3 Challenges CBD Companies Face in Highly Regulated Markets
Cannabidiol (CBD) is a naturally occurring compound found in the cannabis flower. The cannabis plant has a long history of being used for its medicinal properties, but it has a variety of other practical applications as well. More recently, science is further exploring the properties of phytocannabinoids such as CBD. The cannabis plant has over a hundred different cannabinoids, each with unique properties.
CBD has been used to treat many health issues, including:
- Chronic pain
- And more
Despite its popularity and health benefits, CBD companies face many challenges when it comes to production and distribution.
Challenge #1: Tight Regulations and The Farm Bill
In December 2018, President Trump signed a farm bill that legalizes hemp production for agriculture and removed it from the controlled substances list. This bill also listed hemp as a commodity that can be covered with crop insurance. The same bill also directed the Federal Crop Insurance Corporation (FCIC) to make developing hemp policies more streamlined.
This is an excellent step in the right direction for CBD businesses, but there are still strict regulations that may cause issues. One example of a roadblock for CBD businesses is a state’s ability to ban hemp production at its discretion. This ability to ban the production of hemp means that any moment, a CBD company may find itself with fewer suppliers, which will increase costs or even prevent them from producing CBD products.
Additionally, there are still questions regarding the legality of shipping hemp products across state lines. Part of this comes from the ability of states to ban hemp production within their borders. More importantly, this confusion stems from a simple lack of clearly-set-out guidelines regarding cross-state transportation. As such, there is a business risk with this type of transaction, making it harder for CBD businesses to acquire merchant services.
Challenge #2: Public Perception
Another significant challenge facing CBD companies is the issue of public perception. There is a common misconception, among consumers as well as payment processing and other service providers, that CBD products will cause users of those products to experience a high, just like they would with marijuana. This is completely false, but the belief remains.
Such incorrect assumptions and the generally negative public perception can pose a challenge to CBD companies in numerous ways. It may dissuade some consumers from trying the product because they believe the misconceptions. Others may avoid the products despite curiosity or need because they are concerned that others may pass judgment on them for using CBD products.
Even when there is a demand for CBD products, stores may be dissuaded from carrying them due to the public perception. Businesses may be concerned that the reputation of their store will suffer if they sell CBD products. They may even have concerns that various merchant services will drop them due to the public image or their own misconceptions.
Challenge #3: eCommerce and Payment Processing
It’s not just Cannabis SEO and marketing companies are the other ones affected. CBD companies also face particular challenges when it comes to merchant services, payment processing, and e-commerce in general. Many banks will not work with CBD businesses because of the murkiness concerning CBD’s legality and the variations across state lines. As expected, this makes it incredibly challenging to process both online and in-store payments.
It is unfortunately common for merchant service providers to refuse to work with CBD companies. Even if those service providers support the availability of CBD, they will view it as a high-risk venture. The laws regarding CBD may change and there is the risk associated with public perception, which can hurt a company’s reputation in an unfounded manner. Saying that CBD companies can struggle to find payment processing providers and other merchant services is no exaggeration. Big names, such as PayPal and Stripe, will not work with them.
When CBD companies do find merchant services willing to work with them, the challenges continue. There is a higher rate of declined payments, and they have to deal with stricter rules regarding chargebacks. CBD companies also face especially strict requirements and rules for offshore merchant accounts.
CBD companies face numerous challenges, from public perception to strict regulations. Luckily, there are some merchant services providers available to help these companies overcome their challenges. Zenti Services, for example, gladly works with CBD companies so they can overcome the hurdles.
Zenti Services will give CBD businesses everything they need for their business to get up and running with high risk credit card processing services. There is transparent pricing without any of the hidden fees that are applied by most other merchant services providers that work with CBD companies. Zenti Services offers high-quality support as well as exceptional service. With trustworthy high risk payment processing services from Zenti, CBD companies can focus their energy on overcoming other issues, like public perception, instead of worrying about accepting payments.