbia have legalized medical marijuana. Nine of those states, including Massachusetts, Colorado, and California, as well as the District of Columbia have also legalized recreational marijuana. However, selling marijuana violates federal law and handling any proceeds from a marijuana sale is considered money laundering.
Additionally, even in states where marijuana use is legal, the federal Drug Enforcement Administration still classifies CBD extract as a Schedule 1 substance. Considered the DEA’s most restricted category, Schedule 1 substances are defined as drugs that have no acceptable medical uses.
How Do CBD Oil Merchants Move Forward?
The ambiguity between federal and state laws, as well customers’ demands for cashless payment options, makes it very difficult for CBD oil merchants to operate.
Banks and traditional credit card processors are resistant to work with merchants that sell CBD oil because they are afraid they may be penalized if products are sold online and shipped to a place where CBD is illegal.
In order to operate, businesses must either seek a CBD oil merchant account from a high-risk lender or institute a Point of Banking (POB) system.
CBD Oil Merchant Account vs. POB
A CBD oil merchant account allows a business to accept and process credit cards. A POB terminal allows you to accept credit cards without a merchant account. A POB terminal looks like an ATM, but it doesn’t dispense cash. Users swipe their cards and punch in PINs, and then, customers gets receipts, which they use to pay for their products. After the sale is completed, the customer gets his/her change in cash. Using point of banking not only saves merchants from the hassles that can come with an opening a merchant account and paying percentage fees for processing card transactions, it reduces their risks of chargebacks, fraud, and refunds.
Though POB may appear like a much better option over a merchant account, there are some important factors to consider. Obviously, POB would not be an option for an online business since customers have to swipe their own cards and hand the receipts to merchants. Also, since merchants will have to return any change to customers in cash, they will need to have more funds on hand.
Make Merchant Account Approval Easier
If you want to move forward with a CBD oil merchant account, there are steps you can to improve your chances of approval. Prior to applying for merchant accounts, you should ensure they have several months of good processing histories and few chargebacks. Processors also like businesses to have a fair number of sales and some money in the bank, in case of emergencies. Overall, when processors view your business, they want to see a legitimate venture that is profitable and productive.
As the CBD oil industry grows and a cashless society prevails, merchants have no choice but to consider all possible options.
Businesses looking for payment solutions for high-risk ventures, such as CBD oil merchants, should turn to eMerchantBroker.com (EMB). It specializes in solutions for all types of businesses, and it offers CBD oil merchant accounts and point of banking options. Submit an online application today. The process is fast and easy.