Since the passage of the 2018 Farm Bill, which eased federal restrictions on low-THC hemp-derived products such as cannabidiol (CBD), U.S. product sales in this category have soared, reaching $4.7 billion in 2020 and projected to hit $16.8 billion in 2025, according to the Brightfield Group.
But there have been clear downsides to selling these products. Widespread suspension of merchant accounts in 2019 and beyond by traditional banks and payment processors leery of the patchwork of regulatory restrictions and bans across state and local jurisdictions has imperiled more than 13,000 CBD retailers, per the SmokeShops.com data list of U.S. shops.
Facing similar challenges is the sale of Kratom products, a plant-derived stimulant and sedative indigenous to Southeast Asia, which has also seen significant market growth. The National Library of Medicine estimates that 10 to 15 million Americans currently use Kratom products.
Online demand fueled by pandemic lockdowns forced many brick-and-mortar smoke-shop CBD and Kratom merchants to adopt hybrid business models. Classified as high-risk by service providers, many merchants faced the dilemma of either finding a suitable payment processing alternative or closing business entirely.
Fortunately, a handful of highly qualified merchant service providers have stepped in to help these businesses not only stay afloat but thrive.
Under the high-risk merchant classification there are numerous reasons smoke shop CBD and Kratom merchant accounts can be suspended. Below is a shortlist of trigger points that can lead to merchant account suspension:
To explain the financial repercussions a bit further, when funds are held in reserve to account for potential chargeback and fraud losses, high-risk merchants frequently encounter issues with cash flow, increased operating expenses, and the risk of shutting down businesses altogether when funds are held over longer periods of time or in excess of what is financially sustainable.
If your merchant account has been suspended or you are struggling with finances as a direct result of funds availability issues, consider working with a qualified third-party payment processor that is well versed in dealing with issues common to high-risk merchant accounts.
Partnering with a high-risk merchant payment processor experienced in retail tobacco and smoke shop business accounts offers many practical advantages.
High-risk processors who specialize in tobacco and smoke shop businesses can provide the following benefits to ensure business continuity:
When choosing a third-party payment processor, look for a company that offers consistent top level service and support universally, regardless of industry classification. There should be no hidden fees or excessive restrictions, such as fund holds, and pricing should always be transparent.
WizoPay has over a decade experience serving CBD, hemp, cigar/tobacco, and more recently Kratom merchants and understands the jurisdictional regulations governing these products.
Working with the knowledgeable experts at WizoPay, you can expect fast approvals, access to an online fraud and chargeback prevention program, unlimited processing with limited or no-hold options, next-day funding availability, low-rate transparent pricing and fees, free equipment, and an in-house technical support team ready to assist with integrations that are compliant with industry and regulatory standards.